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Intuitive Mathematical Economics Series. Constrained Maximization and the Method of Lagrange Multipliers

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  • Sergio A. Pernice

Abstract

A fundamental assumption in most of economic modeling is that people maximize their utility subject to a budget constraint. This, as well as many other economic problems, math- ematically translate into problems of maximization with constraints. A powerful and widely used method to tackle some of these problems is the method of Lagrange multipliers. Yet, the exposition of such method in standard textbooks is rather formal and utilitarian. In this paper we try to present it emphasising the fundamental intuitions behind the method.

Suggested Citation

  • Sergio A. Pernice, 2018. "Intuitive Mathematical Economics Series. Constrained Maximization and the Method of Lagrange Multipliers," CEMA Working Papers: Serie Documentos de Trabajo. 680, Universidad del CEMA.
    • Handle: RePEc:cem:doctra:680
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    File URL: https://ucema.edu.ar/publicaciones/download/documentos/680.pdf
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    Cited by:

    1. Tomás Marinozzi & Leandro Nallar & Sergio Pernice, 2021. "Intuitive Mathematical Economics Series. General Equilibrium Models and the Gradient Field Method," CEMA Working Papers: Serie Documentos de Trabajo. 820, Universidad del CEMA.

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    Keywords

    Maximization with constraints; Lagrange multipliers.;

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