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Output Maximization Subject to a Nonlinear Constraint

Author

Listed:
  • Islam, Jamal
  • Mohajan, Haradhan
  • Moolio, Pahlaj

Abstract

Using method of Lagrange multipliers and applying first-order necessary conditions as well as second-order sufficient conditions for maximization, an attempt has been made to maximize an output of an agency subject to a nonlinear budget constraint by assuming that the agency gets price discounts for purchasing larger quantity of an input. Such quantity discounts alter the linear budget constraint and result in a nonlinear (convex type) budget constraint. Using comparative static analysis, we study behaviour of the agency when prices of inputs undergo change, besides providing an interpretation of the Lagrange multipliers in this specific case.

Suggested Citation

  • Islam, Jamal & Mohajan, Haradhan & Moolio, Pahlaj, 2011. "Output Maximization Subject to a Nonlinear Constraint," MPRA Paper 50676, University Library of Munich, Germany, revised 08 Nov 2011.
    • Handle: RePEc:pra:mprapa:50676
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    References listed on IDEAS

    as
    1. Jamal Nazrul Islam & Haradhan Kumar Mohajan & Pahlaj Moolio, 2010. "Utility Maximization Subject to Multiple Constraints," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 4(1), pages 15-29, December.
    2. Jamal Nazrul Islam & Haradhan Kumar Mohajan & Pahlaj Moolio, 2009. "Preference of Social Choice in Mathematical Economics," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 3(1), pages 18-38, June.
    3. Pahlaj Moolio & Jamal Nazrul Islam, 2008. "Cost Minimization of a Competitive Firm," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 2(2), pages 148-160, December.
    4. Pahlaj Moolio & Jamal Nazrul Islam & Haradhan Kumar Mohajan, 2009. "Output Maximization of an Agency," Indus Journal of Management & Social Science (IJMSS), Department of Business Administration, vol. 3(1), pages 39-51, June.
    5. Joseph S. Desalvo & Mobinul Huq, 2002. "Introducing Nonlinear Pricing into Consumer Choice Theory," The Journal of Economic Education, Taylor & Francis Journals, vol. 33(2), pages 166-179, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Maximization; Nonlinear Constraint; Interpretation of Lagrange Multiplier;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models

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