The partial derivatives of L with respect to E, X, Z, and give four equations with

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The partial derivatives of L with respect to E, X, Z, and λ give four equations with four unknowns. Although these first-order conditions cannot be solved analytically, they can be rearranged so that E, X, and Z are each expressed as a function of λ and parameters. A solution can be found by guessing values of λ until a value is found that implies values of E, X, and Z that satisfy the budget constraint.

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Cost Benefit Analysis Concepts And Practice

ISBN: 9781108401296

5th Edition

Authors: Anthony E. Boardman, David H. Greenberg, Aidan R. Vining, David L. Weimer

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