For solutions of optimization problems from Examples 3.3 analyse sensitivity of. 1. the demand for a production factor and the maximum profit to changes in a product price and to changes in values of parameters of a production function and of a production cost function, 2. the conditional demand for a production factor and the minimum cost of producing y output units to changes in an output level and to changes in values of parameters of a production function and of a production cost function, 3. the product supply and the maximum profit to changes in a product price and to changes in values of parameters of a production function and of a production cost function.

Examples 3.3

= Example 3.3 Two traders come to a market with bundles of goods: al = X11 X12. 1/4 1/4 (10, 20), a = (20, 10). Utility functions of traders are: u(x11, X12) 1/3 u(x21, x22) = x214x22. We know from Example 3.2 that in the static Arrow- Hurwicz model for a given initial allocation and given utility functions, the excess demand function takes the form: z(p) = (15 P2 - 15, 15P - 15). P1 P2 and the Walrasian equilibrium price vector has a structure: p=(1, 1), > 0. Let us first consider a discrete-time version of the dynamic Arrow-Hurwicz model. A broker announces initial prices: p(0) = (2,4).