Maximization

[Assem]

Could someone explain how first term became the second?

 

[Harry_the_cat]

Differentiate the first expression w.r.t. L and set equal to 0 (for optimisation). Then solve for L.

 

[Assem]

Could someone explain how first term became the second?View attachment 25266

I can’t get how e^rT(1-a)/a)-1 came?

 

[Deleted member 4993]

I can’t get how e^rT(1-a)/a)-1 came?

Please share your work - what did you get?

Also please tell us:

What is L^* ?

What is C ?

What is α ?

 

[Assem]

L is loan, C consumption,
a - I don’t know maybe discount

 

[JeffM]

Give us the complete problem along with context. You have not even provided an equation. Maximize with respect to what?

Note to mathematicians: economists have their own conventions for math. For example, they frequently put the independent variable on the vertical axis. I suspect somewhere there is a definition of some function in this problem. Based on this fragment, we cannot even tell whether we are using univariate or multivariate calculus. The most common tool in many economic theorems are LaGrangians, which definitely means multivariate.

 

[Harry_the_cat]

 

[Harry_the_cat]

I had to assume this is univariate calculus and that you were differentiating w.r.t. L.
L* seems to be the value for L which maximises the first expression.

 

[Harry_the_cat]

L is loan, C consumption,
View attachment 25272a - I don’t know maybe discount

not sure what you have done here.