Maximization

Assem

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Could someone explain how first term became the second?40DF4935-9249-4179-8F56-577A10619E86.jpeg
 

Harry_the_cat

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

Subhotosh Khan

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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

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L is loan, C consumption,
6439281A-DF77-408A-ABC1-56643E53992B.jpega - I don’t know maybe discount
 

JeffM

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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

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20210223_075201.jpg
 

Harry_the_cat

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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.
 
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