Powered by OpenAIRE graph
Found an issue? Give us feedback
addClaim

An Introduction to Lagrange Multipliers: Theory and Applications in Economics

Authors: Yuheng Zhai;

An Introduction to Lagrange Multipliers: Theory and Applications in Economics

Abstract

The purpose of this paper is to explore the basic applications of the Lagrange multiplier method in economics and to help beginners build their understanding of this mathematical tool. Tesla Inc. is used as a case study to examine how it maximizes profits by optimizing pricing and marketing expenses under given market conditions and constraints. The context of the study includes the importance of maintaining Tesla’s leadership position as the world’s leading electric car manufacturer in a competitive market. In this paper, the Lagrange multiplier method is used to incorporate specific market share and marketing expense constraints into the profit function and to find the extreme values by constructing the Lagrange function and solving for the derivatives. However, the results of the study show that the solutions obtained are extreme minima rather than the expected maxima. This result highlights the possible limitations of the Lagrange multiplier method in economic optimization problems. Nonetheless, this paper provides valuable lessons for understanding and applying the Lagrange multiplier method and points the way for further research on the application of optimization methods in economic decision making.

  • BIP!
    Impact byBIP!
    selected citations
    These citations are derived from selected sources.
    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    1
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Average
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Average
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Average
Powered by OpenAIRE graph
Found an issue? Give us feedback
selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
1
Average
Average
Average
Upload OA version
Are you the author of this publication? Upload your Open Access version to Zenodo!
It’s fast and easy, just two clicks!