Business I / Calculus of Variations
Practice question · Multiple choice

Ordinary optimisation asks 'which price?' and calculus of variations asks 'which path?'. What kind of object is being differentiated in the second case?

Hints
  1. The input to the objective is not a number. What is it?
  2. Ask what you would perturb to test whether the path is optimal.
Show the answer

B. A functional, which scores an entire function with one number

Why

The input is a whole function and the output is a single score, so the perturbation is a wiggle in the path itself, that is what makes the Euler–Lagrange equation a differential equation rather than a formula. Option 3 is the discrete approximation, which is how it is usually computed.

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