Practice question · Multiple choice
The Ramsey savings problem and the optimal advertising path are both handled by the calculus of variations rather than ordinary optimisation. What do they have in common that requires it?
Hints
- Ask what is being solved FOR in each problem.
- Is the answer a quantity, or a schedule?
Show the answer
A. The unknown is a whole path through time, not a number
Why
Optimising over functions is the whole point. Saving more today leaves more capital tomorrow, so the choices are linked across time and cannot be made one at a time.
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