Conditional Second-order Derivative and Degree of Homogeneity

**sev** · November 29th 2012, 06:11 AM

I have a function $f(a,b)$ with first-order derivatives $f_a>0, f_b>0$ and second-order derivatives $f_{aa}<0, f_{bb}<0, f_{ab}>0$ .

Additionally I know that the degree of homogeneity of the function is larger than $0$ but smaller than $1$ .

In an economics paper I found the statement that given these assumptions the derivative of $f_a$ with regard to $a$ is negative if the first-order derivative with regard to $b$ is held constant:

$\frac{\partial f_a}{\partial a}\mid_{f_b=C} <0$

Why is this so?

I understand that I can decompose $\frac{f_S(a,b)}{\partial a}$ into

$f_{aa} + f_{ab} \frac{\partial b}{\partial a}$

Now, I would have to show that $f_{aa} < f_{ab} \frac{\partial b}{\partial a}$ but I don't know how to do that using $f_b=C$ and the information about the degree of homogeneity.

**sev** · December 3rd 2012, 06:12 AM

Just a small correction. It should read:

I know that I can decompose $\frac{\partial f_a(a,b)}{\partial a}$ into ...

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