Semester 4

ECON:206: Mathematical Economics (5 Credits)

1. Simple Application of derivatives: The derivative and slope of the function, Deriving marginal
functions, Differentials and Elasticity of demand, Instantaneous rate of growth, Relationship
between average and marginal cost curves, first and higher order derivative test and analysis of
nature of the curve, stationary and point of inflection, concavity and convexity of a function, and
relative maxima and minima.

2. Unconstrained Optimization: General Structure, derivation of first order and second order
conditions, envelope theorem, Applications: Profit maximization in different markets.

3. Constrained Optimization: General Structure with two independent variables, derivation of first
order and second order conditions, envelope theorem. Applications: Utility maximization and
derivation of demand function and some extensions of consumer behaviour including consumption-
labour choice and intertemporal choice; cost minimization and derivation of factor demand function;
Pareto optimality conditions without and with public goods.

4. Duality Approach: Duality in the theory of consumer behaviour: Indirect Utility Function and Roy’s
identity, expenditure function and its properties, derivation of Slutsky equation, Properties of cost
function and Shepard’s Lemma, duality between production and cost, Properties of profit function
and Hotelling’s Lemma, Properties of factor demand function under profit maximization, Slutsky
equation for factor demands.

5. Simple application of integral calculus: Deriving total function from marginal function, Investment
and capital function, Area under the curve, Consumer surplus and Producer

Surplus.

Essential Readings

Alpha C. Chiang & Kevin Wainwright, Fundamental Methods of Mathematical Economics, McGraw
Hill International Edition

Hoy, Livernois, McKenna, Rees and Stengos, Mathematics for Economics, 2nd Edition Prentice Hall of
India, Chapters 18, 20, 21 and 22

Eugene Silberberg and Wing Suen, The Structure of Economics: A Mathematical Analysis, Irwin
McGraw Hill

Knut Sydsaeter and Peter J. Hammod, Mathematics for Economic Analysis, Pearson Education