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ECN5020
LECTURE 1
INTRODUCTION:
How important is Mathematics for
Economics?
The Nature of Mathematical Economics
Economics Model
continue
Mathematical versus
Nonmathematical Economics
3. Economic Model
Consumer Theory
Indifference curves and budgetary
constrainsts maximise utility with
respect to a budget
Intertemporal consumption decisions
allocating consumption between time
periods
Continue
Producer Theory
Pricing and output decisions profit
maximisation
Constant, increasing & decreasing returns
to scale
3. Equilibrium Analysis in
Economics
ontinue..
Three variables
Qd = the quantity demanded of the commodity
Qs = the quantity supplied of the commodity
Continue..
Qd, Qs
a
Qd=a-bP
Qs=-c+dP
(demand)
(supply)
Q*
0
-c
P*
Continue..
Continue..
Q* = (ad bc) / (b + d)
Continue
Continue..
b b 2 4ac
x1 , x 2
2a
Where the + part of the sign yields x 1 , and
the - part yields x 2
Continue..
Qs= 4P - 1
(1,3)
2
Qd = 4 P2
-2
-1
0
-1
Continue..
Ei Qdi Qsi = 0
(i = 1,2,n)
Continue..
(1)
(2)
(3)
(4)
(5)
(6)
Continue..
(i = 0,1,2)
Continue...
(9)
1P1 + 2P2 = - 0
(10)
Continue
P1*
c 2 0 c 0 2
c1 2 c 2 1
P2*
c 0 1 c1 1
c1 2 c 2 1
Continue...
Continue..
Continue
Equilibrium in National-Income
Analysis
Continue..
a I0 G 0
Y
1- b
a b(I0 G 0 )
C
1- b
Graphical Interpretation
Qd=a-bP
Qs=-c+dP
(demand)
(supply)
Q*
0
-c
P*
Qs= 4P - 1
(1,3)
2
Qd = 4 P2
-2
-1
0
-1
Graphical Interpretation
Question: Describe the relationship
between total revenue and sales
(output)?
What mathematical function would
you use to model this relationship?
Continue..
TR(q) = a + bq - cq2
Calculus Review
Calculus Review
db
1. If b is a constant,then
0
dx
d [bf ( x )]
2. If b is a constant,then
bf ' ( x )
dx
dx b
b 1
3. If b is constant, then
bx
dx
d ln x 1
4.
dx
x
Calculus Review..
da x
x
5.
a ln a for any constant a
dx
a special case of this rule is dex/dx = ex
Calculus Review..
Calculus Review..
g ( x ) f ' ( x )g ( x ) f ( x )g ' ( x )
8.
dx
[g ( x )] 2
provided that g ( x ) 0
Calculus Review..
dz dx dz dx dz
Partial Derivatives
Partial Derivatives.
and
Partial Derivatives.
3. If y f (x1, x2 ) a ln x1 b ln x2 , then
f
a
f
b
f1
and
f2
x1
x1
x2
x2
Partial Derivatives.