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Mathematics for Economics – II

The course 'Mathematics for Economics – II' aims to equip students with mathematical concepts for computing economic variables, optimizing functions, and applying the Lagrangian multiplier approach to constrained optimization. It includes units on matrices, multivariate calculus, and constrained optimization, with practical applications in economics. Recommended textbooks provide foundational knowledge and advanced techniques in mathematical economics.

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anushree.singh.2024
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124 views

Mathematics for Economics – II

The course 'Mathematics for Economics – II' aims to equip students with mathematical concepts for computing economic variables, optimizing functions, and applying the Lagrangian multiplier approach to constrained optimization. It includes units on matrices, multivariate calculus, and constrained optimization, with practical applications in economics. Recommended textbooks provide foundational knowledge and advanced techniques in mathematical economics.

Uploaded by

anushree.singh.2024
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Course Name: Mathematics for Economics – II

Number of Credits: 4

Learning Objectives:

1. Students will be able to appraise the use of mathematical concepts to compute economic
variables and their values.
2. Students will be able to interpret and infer from the concepts of optimization.
3. Students will be able to relate the Lagrangian multiplier approach to constrained optimization
problems and to apply special determinants (E.g.: Hessian and Jacobian for optimization) and
learn application of the Envelope Theorem.

Pedagogy:

Students will gain knowledge about the approach to be adopted to solve economic problems
through mathematical methods. Practice exercises, worksheets and assignments will be solved as
a part of experiential learning.

Learning Outcomes:
1. Students will be able to understand the mathematical and economic rationale of optimization
using matrices.
2. Students will be able to interpret concepts such as the envelope theorem, primal and dual
problems in Economics.
3. Students will be able to use optimize functions, such as the indirect utility function,
maximum and minimum value functions.

Course Outline:

Unit 1: Matrices and Special Determinants 20 Hrs


1.1 Types of Matrices, Matrix operation
1.2 Determinants, Inverse of a Matrix, Cramer’s rule for solving a System of Linear Equations.
1.3 Special Determinants and Matrices and their Use in Economics: The Jacobian, The Hessian,
Higher Order Hessians, Bordered Hessian for Constrained Optimization
Applications in forth coming units

Unit 2: Multivariate Calculus and Unconstrained Optimization 18 Hrs


2.1 Multivariate Calculus using Special matrices
Applications: Tax incidence (differing market structures); Utility maximization; Homogeneity
of demand (Cobb-Douglas demand function), Balanced budget multipliers
2.2 Unconstrained optimization using Special matrices
Applications: Cost minimization; Efficiency wages; Multi-plant firm; Multimarket monopoly.

Unit 3: Constrained Optimization using Special matrices 22 Hrs


3.1 Constrained optimization with binding constraints, Lagrangian methods, Value functions and
Lagrange multipliers
Applications: Cost minimization and conditional demand, Profit and Utility maximization,
Slutsky’s Equation, Inter-temporal consumption, Labor demand
3.2 The Envelope Theorem
Applications: Roy’s Identity, Shephard's Lemma.
3.3 Kuhn Tucker Conditions: Constrained optimization with inequality constraints using Kuhn
Tucker Method, One variable optimization, Non-negativity constraints
Applications: Utility maximization, Two-good diet problem, Sales maximization (Baumol’s
Model)

Books Recommended
 Alpha C. Chiang, Fundamental Methods of Mathematical Economics
 Arrow K.J. and M. Intriligator (Eds.), Handbook of Mathematical Economics, Vol I, II & III
 Allen R.G.D, Mathematical Economics
 Edward Dowling, Introduction to Mathematical Economics
 Eugene Silberberg, Wing Suen, The Structure of Economics: A Mathematical Analysis
 Henderson J.M. and R.E. Quandt, Microeconomic theory: A Mathematical Approach
 Knut Sydsaeter, Peter J. Hammond, Mathematics for Economic Analysis
 Knut Sydsaeter, Peter Hammond, Atle Seierstad and Arne Strom, Further Mathematics for
Economic Analysis
 Michael Klein, Mathematical Methods for Economics

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