Assignment no.

Q. 1 Differentiate among variables, constants and parameters. Also define

endogenous as well as exogenous variables.

Ans

A constant is something like a "number". It doesn't change as variables change.

For example 3 is a constant as is π.

A parameter is a constant that defines a class of equations.

(xa)2+(yb)2=1

is the general equation for an ellipse. aa and bb are constants in this equation, but
if we want to talk about the entire class of ellipses then they are also parameters -
because even though they are constant for any particular ellipse, they can take
any positive real values.

A variable is an element of the domain or codomain of a relation. Remember that

functions are just relations so the input and output of functions are variables. For
example, if we talk about the function x↦ax+3x↦ax+3, then xx is a variable and
aa is a parameter -- and thus a constant. 33 is also a constant but it is not a
parameter.

A "known" variable is typically a value that the conditions of the problem dictate
the variable must take. For example if we are discussing an object an free fall,
then acceleration is a variable. But physics puts a constraint on the value that that
variable may take -- acceleration in free fall is a=g≈9.8. Thus, though aa may be
defined as the input of a function, it must take a "known" value. Thus it is a

known variable.

The Pythagorean theorem states that a2+b2=c2 for sides a,b and hypotenuse cc of
a right triangle. These are parameters -- thus they are also constants.

They are all the same sort of thing on different levels of

abstraction/generalization. Setting a value creates a more specialized (less
general) version of the mathematical object (function, optimization problem,
etc.), and replacing a formerly exactly defined value by a symbol creates a
generalized problem (covering a whole family of the specific problems).
❖ If you set aa to some value in ax+3ax+3, you get a more specific version, for
example 5x+3. If you further set xx to some value, you get a specific number
out, like 5⋅6+3.
❖ In the other direction, if you turn ax+3 into ax+tax+t, you can represent a
whole family of (parameterized) functions including ax+8 and ax+1.

tt is the highest level parameter, aa is one lower and xx is the lowest. Since we
usually only use a few such levels at a time, we like to use names for them
instead of just saying "higher level" parameter. Variables are usually those that
get adjusted on the lowest level, parameters are a level above and constants are
those that we don't change or adjust in our current task, but they could be turned
into even higher-level parameters (called hyperparameters) if we wanted to
further generalize our problem or object.

Any function with multiple parameters can be turned into a higher-level function
that just takes one parameter and gives you a new function which now takes one
less parameter than the original. This is called currying. So your
f(a,x)=ax+3f(a,x)=ax+3 can be turned into a function which gives a new function
for each aa:

F=(a↦(x↦(ax+3)))

So F(7) would be a function itself, 7x+3.

If you are familiar with programming it is also similar to variable scoping, i.e.
that values are defined in nested contexts. Functional programming uses these
concepts even more heavily.

Which parameter you put on which level depends on the current problem at hand
and the same problem can often be analyzed in multiple ways, i.e. by swapping
parameters across levels (like in our example, interpreting aa as the lowest and xx
as the higher-level parameter).

A variable is, of course, a quantity that is allowed to vary over its range of
definition. For example, f(x)=3x+5f(x)=3x+5 is a function, where x ranges over
the real numbers.
Now, I think the difference between constants and parameters is a bit more
subtle. First, constants:

A constant is just something that doesn't vary. 3 is a constant value, π is a

constant value. But then, in the function f(x)=ax+b. a and b are arbitrary
constants. So, for whatever reason, say we want to study functions of the form
f(x)=ax+b, where aa and bb are some fixed values, but we don't really care if
those values are 3, 42, or π, so we say aa and bb are constants. I think in that
sense there's a distinction between specific constants, like π, and arbitrary ones,
like a,b in the previous formula.

Now, with parameters, in my experience, there's always some notion of partial

application going on. I think statistical distributions are a really good example of
this. For example, take the normal distribution, if we wanted to, we could think
of it as a function of three variables, x,μ and σ, but that's not what a normal
distribution is! A normal distribution is the particular single-variable function of
x you get when you choose a particular σ and μ, as opposed to being arbitrary,
like aa and bb we talked about above.

Parameter=para+meter=against+measure to measure something against some

other thing" (against an object treated as a unit). So basicly a "parameter" is
something which could be measured with a ruler.

For the sake of modelling some real life system we make up a mathematical
object. Now let's imagine that we are modelling our solar system. After many
hours of mental labor we came up with a model:

x=f(t)=at−bx=f(t)=at−b

where

❖ x - a variable, position of the 3rd planet in the solar system under

consideration,
❖ t - a variable, time,
❖ a - a parameter of the system, speed of the planet rotation,
 ❖ b - a parameter of the system, planet's initial position relative to some point,
thus by plugging tt into f(t) we should get the future position of the planet
in the solar system.

Now f(t)=at−b is a model of the system but it is a general model, not a model of
our particular solar system, but a framework for modelling any solar system there
is! To render f(t)=at−bf(t)=at−b into OUR home system we should measure our
system's parameters: a,b. By measureing them we transform model of general
solar system into particular model of our solar system.

Now let's imagine that after taking measurments by using telescopes we get
values for our parameters: aa=500 km/h and bb=100 000 km. So
f(t)=at−bf(t)=at−b transforms into f(t)=500t−100000f(t)=500t−100000. Now we
can calculate the variable x.

In the example above you should see that:

1. We do not measure variables! We calculate them or plug them in the model
(function). We calculate variables from measured parameters.
2. We do not calculate parameters, instead we measure them as the etymology
of the word suggest.
3. By measuring parameters we select particular model f(t)=500t−100000
from the class of models f(t)=at−b.

So in the end: If you measure something - it's a parameter. If you calculate

something - it's a variable.

In the field of mathematics, a variable defines as an element connected to a

number, known as an estimation of the variable that is self-estimated, not
completely determined, or ambiguous. The expression “variable” originates from
the way that, when the argument (additionally called the “variable of the
Function”) changes, then the estimate changes accordingly.

Q.2 Consider the market model.

Qd = 20-3P

Qs = 10P-2
a) Calculate the equilibrium price and quantity.

Ans

Qd=Qs

20-3P = 10P-2

20+2 = 10P +13P

22 = 13P

P = 22 / 13 = 1.692

Qd = 20-3P

Qd = 20-3(22 / 13)

Qd = 20- 66/13 Qd =

194 / 13 = 14.92

b) Suppose government impose Rs 16 per unit tax on consumers. What will be

the equilibrium price and quantity after tax?

Qd = 20-3P

3P = 20 – Qd

P = 20/3 – Qd / 3

Qs = 10P-2

10P = Qs+2

P = Qs / 10 + 1 / 5 + 16

Q.3 Define matrix, vector and scalar.

Ans

Scalars
 • These are direction independent quantities that can be fully described by a
single number, and are unaffected by rotations or changes in co-ordinate
system. Examples of physical properties that are scalars: Energy,
Temperature, Mass.
• For this TLP scalars will be written in italics.

Vectors
• These are objects that possess a magnitude and a direction, and are

referenced to a particular set of axes known as a basis. A basis is a set of

unit vectors (vectors with a magnitude of 1) from which any other vector
can be constructed by multiplication and addition.
• The vector is referenced to the basis by its components. If possible, the

maths is simplified by using an orthonormal base with orthogonal (mutually

perpendicular) unit vectors. Examples of physical properties that are
described by vectors: Mechanical force, Heat flow, Electric field.
• Vectors will be written in bold and components of a vector, say x, will be

written as xi

Matrices
• A matrix is a mathematical object that contains a rectangular array of

numbers that can be added and multiplied (according to matrix

multiplication rules). They are very useful in many applications, for
example in reducing a set of linear equations into a single equation, storing
the coefficients of linear transformations (e.g. rotations), and as we shall
see, in describing tensors.
• The components of matrix A are written aij where i refers to the row

element and j refers to the column element.

Scalar products
• For two vectors: a = (a1, a2, a3) and b = (b1, b2, b3) The scalar product (also

known as the dot product) is defined as: a.b = a1b1 + a2b2 + a3b3 and so, for
example, the vectors (1, 4, −3) and (2, 5, 1) have a scalar product of 1×2 +
4×5 − 3×1 = 19.
• The scalar product is related to θ, the angle between the two vectors, and

can equivalently be written as: a.b = |a||b|cosθ.

 • For vectors of unit length, we can see that the scalar product is equal to the
cosine of the angle between them.

Matrix multiplication

If we have two matrices,

a11 a12 a13 b11 b12 b13

a21 a22 a23 b21 b22 b23

a32 b32
a31 a33 and B b31 b33
A= =

Then the product C = AB is found by ∑3k=1 aikbkj where i, j and k are indices that
represent the position of the element in the matrix.

a11 a12 a13 b11 b12 b13

a21 a22 a23 b21 b22 b23

a31 a32 a33 b31 b32 b33

C = AB
=
 a11b11 + a12b21 + a13b3 a11b12 + a12b22 + a13b3 a11b13 + a12b23 + a13b
1 2 33

a21b11 + a22b21 + a23b3 a21b12 + a22b22 + a23b3 a21b13 + a22b23 + a23b

1 2 33

a31b12 + a32b22 + a33b3

a31b11 + a32b21 + a33b3 2 a31b13 + a32b23 + a33b
1 33

=
Don't bother trying to remember the above result, remember the rule:

ROW × COLUMN = RC = "Race Car" or "Really Cool!" or make up your own

acronym to remember it. This is also useful to remember the conventional order
of suffices, where the first suffix indicates the row and the second indicates the
column.

You can use the following activity to practice more matrix multiplication.

b) Using Cramer’s rule find the value of ‘x’, ‘y’ and ‘t’
4x + 2y+t= 2
5x + y+2t= 1
3x + 4y+6t= 4
Q.4 Write a detailed note on Jacobean determinants, also give economic
interpretation of total differentiation.

Ans

In vector calculus, the Jacobian matrix of a vector-valued function of several

variables is the matrix of all its first-order partial derivatives. When this matrix is
square, that is, when the function takes the same number of variables as input as
the number of vector components of its output, its determinant is referred to as
the Jacobian determinant. Both the matrix and (if applicable) the determinant are
often referred to simply as the Jacobian in literature.

The Jacobian of a vector-valued function in several variables generalizes the

gradient of a scalar-valued function in several variables, which in turn
generalizes the derivative of a scalar-valued function of a single variable. In other
words, the Jacobian matrix of a scalar-valued function in several variables is (the
transpose of) its gradient and the gradient of a scalar-valued function of a single
variable is its derivative.
At each point where a function is differentiable, its Jacobian matrix can also be
thought of as describing the amount of "stretching", "rotating" or "transforming"
that the function imposes locally near that point. For example, if (x′, y′) = f(x, y)
is used to smoothly transform an image, the Jacobian matrix Jf(x, y), describes
how the image in the neighborhood of (x, y) is transformed.

If a function is differentiable at a point, its differential is given in coordinates by

the Jacobian matrix. However, a function does not need to be differentiable for its
Jacobian matrix to be defined, since only its first-order partial derivatives are
required to exist.

If f is differentiable at a point p in R n, then its differential is represented by J f(p).

In this case, the linear transformation represented by J f(p) is the best linear
approximation of f near the point p, in the sense that where o(‖x − p‖) is a
quantity that approaches zero much faster than the distance between x and p does
as x approaches p. This approximation specializes to the approximation of a
scalar function of a single variable by its Taylor polynomial of degree one,
namely

In this sense, the Jacobian may be regarded as a kind of "first-order derivative" of

a vector-valued function of several variables. In particular, this means that the
gradient of a scalar-valued function of several variables may too be regarded as
its "first-order derivative".

Composable differentiable functions f : R n → Rm and g : Rm → Rk satisfy the

chain rule, namely for x in Rn.

If m = n, then f is a function from Rn to itself and the Jacobian matrix is a square

matrix. We can then form its determinant, known as the Jacobian determinant.
The Jacobian determinant is sometimes simply referred to as "the Jacobian".

The Jacobian determinant at a given point gives important information about the
behavior of f near that point. For instance, the continuously differentiable
function f is invertible near a point p Rn if the Jacobian determinant at p is
nonzero. This is the inverse function theorem. Furthermore, if the Jacobian
determinant at p is positive, then f preserves orientation near p; if it is negative, f
reverses orientation. The absolute value of the Jacobian determinant at p gives us
the factor by which the function f expands or shrinks volumes near p; this is why
it occurs in the general substitution rule.

The Jacobian determinant is used when making a change of variables when

evaluating a multiple integral of a function over a region within its domain. To
accommodate for the change of coordinates the magnitude of the Jacobian
determinant arises as a multiplicative factor within the integral. This is because
the n-dimensional dV element is in general a parallelepiped in the new coordinate
system, and the n-volume of a parallelepiped is the determinant of its edge
vectors.

The Jacobian can also be used to determine the stability of equilibria for systems
of differential equations by approximating behavior near an equilibrium point. Its
applications include determining the stability of the disease-free equilibrium in
disease modelling.

Q.5 Find the derivatives of the following:

Ans

a) Y= (24x2+4) (23x+11)

b) Y= (12x2 + 14) (4x-1 -3)