Professional Documents
Culture Documents
Mathematical Applications in Economics
Mathematical Applications in Economics
Mathematical Applications in Economics
`
ECON 262 – Mathematical Applications in Economics
Fall 2022-23
Instructor Adeel Tariq
Room No. Room 148, Economics Wing Ground Floor, Academic Block
Office Hours
Email adeel.tariq@lums.edu.pk
Telephone 8462
Secretary/TA
TA Office Hours
Course URL (if any)
Course Basics
Credit Hours 4
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 110 minutes
Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration
Course Distribution
Core
Elective
Open for Student Category All
Close for Student Category None
COURSE DESCRIPTION
Economists use the language of mathematics to express theories, formulate problems, and describe complex relationships.
Mathematics allows economists to theorize, postulate, and present conclusions through a systematic process of reasoning.
Mathematical economics is not a distinct branch of economics; it is an approach to economic analysis that draws on mathematical
theorems to make economic thoughts and ideas clear and compelling. This course introduces students to the fundamentals of
mathematics required to apply and communicate economic theories, concepts, and ideas. We will cover a range of themes,
including the mathematical ingredients of an economic model, the use of calculus in the static analysis of economic equilibria, the
specifics of the optimization of economic behavior and objectives, and the methods for examining dynamic and temporal changes
in economic outcomes.
COURSE PREREQUISITE(S)
Econ 111 – Principles of Microeconomics
Math 101 – Calculus I
COURSE OBJECTIVES
This course will enable students to appreciate the application of mathematics in the field of economics. Students will cover and
apply a wide range of mathematical tools necessary to deconstruct economic models, conduct economic analysis, and
comprehend and evaluate modern economic literature. This course is particularly geared towards students who want to pursue
economics in graduate school; write technical papers for independent studies or senior projects; and prepare for a career in
economic research.
Last Modified on 7/1/2020
By Sana Khan
Office of the Registrar
Lahore University of Management Sciences
Learning Outcomes
The course will equip students to:
• Solve systems of linear economic equations using linear algebra
• Identify elements of an economic optimization problem
• Setup unconstrained and constrained optimization problems
• Derive first‐order conditions and second‐order conditions
• Calculate partial derivatives, total derivatives, and differentials of explicit and implicit functions
• Conduct comparative statics
Grading Breakup and Policy
Assignment(s): 0% (Ungraded problem sets will serve as practice for the exams)
Attendance: 13%
Exams (3): 87%
Note: Exams 1 and 2 will be conducted during scheduled class hours. Each of the remaining 26 classes will be worth 0.5% aggregate points for
the “Attendance” component. Exam 3 will be conducted in the final exam slot. Each exam will be worth 29%.
Examination Detail
Duration: 100 minutes
Exams (3)
Specifications: Closed book, closed notes. Analytical/structured questions. NO MCQs or True/False questions.
COURSE OVERVIEW
Module Topics Readings
1 Economic Models Chiang ‐ Chap. 2
Variables, Constants, and Parameters
Equations and Identities
Concepts of Sets
Relations and Functions
Polynomial Functions
Rational Functions
2 Equilibrium Analysis in Economics Chiang ‐ Chap. 3
Partial Market equilibrium (linear and nonlinear models)
General Market Equilibrium
3 Linear Algebra Chiang Chap. 4, 5
Linear Models and Matrix Algebra
Matrices and Vectors
Matrix Operations
Vector Operations
Vector Space
Commutative, Associative, and Distributive Laws
Transposes and Inverses of Matrix
Trace Determinant and Rank of a Matrix
Cramer’s Rule
Applications
4 Comparative Statics and the Concept of a Derivative Chiang Chap. 6, 7
Rate of Change and the Derivative
Derivative and the Slope of a Curve
Concept of Limit
Continuity and Differentiability of a Function
Last Modified on 7/1/2020
By Sana Khan
Office of the Registrar
Lahore University of Management Sciences
Rules of Differentiation
Partial Differentiation
Applications
5 Comparative Static Analysis of General Function Models Chiang Chap. 8
Differentials and derivatives
Total Differentials
Rules of Differentials
Total Derivatives
Derivatives of Implicit Functions
Applications
6 Optimization Chiang Chap. 9, 10
Optimum Values and Extreme Values
Second and Higher Derivatives
Necessary versus Sufficient Conditions
Applications
McLaurin and Taylor Series
Exponential and Logarithmic Functions
7 The Case of More than One Choice Variable Chiang Chap. 11
First‐order and Second‐order condition of optimality
Extreme Values of a Function of Two Variables
Objective Functions with more than Two Variables
Applications
8 Optimization with Equality Constraint Chiang Chap. 12
Effects of a constraint
Finding the Stationary Values
Lagrange‐Multiplier Method
Total‐Differential Approach
Second‐Order Total Differential
The Bordered Hessian
Quasiconcavity and Quasiconvexity
Applications
Textbook(s)/Supplementary Readings
Main Textbooks
1. 1. Alpha C. Chiang and Kevin Wainwright. 2005. Fundamental Methods of Mathematical Economics. 4th ed. New York: McGraw‐Hill
Irwin.
2. 2. Jeffrey Baldani, James Bradfield, and Robert W. Turner. 2005. Mathematical Economics. 2nd ed. Mason, OH: Thompson South‐
Western