Advanced Mathematical

Methods in Economics
ECON-3603
 This course aims to provide students with an
advanced and rigorous theoretical
understanding and technical training to apply
dynamic optimization and optimal control and
analyze certain behaviours of different macro-
Course variables within the domain of economics.
Moreover, the course works as a solid platform
Summary for stability analyses of the optimized value of
economic variables under different macro
models. Indeed, this course serves as a pre-
requisite to Advanced Macroeconomics courses.
Course Objectives
• To introduce dynamic optimization and optimal control theory to the
students.
• To equip students with general rules, special rules, and techniques to
understand real-life dynamic choices, whether constraints or not.
• To make students formulate and solve problem-specific ideas arising in
Canonical control problems.
• To make students apply the advanced mathematical and dynamic
optimization techniques in the macro behaviour of the economy.

• To facilitate students' technical training required to analyze the stability

of different macroeconomic variables in the short and long run.
 On completion of this course, the students will be able to
• Understand and prove the basic formulas of optimization
theory.
• Obtain a rigorous mathematical background focusing on
optimization techniques in areas such as economics.
• Formulate and solve finite and infinite horizon
optimization problems with unconstrained and
Course constrained restrictions.
• Critically examine the specific behaviour of various
Learning macroeconomic variables in both finite and infinite
horizons.
Outcomes • Investigate the economic problems of comparative
statics and dynamic optimization within the framework
of advanced tools and higher dimensions of
mathematical models.
• Understand the connections between the several aspects
of continuous optimization and the suitability and
limitations of optimization methods for different
purposes
 Main Reference
1. Hoy, Michael; LivernThanasis. Mathematics for Economics (2nd
Edition). The MIT Press, Cambridge, Massachusetts.
2. Chiang, Alpha C. Elements of Dynamic Optimization. Waveland
Press.
3. Dowling, E T. Introduction to Mathematical Economics.
Schaum's Outline Series, McGraw Hill, 3rd Edition.

Reference Additional Reference

Materials 1. Simon, Carl P. & Blume, L. Mathematics for Economists. W.W.
Norton Company, New York, London.
2. Chiang, Alpha C. & Wainwright, Kevin. Fundamental Methods
of Mathematical Economics. McGraw Hill, 4th Edition.
3. Leonard, Daniel, Ngo Van Long, and Van Long Ngo. Optimal
control theory and static optimization in economics. Cambridge
University Press.
4. Shone, Ronald. Economic Dynamics: Phase Diagrams and
Their Economic Application. Cambridge University Press.
Practice Questions
Question-1

Solve the following equations

𝒙 𝒙
a) − 𝟏𝟔 = + 𝟏𝟒
𝟑 𝟏𝟐

b) 𝟑𝒙𝟐 − 𝟒𝟏𝒙 + 𝟐𝟔 = 𝟎
 Home Practice
Draw the graph of the following Function

𝒚 = 𝟑𝒙𝟐 − 𝟒𝟏𝒙 + 𝟐𝟔
 Question-2
List all the possible
solutions of
𝟑 𝟐
𝒙 − 𝒙 − 𝟐𝒙 = 𝟎
 Home Practice
List all the possible solutions of

𝟑 𝟐
2𝒙 − 𝒙 − 𝟐𝒙 = 𝟎
Question-3
Graph the following functions and
indicate their respective slopes and
intercepts

a) 𝟑𝒚 + 𝟓𝒙 = 𝟏𝟐𝟎

b) 6y+3x-18=0
 Home Practice
•Find out and draw the perpendicular and
parallen lines of the previous two
equations
 Question-4
Consider the following equations

𝟏𝟐𝒙 + 𝟖𝒚 = 𝟏𝟐𝟎 𝟏
𝟔𝒙 + 𝟒𝒚 = 𝟑𝟔 𝟐

Solve the above equations? Do you

think both of the equations are
functions? Why or why not?
 Home Practice
Consider the following equations

𝟏𝟐𝒙 + 𝟖𝒚 = 𝟏𝟐𝟎 𝟏
𝟔𝒙 + 𝟔𝒚 = 𝟑𝟔 𝟐

Solve the above equations using the Cramer’s rule,

inverse matrix method, elimination and substitution
method
 Question-5
Differentiate the following functions

𝒂) 𝒚 = 𝟎. 𝟓𝒙𝟕 + 𝟎. 𝟐𝟓𝒙𝟓
𝒃) 𝒚 = (𝟑𝒙𝟐 + 𝟒𝒙)(𝟒𝒙𝟑 + 𝟗)
(𝟑𝒙𝟐 + 𝟒𝒙)
𝒄) 𝒚 =
𝟒𝒙𝟑 + 𝟗
Question-6
 Home Practice
• What is relative maximum and relative
minimum?
• Inflection point
• Conditions of finding out the inflection point
Finding out the Inflection Point, relative
maximum and relative minimum

Optimize the following function.

𝐟 𝐱 = 𝟑𝐱 𝟑 − 𝟑𝟔𝐱 𝟐 + 𝟏𝟑𝟓𝐱 − 𝟏𝟑

Determine if at the critical value(s) the function is at a

relative maximum or minimum. Find out the inflection
point.