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EC 336

Colby College
Department of Economics
Fall 2008
Professor: Guillermo Vuletin (email:
Office: Diamond 359
Phone: 5235
Lecture time and location: Tuesdays and Thursdays 9:30-10:45 am, DIAM 341.
Office hours: Tuesdays and Thursdays 3:00-4:30 pm.
TA: Ling Zhu (email:
TA office hours: Wednesdays 7:00-8:30pm (DIAM 354)
Course web page:

A course in advanced economic theory designed to provide students the fundamental
mathematical tools necessary to prepare for graduate work in economics or business
administration. Topics include the development of portions of consumer, producer and macro
(fiscal and monetary) theory. The material includes comparative static analysis, single and
multiple agent unconstraint and constraint optimization problems and dynamic analysis.
Course objectives
By the end of the course, students are expected to i) learn how to read and understand most
current journal articles in economics without stumbling over the mathematics, ii) develop an
initial understanding of how to frame economic modeling ideas in mathematical format, iii)
prepare students to use a wide range of mathematical techniques used in senior undergraduate
and graduate level courses and, iv) develop a set of problem-solving and analytical skills to
solve problems in other fields of study and everyday decisions.
Economics 224 and either Mathematics 122 or 162.
Fundamental Methods of Mathematical Economics (4th Edition) by Alpha C. Chiang and Kevin

The final paper must have a maximum of 7 single-spaced pages of text (including a list of references) and must be typed using Scientific WorkPlace 5. Late problem sets or paper will not be accepted. Acceptable reasons for missing an exam include critical emergencies. We will spend a class in DIAM 322 (day TBA) learning the basics of those programs. problem sets. November 6 class. There.c fm . Academic honesty: Colby’s policy on academic honesty can be found in http://www. athletic trips or illness. I encourage you to work with other classmates.5. It is my job to help you understand the material and this is the reason why office hours are held.colby. If you need to meet with me and cannot make one of those times. The paper will be due Sunday. all problem sets (and exams!) must be your own.Course policies Course web site: You should frequently access the course web site to find updated course information. however. so make use of them. That is to say. there will be no final during finals week. The final exam will Thursday. Diamond 359. please see me prior to using the cell phone. Grading policy: The grades for this course will be based on class participation. please talk to me as soon as possible. If there is a legitimate reason for you to be within reach during class times. . If some athletic event overlaps with a course exam please contact me as soon as you know about such event (at least one week in advance) so I can help you to resolve the problem. If you feel that you are not making as good progress in the course as you should. Software: You will learn to use two software packages (Mathematica 6 and Scientific WorkPlace 5. you will find problem sets and their solutions and postings of important announcements. and a short (one page) paper proposal must be turned in at the beginning of Thursday. There will not be extra credit assigned for this course. December 14 at 11:00am. Please note ahead the scheduled dates of exams. please schedule an appointment by email. Electronic device policy: Please turn off all electronic devices during class. Topics must be chosen by the first week of However. Your final grade will be determined as follows: Problem sets Final Paper Class participation 45% 25% 20% 10% Paper: The paper consists on modeling some real-life phenomenon using the techniques and tools learned in the course. I expect students to attend all classes and actively participate in class discussions.5) that will prove to be very handy. Unexcused absences from exams will result in a zero grade. December 4 (during class time). Office hours: Tuesdays and Thursdays 3:00-4:30 pm. and a paper. Do not wait until the week before the final exam! Class and exam attendance: I do not take attendance. Both packages are currently installed in DIAM 322. a final exam.

1 Optimization of functions of one variable • Main concepts • First-derivative test or first order conditions (necessary conditions) • Second-derivative or second order conditions (sufficient conditions) Applications: Profit maximization (one product) under: .1 and II. • Single vs. 7. ii) Rybczynski model(trade). 2. multiple equilibrium.2 Linear Models and Matrix Algebra • Matrix algebra with special emphasis on Cramer’s rule. multiple commodity markets. 5 Problem set 1 (II.perfect competition. 8 Problem set 2 (III): i) Mundell-Fleming model (IS-LM with small open economy) (macro). II. • Solution of equilibrium.Cournot competition (duopoly). 9.4 . • Partial vs. IV.Tentative course outline Topic I. general equilibrium.1-9.monopoly. UNCONSTRAINT OPTIMIZATION PROBLEMS IV. Alternative approaches. Application: labor supply. EQUILIBRIUM (OR STATIC) ANALYSIS II. INTRODUCTION TO MATHEMATICAL ECONOMICS II. Application: single vs. . III. ii) wage gaps and international trade. 6. .1. Textbook chapters 1. COMPARATIVE STATIC ANALISYS • Review of comparative static analysis using IS-LM model. Applications: i) multiple commodity markets. ii) Heckscher-Ohlin model (trade).2): i) National-Income model (macro). Equilibrium analysis in Economics • Definition of equilibrium.1-2.2 3 4.

Issue 3. The role of elasticity of substitution (micro). V. 12. iii) Presidential preferences for inflation versus unemployment.a) perfect access to international capital markets. iii) Utility maximization.5 (This class will take place in DIAM 322) . ii.5. ii) Utility maximization and consumer demand. iii) Profit maximization (two products) under monopoly (complementary vs. ii.sciencedirect.b) financial autarky.11. one period) (micro). • Extreme values of function of n Problem set 4 (VI): i) Technical vs. • First-derivative test or first order conditions. VI. Application: Profit maximization (two products) under perfect competition. The role of non time-separable preferences. ii.1-12. Zaleski. Applications: i) Monopolist selling in segmented markets.selection under perfect competition. Pages 555-561.2 Optimization of functions of more than one variable 11. Peter A. Problem set 3 (IV.b).1-11. 12.a) vs.7 Applications: i) Utility maximization and consumer demand (two goods. CONSTRAINT OPTIMIZATION PROBLEMS • Lagrange-multiplier method. ii) Utility maximization and consumer demand (one goods. Presidential preferences for inflation versus unemployment.4. ii. Summer 1992. IV. ii. two periods) (macro). policy journal articles selection revisited (micro). INTRODUCTION TO MATHEMATICA 6 AND SCIENTIFIC WORKPLACE 5.3. consumer demand. substitutable goods). (http://www.1 and IV. • Second-derivative or second order conditions. policy journal articles selection (micro). 12. • Extreme values of function of two variables and comparative static aspect of optimization. and labor decisions. Journal of Macroeconomics. ii) Technical vs.7 • The differential version of optimization conditions. Volume 14.6-11.2): i) Inputs -labor and capital. ii) Ordinary least squares (OLS) estimators.c) welfare implications.

VIII. VII. Certainty equivalence and precautionary savings. complete asset markets) Applications: i) Utility maximization and consumption under uncertainty of output path and incomplete markets.2 Multiple agents optimization.1): i) Utility maximization and consumption under uncertainty of output path and complete markets. 19. Benevolent and nonbenevolent government. 20 . DYNAMIC ANALYSIS TBA 14. The role of state contingent assets. Problem set 5 (VII. Problem set 6 (VII. Applications: i) Optimal taxation. 17.VII.2): i) Optimal taxation. Endogenous government spending.1 Uncertainty and consumption under capital markets imperfections (incomplete vs. FURTHER TOPICS IN OPTIMIZATION VII. Exogenous government spending. 15. Benevolent government.