16 views

Uploaded by Sapphasak Bun Chatchawan

The prep math for MSc econ at Warwick

- Notes 1
- 4 OpenCV Main
- 33203 05 Leslie Matrix
- Tcsc Damp Sadikovic
- Modal parameter identification based on ARMAV and state–space approaches
- 1-s2.0-S0895717707000982-main
- List1
- Eigen,Diag,Sumetrix
- Matrix Methods
- bok%3A978-1-4471-2879-3
- 1f_EigenProblemOverview
- 600ex2F13-sol
- Chapter 9
- MatLabNotes.pdf
- MATLAB Introduction
- Matrices
- 6427445.ppt
- Tensores
- MAT1341_Final_2009W
- Vampire Ecology in the Jossverse

You are on page 1of 27

Preparation Material for the Academic Year 2016/17

Michele Aquaro

Piotr Jelonek

These notes may contain typos or mistakes. If you find any, please email us at M.Aquaro@warwick.ac.uk

and P.Z.Jelonek@warwick.ac.uk.

Contents

1. Indicative Syllabus and Suggested

1.1. Introduction . . . . . . . . . .

1.2. Indicative Syllabus . . . . . .

1.3. Suggested Readings . . . . . .

Readings

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Matrix Algebra

2.1. Introduction . . . . . . . . . . .

2.2. Vectors . . . . . . . . . . . . .

2.3. Matrices . . . . . . . . . . . . .

2.4. Vector Spaces . . . . . . . . . .

2.5. Rank, inverse, and determinant

2.6. Systems of Linear Equations . .

2.7. Eigenvalues and Eigenvectors .

2.8. Quadratic Forms . . . . . . . .

5

5

5

6

.

.

.

.

.

.

.

.

7

7

7

8

9

10

11

11

13

3. Statistics

3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2. Random Variables and Probability Distributions . . . . . . . . . . . . . . . . . .

3.3. Moments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

15

15

16

4.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.2. Multivariate Calculus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.3. Constrained Optimization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

19

19

20

5.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.2. Difference Equations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5.3. Differential Equations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

23

23

24

A. Solutions

27

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

3/27

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.

Readings

1.1. Introduction

All of the MSc Economics core modules taught at the University of Warwick require students to

have a solid quantitative background. Introductory Mathematics and Statistics aims to provide you

with the necessary mathematical and statistical skills to complete these modules. In particular,

this document contains a selection of examples and exercises taken from various sources to help

you practicing with core quantitative techniques.

This pre-sessional module covers four topics: matrix algebra, statistics, multivariate calculus and

differential equations. Please see below for a more detailed list of what we intend to cover. Please

be aware that this list is indicative and can be subject to minor changes.

Matrix Algebra Vectors: definition, sum, inner product, orthogonality. Matrices: definition, transpose, sum, product, square matrices, trace, rank, inverse, determinant. Partitioned

matrices: definition, block diagonal matrices, partitioned sum, partitioned product, inverse

of a partitioned matrix. System of linear equations: definition, square matrix systems,

general case. Eigenvalues and eigenvectors: definition, characteristic polynomial, algebraic

multiplicity, geometric multiplicity, determinant and eigenvalues, similar matrices, diagonalisation, symmetric matrices. Quadratic forms: definition, definiteness and eigenvalues,

principal minors, leading principal minors, definiteness and principal minors.

Statistics Probability: definition, independence, conditional probability. Random variables

and probability distributions: discrete random variable (univariate and multivariate), continuous random variable (univariate and multivariate), joint densities, marginal densities,

conditional densities, cumulative distribution functions. Moments: expected value, higher

moments, properties, conditional expectation and conditional variance, law of iterated

expectations. Some special distributions: Bernoulli, Normal, Binomial, Uniform, Chi-square,

Students t, multivariate Normal.

Multivariate Calculus and Constrained Optimization Convex analysis: convex set,

level curves, upper and lower level sets. Multivariate functions: homogeneous of degree k,

convex, concave, quasiconvex, quasiconcave. Multivariate calculus: gradient, Hessian, Young

theorem, Taylor theorem and second order approximations, stationary points, first and

second order optimality condition, bordered Hessian. Constrained optimization: KarushKuhn-Tucker Theorem, sufficient optimality conditions (in two cases: concave and general).

Comparative statics: Envelope Theorem, Roys identity. Matrix differentiation: Jacobian,

derivative of a quadratic form.

5/27

substitution, particular and general solutions, homogeneous and nonhomogeneous equations,

trajectories, stability. System of difference equations: definition, solution by change of

variables in case when A may be diagonalized, higher order equations. Single differential

equation: definition, differential equation as a difference equation in a limit, general solution,

trajectories, stability. System of differential equations: definition, solution by change of

variables in a case where A may be diagonalized, higher order equations. Phase diagrams:

definition, rules of plotting phase diagrams.

These are some suggested reading lists. If you have other textbooks or lecture notes

covering the same material for instance, textbooks or lecture notes you have used

in your undergraduate studies you are welcome to use them instead. Sometimes, we

receive emails asking whether other textbooks are suitable replacements for any of the

suggested readings. Please be aware that, unfortunately, it is not always possible for us to

give a precise answer to this question.

Main Suggested Readings:

(SB) Simon and Blume, Mathematics for Economists, 1994.

(SHSS) Sydsaeter, Hammond, Seierstad, and Strom, Further Mathematics for Economic

Analysis, 2008.

(A) Amemiya, Introduction to Statistics and Econometrics, 1994.

You are welcome to use different editions than the ones listed. Also, the first two texts (SB and

SHSS) are largely substitutes for each other.

Here are some suggestions for other textbooks you may find helpful:

Abadir and Magnus, Matrix Algebra. This is the inspiration for the matrix algebra lecture

slides.

Sydsaeter and Hammond (and Strom), Essential Mathematics for Economic Analysis. This

is a basic, undergraduate level maths book. It is a predecessor to the SHSS book above.

Pemberton and Rau, Mathematics for Economists: An Introductory Textbook. This is an

alternative to the maths books above.

Casella and Berger, Statistical inference, second edition.

DeGroot and Schervish, Probability and statistics, fourth edition.

Hogg, McKean, and Craig, Introduction to mathematical statistics, seventh edition.

Bain and Engelhardt, Introduction to probability and mathematical statistics, second edition.

6/27

2. Matrix Algebra

2.1. Introduction

This chapter contains a selection of exercises taken from Abadir and Magnus (2005). The

numbering is the same as in the original textbook; for instance, Exercise (1.7 Inner product)

refers to Exercise 1.7 on page 6 in Abadir and Magnus (2005). Also the notation is the same

as in the textbook; for instance, bold-face capital letters such as A and B denote matrices,

whereas bold-face small letters such as a and b denote vectors, see also Abadir and Magnus (2005;

Appendix B). All vectors are column vectors, unless stated otherwise.

The level of difficulty of these exercises ranges from basic to advanced. For your convenience,

exercises have been divided into two categories:

Core (basic and intermediate): Exercises 1.7(a)(d), 1.8, 1.10(a)(b), 2.3, 2.4(b)(e),

2.5(a), 2.9, 2.22(a)(b), 2.24, 3.15(a)(c), 3.16(a)(b), 3.17, 3.22, 3.23, 4.19, 4.20(a), 4.44,

6.46, 7.1, 7.2, 7.3, 7.4, 7.6, 7.10, 7.11, 7.15, 7.32, 8.1, and 8.2.

Advanced: Exercises 2.26(a)(b), 3.9(a)(c), 3.19(a)(c), 4.22(a)(e), 7.8, 7.9, 7.12, 7.13,

7.24, 7.26, 7.31, and 8.11.

We recommend you to practice all core exercises (a few times) before attempting the more

advanced ones.

2.2. Vectors

Exercise (1.7 Inner product)

Pm

Recall that the inner product of two real vectors x and y in Rm is defined as hx, yi := i=1 xi yi .

Prove that:

(a) hx, yi = hy, xi;

(b) hx, y + zi = hx, yi + hx, zi;

(c) hx, yi = hx, yi, where R;

(d) hx, xi 0, with hx, xi = 0 x = 0.

Exercise (1.8 Inner product, numbers)

Let

1

4

1

x = 2 , y = 5 , z = 1 ,

3

1

1

3

w = .

1

Compute hx, yi, hx, zi, and hy, zi, and find such that hy, wi = 0.

7/27

For any x in Rm , show that

(a) kxk = || kxk for every scalar ;

(b) kxk 0, with kxk = 0 if and only if x = 0;

(c) kx + yk kxk + kyk for every x, y Rm , with equality if and only if either x = 0, y = 0 or

x = y (triangle inequality).

2.3. Matrices

Exercise (2.3 Matrix addition)

Let A, B, C, and the null matrix O be matrices with suitable dimensions so that the following

operations are defined. Prove that:

1. A + O = A.

2. A + B = B + A.

3. A + B + C = (A + B) + C = A + (B + C).

Exercise (2.4 Transpose)

(b) Prove that (X 0 )0 = X for any matrix X.

(c) What is the transpose of the row vector b0 = (1, 2, 3)?

(d) Show that (A + B)0 = A0 + B 0 for any two matrices A and B of the same order.

(e) For two real vectors a and b of the same order, show that the inner product ha, bi = a0 b.

Exercise (2.5 Multiplication, 1)

Let

1 2 3

A=

4 5 6

B=

4

1

5

2

6

3

Exercise (2.9 Noncommutativity)

(a) Show that BA need not be defined, even if AB is.

(b) Show that, even if AB and BA are both defined, they are in general not equal.

(c) Find an example of two matrices A and B such that AB = BA. (Two matrices with this

property are said to commute.)

Exercise (2.22 Symmetry)

Let A be a real square matrix.

(a) Show that A + A0 is symmetric, even if A is not symmetric.

(b) Show that AB is not necessarily symmetric if A and B are.

8/27

Let A and B be square matrices of the same order, and let and be scalars. Show that:

(a) tr(A + B) = tr(A) + tr(B);

(b) tr(A + B) = tr(A) + tr(B);

(c) tr(A0 ) = tr(A);

P P

(d) tr(AA0 ) = tr(A0 A) = i j a2ij ;

P

(e) tr(aa0 ) = a0 a = i a2i for any vector a.

Exercise (2.26 Trace, cyclical property)

(a) Let A and B be m n matrices. Prove that

tr(A0 B) = tr(BA0 ) = tr(AB 0 ) = tr(B 0 A).

(b) Show that tr(Aaa0 ) = a0 Aa for any square A and conformable a.

Exercise (3.9 Subspaces of R2 )

(a) Show that the set of real 2 1 vectors whose first component is zero is a subspace of R2 .

(b) Is the set of real 2 1 vectors whose first component is one also a subspace of R2 ?

(c) Is the set {(x, y), x 0, y 0} a subspace of R2 ?

Exercise (3.15 Linear dependence, theory)

A finite set of vectors x1 , . . . , xn (n 1) is linearly dependent if there exist scalars 1 , . . . , n ,

not all zeros, such that 1 x1 + + n xn = 0; otherwise it is linearly independent. Show that:

(a) the null vector by itself is a linearly dependent set;

(b) any set of vectors containing the null vector is a linearly dependent set;

(c) a set of nonzero vectors x1 , . . . , xn is linearly dependent if and only if a member in the set is

a linear combination of the others.

Exercise (3.16 Linear dependence)

(a) Show that the columns of the n n identity matrix are linearly independent.

(b) Show that the columns of

1 3

2

A = 1 5 3

5 1 0

the matrix

0

1

2

Exercise (3.17 Linear dependence, some examples)

9/27

(a) If x, y, and z are linearly independent vectors, are x + y, x + z, and y + z also linearly

independent?

(b) For which values of are the vectors (, 1, 0)0 , (1, , 1)0 , and (0, 1, )0 linearly dependent?

Exercise (3.19 Spanned subspace in R3 )

(a) Let A be a circle in R3 centered at the origin. What is the space A spanned by A?

(b) Let A be a plane in R3 not passing through the origin. What is A?

(c) Consider the vectors e1 = (1, 0, 0)0 , e2 = (0, 1, 0)0 , and v = (0, 2, 0)0 in R3 . Show that the

three vectors span a plane (the x-y plane), that e1 and e2 alone span the same plane, and

that e2 and v span only a line.

Exercise (3.22 Basis)

(a) Find a basis of R2 .

(b) Find another basis of R2 .

(c) Show that there are infinitely many basis of R2 .

Exercise (3.23 Basis,

Consider the matrix

1 1 1

A = 0 1 1

1 1 2

numbers)

1

2

3

1

2

5

1

3

5

2

1

1

2 5

3 3

0 4

and denote the nine columns by a1 , . . . , a9 . Which of the following form a basis of R3 ?

(a) a1 and a2 ;

(b) a1 , a4 , a6 , a8 ;

(c) a2 , a4 , a7 ;

(d) a3 , a5 , a9 .

Exercise (4.19 Inverse of 2-by-2 matrix)

Consider the matrices

1 2

A=

2 4

B=

(b) Does B have an inverse? What is rk(B)?

Exercise (4.20 Uniqueness of inverse)

(a) Show that an inverse, if it exists, is unique.

10/27

1

2

3

.

4

For any nonsingular matrix A, show that:

(a) (A)1 = (1/)A1 with 6= 0;

(b) (A1 )1 = A;

(c) (A1 )0 = (A0 )1 ;

(d) (AB)1 = B 1 A1 if B is nonsingular and of the same order of A;

(e) if A and B commute and B is nonsingular, then A and B 1 commute.

Exercise (4.44 Determinant of the inverse)

(a) If A is nonsingular, show that |A1 | = |A|1 .

(b) If A is orthogonal, show that |A| = 1.

Exercise (Again: 4.19 Inverse of 2-by-2 matrix)

Consider the matrices

1 2

1

A=

B=

2 4

2

3

.

4

(b) Does B have an inverse? What is rk(B)?

Exercise (6.46)

Show that the system

2x1 + 3x2 + x3 = 7,

x1 + 2x2 2x3 = 8,

3x1 + 4x2 + 4x3 = 20

has no solutions.

Exercise (7.1 Find two eigenvalues)

Find the eigenvalues of the 2 2 matrices

3

5

3

4

A=

, B=

,

2 4

5 5

Exercise (7.2 Find three eigenvalues)

Find the eigenvalues of the 3 3 matrices

7 0 0

7 0 0

A = 0 3 0 , B = 0 3 5 ,

0 0 3

0 5 4

C=

3

5

7

C = 0

0

11/27

5

.

7

0

3

0

0

1 .

3

(a) Find the characteristic equation and the eigenvalues of

1 3 0

A = 0 1 0 .

2 1 5

(b) What is the rank of A?

Exercise (7.4 Characteristic polynomial)

(a) Find the characteristic polynomial and the eigenvalues 1 and 2 of the 2 2 matrix

a b

A :=

.

c d

(b) Show that 1 2 = |A| and 1 + 2 = tr A.

Exercise (7.6 A 6= B may have the same eigenvalue)

Suppose that two matrices A and B (of the same order) have the same characteristic polynomial.

Is it necessarily true that A = B?

Exercise (7.8 Eigenvectors are not unique)

(a) Show that an eigenvector cannot be associated with two distinct eigenvalues.

(b) But can two vectors be associated with the same eigenvalue?

Exercise (7.9 Linear combination of eigenvectors with same eigenvalue)

Pm

If x1 , . . . , xm are all eigenvectors of A associated with the same , show that i=1 i xi is also

an eigenvector of A.

Exercise (7.10 Find the eigenvectors, 1)

Consider the matrices

1 1

2 0

A=

, B=

0 1

0 2

(a) What are the eigenvalues and eigenvectors of A?

(b) What are the eigenvalues and eigenvectors of B?

Exercise (7.11 Geometric multiplicity, 1)

Consider the matrix

1 3 0

A = 0 1 0 .

2 1 5

What are the eigenvectors of A? Are they linearly independent? Are they orthogonal?

Exercise (7.12 Multiples of eigenvalues and eigenvectors)

(a) If is an eigenvalue of A, show that t is an eigenvalue of tA, with the same eigenvector(s).

12/27

the same eigenvalue.

Exercise (7.13 Do A and A0 have the same eigenvalues?)

(a) Show that a matrix A and its transpose A0 have the same eigenvalues.

(b) Do they also have the same eigenvectors?

Exercise (7.15 Eigenvalues of a triangular matrix)

(a) What are the eigenvalues of a diagonal matrix?

(b) What are the eigenvalues of a triangular matrix?

Exercise (7.24 Similarity)

(a) Show that similar matrices have the same set of eigenvalues (with the same multiplicities).

(b) Do they have the same set of eigenvectors as well?

Exercise (7.26 Determinant and eigenvalues)

Qn

Show that the determinant of a square matrix equals the product of its eigenvalues, |A| = i=1 i .

Exercise (7.31 Linear independence of eigenvectors)

(a) Show that eigenvectors associated with distinct eigenvalues are linearly independent.

(b) Are there eigenvectors orthogonal to each other?

Exercise (7.32 Diangonalization of matrices with distinct eigenvalues)

Let A be an n n matrix with distinct eigenvalues. Then there exist a non singular n n matrix

T and a diagonal n n matrix whose diagonal elements are the eigenvalues of A, such that

T 1 AT = .

Exercise (8.1 Symmetry and quadratic forms)

(a) For every square matrix A, show that

A + A0

0

0

x Ax = x

x.

2

Exercise (8.2 Matrix representation of quadratic forms)

Write the following quadratic forms in matrix notation with a symmetric matrix: (a) x2 + y 2 xy,

(b) 4x2 + 5y 2 + z 2 + 2xy + 2yz, (c) x2 + 2y 2 + xy. Verify whether these forms are positive (or

negative) definite, semidefinite, or indefinite.

13/27

3. Statistics

3.1. Introduction

This chapter contains a selection of exercises taken from Amemiya (1994). The numbering is the

same as in the original textbook; for instance, Example (3.2.3) refers to Example 3.2.3 on

page 24 in Amemiya (1994). Also the notation is the same as in the textbook; for instance, capital

letters X, Y, denote random variables, and small letters x, y, denote their realisations.

Example (3.2.3)

Let the joint probability distribution of X and Y be given by

X

1

0

Pr (Y = yj )

Pr (X = xi )

2/8

2/8

4/8

1/8

3/8

4/8

3/8

5/8

1

Example (3.4.1)

If fX,Y (x, y) = xye(x+y) , x > 0, y > 0, and 0 otherwise, that is Pr (X > 1, Y < 1)?

Example (3.4.5)

Suppose

(

(3/2)(x2 + y 2 )

fX,Y (x, y) =

0

otherwise.

Calculate

1

1

Pr 0 < X < 0 < Y <

2

2

and determine if X and Y are independent.

Hint: First calculate Pr(0 < X < 1/2, 0 < Y < 1/2) and Pr(0 < Y < 1/2), and then use the

Bayes Rule.

Example (3.5.1)

Suppose

(

fX (x) =

1 x/2

2e

if x > 0,

otherwise.

Find FX (x).

15/27

Example (3.5.2)

Suppose

(

2(1 x)

fX (x) =

0

if 0 < x < 1,

otherwise.

Find FX (x).

Example (3.5.3 Mixture random variable)

Suppose

0

if x 0,

FX (x) =

x

if 0.5 < x 1,

1

if x > 1.

Draw FX (x).

Example

2

Let X be a continuous random variable with pdf fX (x) = (1/ 2)ex /2 , x R, and let

Y = + X, where and are two constants, with > 0. Determine fY (y).

3.3. Moments

Example (4.1.1)

Let

(

2x3

fX (x) =

0

if x > 1

.

otherwise

Example (4.1.2)

Let

(

x2

fX (x) =

0

if x > 1

.

otherwise

Example (4.3.1)

X

1

-1

Pr (Y = yj )

Y

1

-1

/2

(1 )/2

(1 )/2

/2

Pr (X = xi )

Compute cov(X, Y ).

16/27

Example (4.3.2)

Let the joint probability distribution of (X, Y ) be given by

X

1

0

-1

Pr (Y = yj )

-1

1/6

1/12

1/6

1/12

0

1/12

1/6

1/12

1/6

Pr (X = xi )

Example (4.3.4)

Let the joint density be

(

x+y

fX,Y (x, y) =

0

.

otherwise

Calculate cov(X, Y ).

Example (4.4.1)

Suppose fX (x) = 1 for 0 < x < 1 and equal to zero otherwise, and fY |X (y|x) = 1/x for 0 < y < x

and equal to zero otherwise. Calculate E(Y ).

Example (4.4.2)

The marginal density of X is given by fX (x) = 1, 0 < x < 1. The conditional probability of Y

given X = x is given by

Pr (Y = 1|X = x) = x

Pr (Y = 0|X = x) = 1 x.

Find E(Y ) and var(Y ).

Example (7.3.3, Normal distribution)

Let X1 , , Xn be a random sample on N(, 2 ) and let x1 , , xn be their observed values.

Compute the maximum likelihood estimator of and .

Example (7.7.1, Binomial distribution)

Let X1 , , Xn be a random sample on Bin(n, p) and let x1 , , xn be their observed values.

Compute the maximum likelihood estimator of p.

17/27

Maximization

4.1. Introduction

This chapter contains a selection of examples and exercises taken from the following textbooks:

(SB) Simon and Blume, Mathematics for Economists, 1994.

(SHSS) Sydsaeter, Hammond, Seierstad, and Strom, Further Mathematics for Economic

Analysis, 2008.

(PR) Pemberton and Rau, Mathematics for Economists: An Introductory Textbook, 2011.

The numbering is the same as in the original textbooks. For instance, Example (SB, 21.2)

refers to Example 21.2 on page 515 in Simon and Blume (1994); or Exercise (SHSS, 3.5.2)

refers to Section 3.5, Exercise 2 on page 134 in Sydsaeter, Hammond, Seierstad, and Strom (2008).

Example (SB, 21.2)

Find gradient and Hessian of the function f : R2 R:

f (x, y) = x2 + x2 y 2 + y 4 3x 8y.

Check definiteness of the Hessian. Is this function: convex, concave, both or neither?

Example (SB, 21.3)

A commonly used simple utility (or production) function f : R2 R: is

f (x, y) = xy.

Find the corresponding gradient and Hessian. Check definiteness of the Hessian. Could this

function be either concave or convex?

Example (SB, 21.4)

Find gradient and Hessian of the function f : R2 R:

1

f (x, y) = x 4 y 4 .

Check definiteness of the Hessian. Is this function: convex, concave, both or neither?

Example (SB, 21.5)

Now consider a general Cobb-Douglas function f : R2+ R:

f (x, y) = xa y b ,

where both a and b are any real constants. Check definiteness of the Hessian on R2 . Under what

conditions is f concave in this set? When f indeed is concave, what type of returns to scale does

it exhibit?

19/27

For each of the following functions on R, determine whether it is quasiconcave, quasiconvex, both

or neither:

(a) ex ,

(b) ln z,

(c) x3 + x,

(d) x3 x,

(e) x4 x2 ,

(f) x4 + x2

(h) sin(x).

From the exercise above we know that the Cobb-Douglas function is concave when: 0 < a < 1,

0 < b < 1 and a + b 1. Since for this choice of parameters it is concave, it is also quasiconcave.

However, for some range of a and b this function may be quasiconcave without being concave.

Using the bordered Hessian criterion check for which a > 0 and b > 0 is the Cobb-Doubles

function quasiconcave.

Exercise (SHSS, 3.5.2)

Assume that c is a positive constant and that we need to maximise

f (x, y) = ln (x + 1) + ln (y + 1)

subject to

x + 2y c,

x + y 2.

(a) Write does the necessary Karush-Kuhn-Tucker conditions for point (x, y) to be a solution

of the problem.

(b) Solve the problem for c = 52 . Justify why do the KKT conditions yield a maximum (why

are they sufficient).

0

Exercise (SHSS, 3.5.3)

Find the maximum of:

f (x, y) = 4 ln (x2 + 2) + y 2

subject to:

x2 + y 2,

x 1.

Exercise (SHSS, 3.5.4)

Maximize:

f (x, y) = (x a)2 (y b)2

subject to:

x 1,

y 2,

20/27

A small open economy produces two goods labelled 1 and 2; their prices p1 and p2 are determined

in world markets. The economy has fixed supplies K and L of capital and labour. For i = 1, 2 let

the economys output of good i be Fi (Ki , Li ), where Ki and Li denote the quantities of capital

and labour allocated to sector i, and where Fi is the production function for good i (subscripts

do not indicate partial differentiation). Under perfect competition, the economy will choose K1 ,

K2 , L1 and L2 so as to maximise:

p1 F1 (K1 , L1 ) + p2 F2 (K2 , L2 )

subject to the constraints: K1 + K2 = K, L1 + L2 = L. The maximum value of the objective

function is denoted by V (p1 , p2 , K, L). Using the Envelope Theorem, show that:

(a)

V

= Fi (Ki , Li )

pi

for i = 1, 2.

(b)

V

F1

F2

= p1

= p2

.

K

K1

K2

(c)

F1

F2

V

= p1

= p2

.

L

L1

L2

21/27

5.1. Introduction

This chapter contains a selection of examples and exercises taken from the following textbooks:

(SB) Simon and Blume, Mathematics for Economists, 1994.

(SHSS) Sydsaeter, Hammond, Seierstad, and Strom, Further Mathematics for Economic

Analysis, 2008.

The numbering is the same as in the original textbooks. For instance, Example (SB, 21.2)

refers to Example 21.2 on page 515 in Simon and Blume (1994); or Exercise (SHSS, 3.5.2)

refers to Section 3.5, Exercise 2 on page 134 in Sydsaeter, Hammond, Seierstad, and Strom (2008).

Exercise (SHSS, 11.3.1)

Verify by direct substitution that the following functions of t are solutions of the associated

difference equation (A and B are constant):

(a) xt = A + B2t where xt+2 3xt+1 + 2xt = 0,

(b) xt = A3t + B4t where xt+2 7xt+1 + 12xt = 0.

Exercise (SHSS, 11.3.2)

Check that xt = A + Bt is the general solution of xt+2 2xt+1 + xt = 0.

Exercise (SHSS, 11.3.3)

Check that xt = A3t + B4t is the general solution of xt+2 7xt+1 + 12xt = 0.

Exercise (SB, 23.8)

Find the general solution to the systems of difference equations provided below. You may denote

the initial values as, respectively, x0 , y0 and z0 .

23/27

(a)

(b)

xn+1 = 3xn

yn+1 = xn + 2yn ;

xn+1 = 3xn yn

yn+1 = xn + 2yn zn

(c)

zn+1 = yn + 3zn ;

xn+1 = yn

(d)

yn+1 = xn + 5yn ;

(e)

yn+1 = yn

zn+1 = xn + zn .

xn+1 = xn yn

yn+1 = 2xn + 4yn ;

Exercise (SB, 24.13 and 24.16)

Find the solution of each of the following differential equations:

(a) y + 6y + 9y = 0 for initial values y(0) = 0 and y(0)

= 1,

(b) 6

y y y = 0 for initial values y(0) = 1 and y(0)

= 0,

(c) 4

y 4y + y = 0 for initial values y(0) = 1 and y(0)

= 0,

(d) y + 5y + 6y = 0 for initial values y(0) = 1 and y(0)

= 0.

Example (SB, 24.13)

Let u(x) be utility function over wealth x. At any wealth level x, Arrow-Pratt measure of absolute

00

0

0

risk aversion A(x) equals u (x)/u (x). The function A(x) is a percent rate of change of u at x;

it is a measure of concavity of the function u. Find a utility function that has a absolute risk

aversion that is constant (and equal to a). That is, solve:

00

u (x) + au (x) = 0.

Example (SHSS, 6.5.34)

Solve the following two systems of equations homogeneous and nonhomegeneus. Observe how

both solutions differ.

(a)

(b)

x = 2y

x = 2y + 6

y = x + y;

y = x + y 3.

Check (if possible) stability of the following systems of equations.

(b)

(a)

(c)

x = x 8y

x = x 4y + 2

x = x 3y + 5

y = 2x 4y;

y = 2x y 5;

y = 2x 2y + 2.

24/27

For what values of constant a are the following systems globally asymptotically stable?

(a)

(b)

x = ax y

x = ax (2a 4)y

y = x + ay;

y = x + 2ay.

Find the general solution of the system:

x = x + 2y + 1

y = y + 2.

Is the system globally asymptotically stable?

Exercise (SHSS, 6.6.4)

Please do the following.

(a) Solve the differential equation system

x = ax + 2y +

y = 2x + ay + ,

where a, and are constants, a 6= 2.

(b) Find the equilibrium point (x , y ), and find necessary and sufficient conditions for this

system to be globally asymptotically stable.

(c) Let a = 1, = 4 and = 1. Determine a solution curve that converges to the

equilibrium point.

25/27

A. Solutions

We are very keen on you first trying the majority of examples and exercises without having

solutions. Therefore, full answers will be uploaded on the web-page of the module by the

end of September.

27/27

- Notes 1Uploaded byRuben Gutierrez
- 4 OpenCV MainUploaded byAilton Da Costa
- 33203 05 Leslie MatrixUploaded byPaula
- Tcsc Damp SadikovicUploaded bysathyakalyan
- Modal parameter identification based on ARMAV and state–space approachesUploaded byPedro Motta Nunes
- 1-s2.0-S0895717707000982-mainUploaded byRyan Ali
- List1Uploaded byFrancisco Quinga
- Eigen,Diag,SumetrixUploaded byRia Dwi Agustin
- Matrix MethodsUploaded byiganti
- bok%3A978-1-4471-2879-3Uploaded byLê Hữu Nam
- 1f_EigenProblemOverviewUploaded byGauthier Toudjeu
- 600ex2F13-solUploaded byyamero
- Chapter 9Uploaded byMohan Rao
- MatLabNotes.pdfUploaded byParamesh Waran
- MATLAB IntroductionUploaded byAshirbad Swain
- MatricesUploaded byLeez Wahab
- 6427445.pptUploaded byAli Alkassem
- TensoresUploaded byMateus Corato Zanarella
- MAT1341_Final_2009WUploaded byexamkiller
- Vampire Ecology in the JossverseUploaded byPedro de la Costa
- Int Fm NotesUploaded bynusairh
- 13.mechtronics(1)Uploaded byRaj Nivas
- Fractal Dimension Estimators for a Fractal ProcessUploaded byChan Siew Chong
- Paper 4-Pattern Recognition-Based Environment Identification for Robust Wireless Devices PositioningUploaded byEditor IJACSA
- ECON509 Introduction to Mathematical Economics I - Lecture NotesUploaded bySyed Asim Bukhari
- Montillet SPL2013Uploaded bywe1l1n
- [Anthony E. Armenakas] Structural Analysis(Z-lib.org)Uploaded byarjun
- LA & DE-Lec-1Uploaded byAhmad Khan
- 04654615Uploaded byUtpal Das
- ch3Uploaded byNeoneoDu

- 2010_3_2104.pdfUploaded bySapphasak Bun Chatchawan
- growthnotes_ec9012_moavUploaded bySapphasak Bun Chatchawan
- 2010_4_0206Uploaded bySapphasak Bun Chatchawan
- 2011_1_1201Uploaded bySapphasak Bun Chatchawan
- growthnotes_slides2015Uploaded bySapphasak Bun Chatchawan
- Bayesian GameUploaded bySapphasak Bun Chatchawan
- Print Out MSUploaded bySapphasak Bun Chatchawan
- 1Uploaded bySapphasak Bun Chatchawan
- Mathematical EconomicsUploaded byChuzen
- Mathematical EconomicsUploaded byChuzen
- Mathematical EconomicsUploaded byChuzen
- Sydsaeter Hammond - Mathematics for Economic AnalysisUploaded byhohotun11
- 243420656-Further-Mathematics-for-Economic-Analysis.pdfUploaded bySapphasak Bun Chatchawan
- Msc Induction Arrangements 2016-2017 - Master 1Uploaded bySapphasak Bun Chatchawan
- Brief Answers to 2006 ExamUploaded bySapphasak Bun Chatchawan

- C++_811451189Uploaded byFábioIzidio
- Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Auto Regressive ModelsUploaded byMenaz Ali
- Engineering Analysis - Jackson State University Lecture NotesUploaded bytidwave
- Simultaneous Linear EquationUploaded byDimas Baskoro Heryunanto
- Determinants, And Linear Independence - SpringerUploaded bylgpacheco
- 2d TransformationsUploaded byMariyam Ashraf
- Chapter 4 DeterminantsUploaded byCharandeep Singh Dhingra
- Adv Mech of Structures - Module1Uploaded byArun Kumar S.L.
- project rubricUploaded byapi-216664034
- ADAADSUploaded byKenneth Dionysus Santos
- 6 Mirror MatricesUploaded byIgor Gjorgjiev
- 25StokesThmUploaded byBrian Robert O'Connor
- Tutorial MatricesUploaded bydiktatorimhotep8800
- Lecture 9 Linear Least Squares SVDUploaded byminhthangbk
- New EM Quiz11Uploaded bySingh Karan
- WR1_EMT451T_2012B_Memo_A1Uploaded byGauthier Toudjeu
- Iterative Techniques in Matrix AlgebraUploaded byJuan Juan
- Homework MatlabUploaded byMahmoud Basho
- 17Uploaded bySalmizan Abdul Salam
- Dyadic NotationsUploaded bytejasruparel
- Notes6.pdfUploaded byMoumita Das
- CartUploaded bystefanovicana1
- Adjoint operatorsUploaded byStephanie Bush
- Advanced Linear Algebra.pdfUploaded byaviantara
- noval orthogonal spreading code cdma.pdfUploaded byRehan Ahmad
- Comprative Study Kirchoff’s and Tutte Matrix TheoremUploaded byEditor IJRITCC
- Linear Algebra SolutionsUploaded byDKz
- EssentialMathematicsForComputationalDesign_SecondEditionUploaded byShreyas Srivatsa
- Lecture Notes 05-EigenvaluesUploaded byAdof Addar Mudhoffar
- Periodic Plus Smooth Image DecompositionUploaded byAdrian Bottomley