MATRIX

PAPER

Arranged to Fulfill The Task of Mathematics for Advanced Economic

Guided by Drs. Ir. Yohanes Hadi., M.Div., M.Si.

Arranged By:

Ajimas Syaban Lintang Jauhar 180432625088

Latisha Sarah 180432625100

Rafinda Asca Riandy 180432625145

STATE UNIVERSITY OF MALANG

FACULTY OF ECONOMICS

DEVELOPMENT ECONOMICS

OCTOBER 2019
PREFACE

Praise be to God Almighty for the blessings of his grace, and that the
authors were given the opportunity to be able to arrange a paper entitled Matrix
can be completed as expected. This paper was prepared to fulfill the tasks of the
Mathematics for Advanced Economic course.

The authors realize that in making this paper many find obstacles. But
from the encouragement of several parties, this paper can be resolved properly.
Gratitude for:

1. Drs. Ir. Yohanes Hadi., M.Div., M.Si., as a lecturer in Mathematics for

Advanced Economic courses who have guided the author in making
this assignment to completion.
2. The authors’ parents have provided motivation in making this task.
3. As well as other parties who support the author in making this task.

The authors are aware that the preparation of this paper is far from perfect.
Therefore the authors apologize if there are errors in the preparation of this paper.

Thus this paper was made, hopefully this paper will be useful for the
reader.

Malang, October 13th, 2019

Authors

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TABLE OF CONTENTS

PREFACE ................................................................................................................ i
TABLE OF CONTENTS ........................................................................................ ii
CHAPTER I .............................................................................................................1
INTRODUCTION ...................................................................................................1
1.1 Background of The Paper ..........................................................................1
1.2 Formulation of The Problem .....................................................................1
1.3 Purpose of The Paper .................................................................................1
CHAPTER II ............................................................................................................2
THEORY AND DISCUSSION ...............................................................................2
2.1 Basic matrix operations ..............................................................................2
2.2 Gauss Method ...........................................................................................12
2.3 Determinant matrix ...................................................................................12
2.4 Laplance Expansion .................................................................................12
2.5 Adjoint Matrix ..........................................................................................12
2.6 Cramer Rules ............................................................................................12
2.7 Determinant of Hessian ............................................................................12
CLOSING ..............................................................................................................19
3.1 Conclusion ................................................................................................19
BIBLIOGRAPHY ..................................................................................................20

ii
 CHAPTER I

INTRODUCTION

1.1 Background of The Paper

Mathematics is a symbol used to simplify problems in life. The role of

mathematics is very important, so that mathematicians continue to develop
mathematics until mathematics has so many branches of science. One branch of
mathematics is algebra. Like other mathematics, algebra continues to be
developed. In algebra there is discussion of linear equations, where this
development results in further discussion of matrices. It does not stop just finding
the matrix form but continues to be developed starting from the number
operations that apply to the matrix, forms matrix up to how its application.

1.2 Formulation of the problem

1.2.1 What is Matrix?
introduces the concept of a matrix, which is a convenient mathematical
way of representing information displayed in a table. By defining the
matrix operations of addition, subtraction and multiplication it is possible
to develop an algebra of matrices. Simple economic examples are used to
illustrate these definitions and it is shown that the rules of matrix
manipulation are almost identical to those of ordinary arithmetic. In this
paper you are shown how to calculate the inverse of a matrix. This is
analogous to the reciprocal of a number and enables matrix equations to be
solved. In particular, inverses provide an alternative way of solving
systems of simultaneous linear equations and so can be used to solve
problems in statics. Section 2.6 describes Cramer’s rule for solving
systems of linear equations. This method is a particularly useful way of
solving economic models where only a selection of endogenous variables
need to be determined.
1.3 Purpose of The Paper
1.3.1 To find out the concept of investment analysis

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 1.3.2 To find out the concept of depreciation

CHAPTER II

THEORY AND DISCUSSION

2.1 GAUSS METHOD

Gaussian elimination, also known as row reduction, is
an algorithm in linear algebra for solving a system of linear equations. It is usually
understood as a sequence of operations performed on the corresponding matrix of
coefficients. This method can also be used to find the rank of a matrix, to
calculate the determinant of a matrix, and to calculate the inverse of an invertible
square matrix. The method is named after Carl Friedrich Gauss (1777–1855),
building on methods of linear reduction done by Chinese mathematicians circa
179 AD.
To perform row reduction on a matrix, one uses a sequence of elementary
row operations to modify the matrix until the lower left-hand corner of the matrix
is filled with zeros, as much as possible. There are three types of elementary row
operations:

 Swapping two rows,

 Multiplying a row by a nonzero number,
 Adding a multiple of one row to another row.
Using these operations, a matrix can always be transformed into an upper
triangular matrix, and in fact one that is in row echelon form. Once all of the
leading coefficients (the leftmost nonzero entry in each row) are 1, and every
column containing a leading coefficient has zeros elsewhere, the matrix is said to
be in reduced row echelon form. This final form is unique; in other words, it is
independent of the sequence of row operations used. For example, in the
following sequence of row operations (where multiple elementary operations
might be done at each step), the third and fourth matrices are the ones in row
echelon form, and the final matrix is the unique reduced row echelon form.

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 Using row operations to convert a matrix into reduced row echelon form is
sometimes called Gauss–Jordan elimination. Some authors use the term
Gaussian elimination to refer to the process until it has reached its upper
triangular, or (unreduced) row echelon form. For computational reasons, when
solving systems of linear equations, it is sometimes preferable to stop row
operations before the matrix is completely reduced.

Example Question:
solve the linear equation below using the gauss method
4𝑥1 + 4𝑥2 + 8𝑥3 = 36
𝑥1 + 2𝑥2 + 3𝑥3 = 14
4𝑥1 + 𝑥2 + 𝑥3 = 9
Answer:

4 4 8  x1  36 1 1 2   9 
1 2 3  x   14  1 2 3  14
   2      
4 1 1  x3   9  4 1 1   9 
1
 Multiply the first row by 4 to get 1 on position 𝑎11

1 1 2   9  1 1 2  9 
1 2 3  14 0 1 1    5 
    
4 1 1   9  0  3  7  27

 decrease the second row with the first row 1 times and decrease the third
row with 4 times first row.

1 1 2  9  1 0 1   4 
0 1 0 1 1    5 
 1    5     
0  3  7  27 0 0  4  12

 minus 1 times the second line in the first line and add 3 times row 1 to
line 3

1 0 1   4  1 0 1 4
0 1 1    5  0 1 1  5
    3    
0 0  4  12 0 0 1 3
 1
 multiply the third row by 4 to get 1 at position 𝑎33

1 0 1 4 1 0 0 1 
0 1 1  5 0 1 0    2 
       
0 0 1 3 0 0 1 3

 Reduce third row with first row 1 times and Reduce second row with third
row 1 time
Solutions obtained :
𝑥1 = 1 𝑥2 = 2 𝑥3 = 3

2.2 DETERMINANT MARTIX

The determinant of a matrix is a scalar number obtained through certain
operations of the elements of the matrix. The determinant can only be obtained on
a square matrix. Writing a determinant matrix is indicated by brackets | |, for
example determinant matrix A is written |𝐴|
calculation method divided by 2, there are:
second-order determinant (2x2) third-order determinant (3x3)
Example Example
2 9 1 2 0 1 2
a) [ ] = 2(1) – 9(3)
3 1 [1 1 1] [1 1]
2 4 6 2 4
= 2-27 = -25
 [(1.1.6) + (2.1.2) + (0.1.4)] -
4 10
b) [ ] = 4(5) – 10(2) [(0.1.2) + (1.1.4) + (2.1.6)]
2 5
 [ 6 + 4 + 0 ] – [ 0 + 4 + 12 ]
= 20 -20 =0  10 – 16 = -6

2.4 LAPLANCE EXPANSION

the Laplace expansion, named after Pierre-Simon Laplace, also
called cofactor expansion, is an expression for the determinant |B| of
an n × n matrix B that is a weighted sum of the determinants of n sub-matrices

4
(or minors) of B, each of size (n − 1) × (n − 1). The Laplace expansion is of
didactic interest for its simplicity and as one of several ways to view and compute
the determinant. For large matrices,.
Theorem.
Suppose B = [bij] is an n × n matrix and fix any i, j ∈ {1, 2, ..., n}
Then its determinant |B| is given by:

where 𝑏𝑖𝑛,𝑖𝑛 are 𝑏𝑖𝑗,𝑖𝑗 are values of the matrix's row or column that were excluded
by the step of finding minor matrix 𝑚𝑖𝑗 for the cofactor 𝑐𝑖𝑗 (see example below).

Consider the matrix

The determinant of this matrix can be computed by using the Laplace expansion
along any one of its rows or columns. For instance, an expansion along the first
row yields:

Laplace expansion along the second column yields the same result:

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2.5 ADJOINT MATRIX
The adjugate of A is the transpose of the cofactor matrix C of A,
𝑎𝑑𝑗(𝐴) = 𝐶 𝑇
In more detail, suppose R is a commutative ring and A is an n × n matrix with
entries from R. The (i,j)-minor of A, denoted Mij, is the determinant of the (n − 1)
× (n − 1) matrix that results from deleting row i and column j of A. The cofactor
matrix of A is the n × n matrix C whose (i, j) entry is the (i, j) cofactor of A,
which is the (i, j)-minor times a sign factor:

The adjugate of A is the transpose of C, that is, the n×n matrix

whose (i,j) entry is the (j,i) cofactor of A,
The adjugate is defined as it is so that the product of A with its adjugate
yields a diagonal matrix whose diagonal entries are the determinant det(A). That
is,

where I is the n×n identity matrix. This is a consequence of the Laplace

expansion of the determinant.
The above formula implies one of the fundamental results in matrix algebra,
that A is invertible if and only if det(A) is an invertible element of R. When this
holds, the equation above yields

Example :
Consider a 3×3 matrix, find the cofactor C and atrix adjoint A also deterinant
from matrix below
2 0 5
A = [0 1 1 ]
1 2 3
 by changing the area between the element 𝐴𝑖𝑗 and its cofactor |𝐶𝑖𝑗 |
according to the law of the cofactor is ..
1 1 0 1 0 1
+[ ] −[ ] +[ ]
2 3 1 3 1 2 1 1 −1
0 5 2 5 2 0
C =.. − [ ] +[ ] −[ ] = [ 10 1 −4]
2 3 1 3 1 2
0 5 2 5 2 0 −5 −2 2
+ [
[ 1 1 ] − [ ] + [ ]
0 1 0 1]
 So matrix adjoint A are the transpose from C

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 1 10 −5
Adj A = C’ = [ 1 1 −2]
−1 −4 2
 The Determinant of the matrix is
|𝐴| = 2(1) + 0(1) + 5(−1) = −3 [row 1`]
|𝐴| = 0(10) + 1(1) + 1(−4) = −3 [row 2 ]
|𝐴| = 1(−5) + 2(−2) + 3(2) = −3 [row 3 ]
2.6 CRAMER RULES
Cramer's rule implemented in a naïve way is computationally inefficient
for systems of more than two or three equations. In the case of n equations
in n unknowns, it requires computation of n + 1 determinants, while Gaussian
elimination produces the result with the same computational complexity as the
computation of a single determinant. Cramer's rule can also be numerically
unstable even for 2×2 systems. However, it has recently been shown that Cramer's
rule can be implemented in O(n3) time, which is comparable to more common
methods of solving systems of linear equations, such as Gaussian
elimination (consistently requiring 2.5 times as many arithmetic operations for all
matrix sizes), while exhibiting comparable numeric stability in most cases.
Example
Solve the linear function below using cramer rules
x + 2 y + 4x = 32
4x +2y =30
2x + 3y +z =13

 Matrix AX = B
1 2 4 𝑥 32
[4 2 0] [𝑦] = [30]
2 3 1 𝑧 13

 With determinant =
[(1.2.1)+(2.0.2)+(4.4.3)] -[(2.2.4)+(1.0.3)+(1.4.2)] = 26

32 2 4
A. [30 2 0] [𝐴1 ] 260
13 3 1
X=
[𝐴]
= = 10
26
With determinant :
[(32.2.1)+(2.0.13)+(4.30.3)]-[(4.2.13)+(32.0.1)+(2.30.1)] = 260
1 32 4
B. [4 30 0] [𝐴2 ] −130
2 13 1
Y=
[𝐴]
= = −5
26

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 With determinant =
[(1.30.1)+(32.0.2)+(4.4.13)]-[(4.30.2)+(32.4.1)+(1.0.13)] = -130
1 2 32
C. [4 2 30] [𝐴 3 ] 208
2 3 13 Z=
[𝐴 ]
= =8
26
With determinant =
[(1.2.13)+(2.30.2)+(32.4.3)]-[(32.2.2)+(2.4.13)+(1.30.3)] = 208

2.7 DETERMINANT OF HESSIAN

Hessian determinant | H | is a determinant matrix consisting of all partial
derivatives of the second level with direct partial second level above the main
diagonal and the second partial cross outside the main diagonal
For testing the second tier requirements, a hessian determinant is
introduced as follows
𝑍𝑥𝑥 𝑍𝑥𝑦
|𝐻1 | = 𝑍𝑥𝑥 < 0 𝑑𝑎𝑛 |𝐻2 | = | | = 𝑍𝑥𝑥 × 𝑍𝑥𝑦 − 𝑍𝑥𝑦 2 > 0
𝑍𝑦𝑥 𝑍𝑦𝑦
That Hessian is a negative definite. Hessian meets the second level requirement
for a maximum.
𝑍𝑥𝑥 𝑍𝑥𝑦
|𝐻1 | = 𝑍𝑥𝑥 > 0 𝑑𝑎𝑛 |𝐻2 | = | | = 𝑍𝑥𝑥 × 𝑍𝑥𝑦 − 𝑍𝑥𝑦 2 > 0
𝑍𝑦𝑥 𝑍𝑦𝑦
That Hessian is a positive definite. Hessian meets the second level requirements
for a minimum
Example:
Company A produces 2 kinds of goods where the total income function is TR =
70𝑞1 + 190𝑞2 and the cost function TC = 𝑞1 2 + 2𝑞2 𝑞1 + 4𝑞2 2 (the two items are
technically related) . Maximize profits by using
(a) Crammer's rules for first level requirements
(b) test with the hessian matrix determinant

a) Profit, π = TR − TC = (70𝑞1 + 190𝑞2 ) − (𝑞1 2 + 2𝑞2 𝑞1 + 4𝑞2 2 )

π = TR = 70𝑞1 + 190𝑞2 − 𝑞1 2 + 2𝑞2 𝑞1 + 4𝑞2 2
First level requirements:
δπ
= 𝜋1 = 70 − 2𝑞1 − 2𝑞2 = 0 −2𝑞1 − 2𝑞2 = −70
δ𝑞1
δπ
= 𝜋2 = 190 − 2𝑞1 − 8𝑞2 = 0 −2𝑞2 − 8𝑞2 = −190
δ𝑞2
−2 −2 𝑞1 −70
In the form of matrix= | || | = | |
−2 −8 𝑞2 −190
solution with cramer rules:

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 |𝐴| = 16 − 4 = 12 |𝐴1 | = 560 − 360 = 180 |𝐴2 | = 380 − 140 =
240
180 240
Obtained: 𝑞1 = 12 = 15 𝑞2 = 12 = 20
b) Testing the requirements of the second level by taking the partials of the
second level to form the hessian determinant =
𝜋11 = 𝜋12 = 𝜋21 = −2 𝜋22 = −8

By taking a minor minor in principle|𝐻1 | = −2 < 0 and

|𝐻2 | = |−2 −2| = 2(8) − 2(2) = 12 > 0
−2 −8
c) At |𝐻1 | < 0 𝑑𝑎𝑛 |𝐻2 | > 0 the Hesian is definite negative and reaches its
maximum at a critical point.
Maximum profit gained π = 70(15) + 190(20) − (15)2 + 2(15)(20) +
4(20)2 = 4.425.

2.8 INVERSE MATRIX

A real number is said to have a multiple inverse if there is a number b so
1
that ab = 1. Any nonzero number a has a multiplicative inverse of 𝑏 = 𝑎. Whereas
the inverse concept in matrix is defined as: "A matrix A ordered n x n is said to be
taxing (nonsingular) or reversible (invertible) if there is a matrix B so that AB =
BA = I. Matrix B is called the multiplicative inverse of A." (Leon, 2001: 45)
Inverse the matrix is denoted by A-1. One way to look for matrix inverses is by
adjoining and determining determinants as follows:

1
A1  Adj A
A
2.9 DETERMINANT OF THE 3X3 ORDER

To find the determinant of the 3 x 3 sequence matrix, the Sarrus method

can be used as follows.

a11 a12 a13

If matrix B = a21 a22 a23
a31 a32 a33

Then with the Sarrus Method:

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2.10 HESSIAN CONSTRAINED OPTIMAZATION

This method is invented by Hessian himself as a means to calculate a

matrix if it has a constrained function as well as how to optimize the value with
said function. Example:

A company produced 2 different types of product (Q1 and Q2) with the
intention to maximize the revenue from said products.

… objective function

Q1 + Q2 = |n| … constrained function

The problem faced is limited capital, so the amount of production is limited

(production quota) to 950 units. If the amount of production is limited (production
quota = 950 units), what is the total of Q1 and Q2 to achieve maximum profit?

To answer this question there are various ways to solve this and one of
them is through the LaGrange method:

f (x, y) … Objective function

… Constrained function

ax + by = c … LaGrange Function

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 CLOSING

3.1 Conclusion

Matrix is vastly used in different aspect in life. In this paper it is used as a

potential calculation for multiples variables in the economy business. It is also
capable of calculating a probability of an action theoretically. For future readers, it
is highly suggested to read more further into different point of view in deciding an
analysis based on matrixs.

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BIBLIOGRAPHY

Wibisono, Yusuf. 1999. Manual Matematika Ekonomi. Yogyakarta: Gadjah Mada

University Press.

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