ECO 256 MATHEMATICS FOR ECONOMISTS II - Teacher - Co - .Ke

NATIONAL OPEN UNIVERSITY OF NIGERIA
MATHEMATICS FOR ECONOMISTS II

ECO 256
SCHOOL OF ARTS AND SOCIAL SCIENCES
COURSE GUIDE
Course Developer/Writer:
OHIOZE, Wilson Friday - NOUN
Course Editor:
Dr. Ayadi, Sunday F - UNILAG
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CONTENT
Introduction
Course Content
Course Aims
Course Objectives
Working through This Course
Course Materials
Study Units
Textbooks and References
Assignment File
Presentation Schedule
Assessment
Tutor-Marked Assignment (TMAs)
Final Examination and Grading
Course Marking Scheme
Course Overview
How to Get the Most from This Course
Tutors and Tutorials
Summary
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Introduction
Welcome to ECO: 256 MATHEMATICS FOR ECONOMISTS II.
ECO 256: Mathematics for Economist II is a two-credit and one-semester
undergraduate course for Economics students. The course is made up of nineteen units
spread across fifteen lecture weeks. This course guide tells you how important research
is to students of economics, and how statistical tools can be applied in solving some
basic economic problems. It tells you about the course materials and how you can work
your way through these materials. It suggests some general guidelines for the amount of
time required of you on each unit in order to achieve the course aims and objectives
successfully. It will also provide answers to your tutor marked assignments (TMAs) to
assist you work on the materials and examine yourself unaided.
Course Content
This course is a continuation of mathematics for Economists I (ECO 255). The topics
covered includes Derivatives, integration, economic applications of derivatives and
integration, introduction to optimization, functions of several variables, optimization with
constraints, differentials, matrix, matrix operations, matrix inversionand economic
applications of matrix. As it is, the course will take you through derivatives to matrix and
their applications.
Course Aims
The aims of this course are to give you in-depth understanding of Mathematical
applications in Economics in the following areas:
 Basic concepts in Mathematics for Economists at year two undergraduate studies.
 To familiarize students with the basic topics in the course.
 To stimulate students’ understanding in the applications of mathematics in

decision-making.
 To expose students to the task ahead in their study of higher level mathematics for
economists as they progress in the course.
Course Objectives
To achieve the aims of this course, there are overall objectives which the course is out to
achieve and, there are set out objectives for each unit. The unit objectives are included at
the beginning of each unit; you should endeavor to read them before you start working
through the unit. You may want to refer to them during your study of the units to check
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on your progress through the units. You should always look at each unit objectives after
completing the unit to ascertain the level of achievements. This is to assist you in
accomplishing the tasks involved in this course. In this way, you can be sure you have
done what was required of you by the units. The objectives serve as study guides, such
that students would know if he/she is able to grab an understanding of each unit through
the sets objectives. At the end of the course period, students are expected to be able to:
 Define and explain the concept of derivative.
 State the rules of differentiation
 Apply it in economics.
 Define and understand integration
 Differentiate between integration and differentiation.
 Learn the rules of integration, and apply it accordingly
 Know the difference between function of single variable and multi-variables

models.
 Define and explain linear/matrix algebra.
 State and apply the laws of matrix and, its operations.
 Use matrix to solve complex systems of equations, and a lot more.
Working through the Course

To successfully complete this course, you are required to read the study units, referenced
books and othersupplementary materials on the course.
Each unit contains self-assessment exercises called Student Assessment Exercises (SAE).
At some points in the course, you will be required to submit assignments for assessment
purposes. At the end of the course there is a final examination. This course should take
about 15weeks to complete and some components of the course are outlined under the
course material subsection.
Course Material
The major component of the course, what you have to do and how you should allocate
your time to each unit in order to complete the course successfully on time are listed
below:
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1. Course guide
2. Study unit
3. Textbook
4. Assignment file
5. Presentation schedule
Study Unit
There are 12 units in this course which should be studied carefully and thoroughly.
Module 1 calculus
Unit 1: Derivate I
Unit 2: Derivate II
Unit 3 Integration
Unit 4 Differentiation and Integration in Economics
Module 2 Optimization
Unit 1: Introduction to Optimization
Unit 2: Functions of Several Variables
Unit 3: Optimization with Constraints
Unit 4: Differentials
Module 3 Linear Algebra

Unit 1 Matrix
Unit 2 Matrix operations
Unit 3 Matrix Inversion
Unit 4 Economics applications of matrix
Each study unit will take at least two hours, and it includes the introduction, objectives,
main content, self-assessment exercise, conclusion, summary and reference. Other areas
bordered on the Tutor-Marked Assessment (TMA) questions. Some of the self-
assessment exercise will necessitate discussion, brainstorming and argument with some
of your colleagues. You are advised to do so in order to understand and get acquainted
with historical economic events as well as notable periods.
There are also textbooks under the references and other (on-line and off-line) resources
for further reading. They are meant to give you additional information if only you can lay
your hands on any of them. You are required to study the materials; practice the self-
assessment exercises and tutor-marked assignment (TMA) questions for greater and in-
depth understanding of the course. By doing so, the stated learning objectives of the
course would have been achieved.
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Textbook and References
For further reading and more detailed information about the course, the following
materials are recommended:
Adams, R.A. (2006). Calculus: A Complete Course (6th edition): Pearson Education Inc.,
Toronto, Ontairo, Canada.
Chinang, A.C. & Wainwright, K. (2005). Fundamental Methods of mathematical

Economics (4thedition): McGraw-Hill/Irwin, New York, NY, USA.
Dowling, E. T. (2001). Introduction to Mathematical Economics (3rd): Schaum’s outline

Series, McGraw-Hill, USA.
Ekanem, O.T. (2000). Mathematics for Economics and Business (2nd): Uniben Press,
Benin City, Nigeria.
Lial, M.L., Greenwill, R.N, & Ritchey, N.P. (2005).Calculus with Applications (8th
Edition): Pearson Education, Inc., Boston, Massachusetts, USA.
Sydsaeter, K.,& Hammond, P. (2002). Essential Mathematics for Economic Analysis:

Pearson education ltd, Edinburgh gate, England.
Assignment File
Assignment files and marking scheme will be made available to you. This file presents
you with details of the work you must submit to your tutor for marking. The marks you
obtain from these assignments shall form part of your final mark for this course.
Additional information on assignments will be found in the assignment file and later in
this Course Guide in the section on assessment.
There are three assignments in this course. The three course assignments will cover:
Assignment 1 - All TMAs’ question in Units 1 – 4 (Modules 1)
Assignment 2 - All TMAs' question in Units 5 – 8 (Module 2)
Assignment 3 - All TMAs' question in Units 9 – 12 (Module 3)
Presentation Schedule
The presentation schedule included in your course materials gives you the important
dates in this year for the completion of tutor-marking assignments and attending tutorials.
Remember, you are required to submit all your assignments by the due dates. You are to
guide against falling behind in your work.
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Assessment
There are two types of assessment for the course. First are the tutor-marked assignments
and second, is a written examination.
In attempting the assignments, you are expected to apply information, knowledge and
techniques gathered during the course. The assignments must be submitted to your tutor
for formal assessment in accordance with the deadlines stated in the Presentation
Schedule and the assignment File. The work you submit to your tutor for assessment will
count as 30 % of your total course mark.
At the end of the course, you will need to sit for a final written examination of three
hours' duration. This examination will also count for 70% of your total course mark.
Tutor-Marked Assignments (TMAs)

There are four tutor-marked assignments in this course. You will submit all the
assignments. You are encouraged to work all the questions thoroughly. The TMAs
constitute 30% of the total score.
Assignment questions for the units in this course are contained in the Assignment File.
You will be able to complete your assignments from the information and materials
contained in your set books, reading and study units. However, it is desirable that you
demonstrate that you have read and researched more widely than the required minimum.
You should use other references to have a broad viewpoint of the subject and also to give
you a deeper understanding of the subject.
When you have completed each assignment, send it, together with a TMA form, to your
tutor. Make sure that each assignment reaches your tutor on or before the deadline given
in the Presentation File. If for any reason, you cannot complete your work on time,
contact your tutor before the assignment is due to discuss the possibility of an extension.
Extensions will not be granted after the due date unless there are exceptional
circumstances.
Final Examination and Grading

The final examination will be of three hours' duration and have a score of 70% of the
total course grade (100%). The examination will consist of questions which reflect the
types of self-assessment practice exercises and tutor-marked problems you have
previously encountered. All areas of the course are possible candidates for assessment
and students are encouraged to read wide.
Revise the entire course material using the time between finishing the last unit in the
module and that of sitting for the final examination to do a thorough revision of the
course material. You might find it useful to review your self-assessment exercises, tutor-
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marked assignments and comments on them before the examination. The final
examination covers information from all parts of the course.
Course Marking Scheme

The Table presented below indicates the total marks (100%) allocation.
Assignment Marks
Assignments (Best three assignments out of four that is 30%

marked)
Final Examination 70%
Total 100%
Course Overview
The Table presented below indicates the units, number of weeks and assignments to be
taken by you to successfully complete the course - Mathematics for Economists II (ECO
256).
Units Title of Work Week’s Assessment

Activities (end of unit)
Course Guide
Module 1Calculus
1 Derivative I Week 1 Assignment 2
2 Derivative II Week 1 Assignment 2
3 Integration Week 2 Assignment 3
4 Differentiation and Integration in Week 2 Assignment 2
Economics
Module 2Optimization
1 Introduction to Optimization Week 3 Assignment 2
2 Function of Several Variables Week 4 Assignment 3
3 Optimization with Constrains Week 5 Assignment 3
4. Differentials Week 6 Assignment 3
Module 3Linear Algebra
1 Matrix Week 7 Assignment 3
2 Matrix Operations Week 8 Assignment 2
3 Matrix Inversion Week 9 Assignment 3
4 Economic applications of matrix Week 10 Assignment 2
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How to Get the Most from This Course
In distance learning, the study units replace the university lecturer. This is one of the
great advantages of distance learning; you can read and work through specially designed
study materials at your own pace and at a time and place that suits you best.
Think of it as reading the lecture instead of listening to a lecturer. In the same way that a
lecturer might give you some reading to do, the study units tell you when to read your
books or other material, and when to embark on discussion with your colleagues. Just as
a lecturer might give you an in-class exercise, your study units provides exercises for you
to do at appropriate points in time.
Each of the study units follows a common format. The first item is an introduction to the
subject matter of the unit and how a particular unit is integrated with the other units and
the course as a whole. Next is a set of learning objectives. These objectives let you know
what you should be able to do by the time you have completed the unit.
You should use these objectives to guide your study. When you have finished the unit
you must go back and check whether you have achieved the objectives. If you make a
habit of doing this, you will significantly improve your chances of passing the course and
getting the best grade.
The main body of the unit guides you through the required reading from other sources.
This will usually be either from your set books or from a reading section. Some units
require you to undertake practical overview of historical events. You will be directed
when you need to embark on discussion and guided through the tasks you must do.
The purpose of the practical overview of some certain historical economic issues are in
twofold. First, it will enhance your understanding of the material in the unit. Second, it
will give you practical experience and skills to evaluate economic arguments, and
understand the roles of history in guiding current economic policies and debates outside
your studies. In any event, most of the critical thinking skills you will develop during
studying are applicable in normal working practice, so it is important that you encounter
them during your studies.
Self-assessments are interspersed throughout the units, and answers are given at the ends
of the units. Working through these tests will help you to achieve the objectives of the
unit and prepare you for the assignments and the examination. You should do each self-
assessment exercises as you come to it in the study unit. Also, ensure to master some
major historical dates and events during the course of studying the material.
The following is a practical strategy for working through the course. If you run into any
trouble, consult your tutor. Remember that your tutor's job is to help you. When you need
help, don't hesitate to call and ask your tutor to provide the assistance.
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1. Read this Course Guide thoroughly.
2. Organize a study schedule. Refer to the `Course overview' for more details. Note
the time you are expected to spend on each unit and how the assignments relate to
the units. Important information, e.g. details of your tutorials, and the date of the
first day of the semester is available from study centre. You need to gather
together all these information in one place, such as your dairy or a wall calendar.
Whatever method you choose to use, you should decide on and write in your own
dates for working breach unit.
3. Once you have created your own study schedule, do everything you can to stick to
it. The major reason that students fail is that they get behind with their course
work. If you get into difficulties with your schedule, please let your tutor know
before it is too late for help.
4. Turn to Unit 1 and read the introduction and the objectives for the unit.
5. Assemble the study materials. Information about what you need for a unit is given
in the `Overview' at the beginning of each unit. You will also need both the study
unit you are working on and one of your set books on your desk at the same time.
6. Work through the unit. The content of the unit itself has been arranged to provide
a sequence for you to follow. As you work through the unit you will be instructed
to read sections from your set books or other articles. Use the unit to guide your
reading.
7. Up-to-date course information will be continuously delivered to you at the study
centre.
8. Work before the relevant due date (about 4 weeks before due dates), get the
Assignment File for the next required assignment. Keep in mind that you will
learn a lot by doing the assignments carefully. They have been designed to help
you meet the objectives of the course and, therefore, will help you pass the exam.
Submit all assignments no later than the due date.
9. Review the objectives for each study unit to confirm that you have achieved them.
If you feel unsure about any of the objectives, review the study material or consult
your tutor.
10. When you are confident that you have achieved a unit's objectives, you can then
start on the next unit. Proceed unit by unit through the course and try to pace your
study so that you keep yourself on schedule.
11. When you have submitted an assignment to your tutor for marking do not wait for
its return `before starting on the next units. Keep to your schedule. When the
assignment is returned, pay particular attention to your tutor's comments, both on
the tutor-marked assignment form and also written on the assignment. Consult
your tutor as soon as possible if you have any questions or problems.
12. After completing the last unit, review the course and prepare yourself for the final
examination. Check that you have achieved the unit objectives (listed at the
beginning of each unit) and the course objectives (listed in this Course Guide).
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Tutors and Tutorials
There are some hours of tutorials (2-hours sessions) provided in support of this course.
You will be notified of the dates, times and location of these tutorials. Together with the
name and phone number of your tutor, as soon as you are allocated a tutorial group.
Your tutor will mark and comment on your assignments, keep a close watch on your
progress and on any difficulties you might encounter, and provide assistance to you
during the course. You must mail your tutor-marked assignments to your tutor well
before the due date (at least two working days are required). They will be marked by your
tutor and returned to you as soon as possible.
Do not hesitate to contact your tutor by telephone, e-mail, or discussion board if you need
help. The following might be circumstances in which you would find help necessary.
Contact your tutor if.
• You do not understand any part of the study units or the assigned readings
• You have difficulty with the self-assessment exercises
• You have a question or problem with an assignment, with your tutor's comments on an
assignment or with the grading of an assignment.
You should try your best to attend the tutorials. This is the only chance to have face to
face contact with your tutor and to ask questions which are answered instantly. You can
raise any problem encountered in the course of your study. To gain the maximum benefit
from course tutorials, prepare a question list before attending them. You will learn a lot
from participating in discussions actively.
Summary
The course, Mathematics for Economists II (ECO 256), exposes you to the basic concept
of Derivative, integration, derivative and integration in economics, introduction to
optimization, functions of several variables, optimization with constraints, differential,
matrix, matrix operations, matrix inversion and matrix in economics. As it is, the course
will take you through derivative to matrix in economics. Thereafter it shall enlighten you
about decision making as regard using mathematics for economics.
On successful completion of the course, you would have developed critical analytical
skills with the material necessary for efficient and effective discussion of basic areas in
economics. However, to gain a lot from the course, please try to apply whatever you learn
in the course to term papers writing in other aspect of economics courses. We wish you
success with the course and hope that you will find it fascinating and handy.
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MODULE 1: CALCULUS
Unit 1: Derivatives I
Unit 2: Derivatives II
Unit 3: Integration
Unit 4: Economic applications of Derivatives and Integration
UNIT 1 DERIVATIVE I
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 The Derivative
3.2 Derivative Notations
3.3 Rules of Differentiation
4.0 Conclusion
5.0 Summary
6.0 Tutor Marked Assignment
7.0 Reference and Further Readings
1.0 INTRODUCTION
Mathematics for Economists I that is, ECO 255 is the foundation course upon which this
course (Mathematics for Economists II) will be built. In fact, it is a prerequisite course
for ECO 256. This means as a student of ECO 256 you are required to have registered for
the ECO 255, read it, understand it and passed it before you are allowed to register for
this advanced version, ECO 256.Mathematics for economists I would have introduced
you to what you are expected to study in this advanced version at the rounding-off of the
course (ECO 255).Meanwhile, in the prerequisite course, that is, Mathematics for
economists I, you are expected to learn number system, exponents and roots, equations,
logarithms, and a lot more. In this aspect (Mathematics for economists II), you will be
studying mathematical economics at a level higher than what you have studied in the
foundation class. In this advanced version, you will be discussing basically calculus and
its periphery. We shall be treating topics like derivatives, integration, optimization with
constraint, functions of variables, linear algebra, and etcetera. In the very first unit of this
module, we shall be looking at the concept of derivatives, notations of derivatives,
differentiation rules, and many others and its application to economics.It is important to
make it clear to students that, mathematical economics is not pure mathematics but an
application of mathematical concepts in explaining economic issues. All these we shall
be discussing in this version.
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2.0 OBJECTIVES
At the end of this unit, the students should be able to:
 Define and explain the concept of derivatives

 Discuss the notations for derivatives
 State the rules of differentiation
3.0 MAIN CONTENTS

3.1 The Concept of Derivatives
The concept of derivative is a significant aspect of comparative statics, because it is the
most basic part of mathematics known as differential calculus, which is concerned about
the notion of rate of change. Comparative static has to do with the comparison of various
states of equilibrium that are related to kind of sets of values of parameters and
exogenous variables. For instance, in a of demand function model, such an initial
equilibrium will be denoted by a determinate price P* and quantity Q*. If there
disequilibriumoccurs in the demand function or model in a way that there will be changes
in the exogenous variables (they are variables in which the values are determined outside
the model. In order words, are variables on the right-hand of an equation), there will
definitely be an upset in the initial equilibrium which must lead to certain adjustments in
the endogenous variable (variable in which the value is determined within the model. In
fact, it is always on the left-hand of an equation). In the scenario just given, the issue is
about theresponse of the endogenous variables to the changes that occur in the exogenous
variables, which is the ‘rate of change.’ The rate of change of the endogenous variables
with respect to the change in a certain exogenous variable is what the concept of
derivatives deals with in mathematics.
Slope of a line
To fully understand the concept of derivatives using a curve, it is imperative for the
leaner to first understand the concept using a linear graph (straight line). One important
feature of a linear graph is its slope, a number which signifies the steepness of the line.
See diagram below. The slope of a linear graph is oftenreferring to as “slope of a line.”
The slope of linear graph is the vertical change over the horizontal change as a body
moves along the linear path.
y
o
x
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From the figure above, the slope of the linear graph AB can be interpreted to mean the
average amount of change in the vertical axis represented by ‘y’, per unit change in the
horizontal axis represented by ‘x’, fondly written as .
Assuming we have a function y  f ( x)  a  bx, the slope of this function is (b), the coefficient
of x. If we have and as coordinate points on a linear graph, the slope which is as
b, is defined thus:
b= .
Derivative is all about slope. In fact, the derivate at a point of a function of a single
variable is the slope of the tangent line to the graph of the function at that very point. For
example, assuming a curve is drawn which is either maximum or minimum in shape, to
find the gradient or slope of the curve, a straight line will be drawn that will be tangential
or meet the curve at any point. At this point (see point c in the figure below), the slope of
the curve can be determined.
D
E
The graph of a function drawn in green colour above has a straight lineDE in black colour
drawn to be tangential to the function. At that point, as seen above, the slope of the
tangential line is equal to the derivative of the function at the point where the graph and
the line coincide. The slope of the tangential line is equal to the derivative of the function
at the point where the curve intersects with the line, and the derivative measures the
change in one variable as result of the changes in some other variables. In order words,
the slope of a curve at a point on the curve is the same as the average rate of change. By
definition, the rate of change determines how one parameter changes in relation to the
other. From this definition, we can infer one fundamental issue, that is, two points are
involved here (points A and B), see figure above. For instance, a car travelling from
Lagos to Benin, started-off at a point ‘A’ in Lagos, and stopped at a final point ‘B’ in
Benin with the hours or minutes traveled recorded against the distance made. In this case,
we can find the average rate of change between the two points.
The average rate of change of function of xf(x) with respect to x for a function f as x
changes from point A to point B is
f (b)  f (a)
ba
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Note, the formula as stated is the same as the formula for the slope of a line through (a,
f(a) ) and (b, f(b) ). Where f(a) and f(b) are functional values of the variables (a and b).
Going back to our earlier example on a car travelling from Lagos to Benin, assuming we
have the following points where a = (.5, 20),b =(1, 48),c = (1.5, 80) andd= (2,
104) each representing time taken in hour and distance in kilometer made.To determine
the average speed or average rate of change, we will apply the formula above. See
diagram below for further illustration.
y
distance
104
or f(b) – f(a)
20
o
0.5m 2 time x
Meanwhile, recall that mm
m
Average speed =
Therefore, to calculate the rate of change or speed over the time interval from t = 0.5 to
t = 2.
To be able to calculate the rate of change or average speed over time, an understanding of
the concept of delta is very important. Delta is denoted thus ( ; it is synonymous to the
concept of limit. Delta is the rate of change in one variable to the change in another
variable. For instance if we have , it means that as y moves from one stationary
position to another stationary point, x changes too. To determine the extent of the change
called rate of change (slope of the function), we apply the delta notation as given
above.To calculate the rate of change using points a and f[(.5, 20) and (2, 104)]as
indicated above,
Rate of change = = = , note, let b represent rate of change.
b= = = .
The slope of the linear graph indicates how fast y changes for each unit of change in x.
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Let us consider a scenario where the formula can be applicable to resolving practical
issue(s). Assuming an organization determines to ascertain the cost in naira [C(x)] of
producing x numbersof school bags using the mathematicalequation C(x) = 150 + 10x –
x2 where, x is between is greater than zero, but less than eight (0 <x< 8). Find the average
rate of change or slope of cost per bag for producing between 1 and 6 bags.
Solution:apply the formula for average rate of change. The cost of producing 1 bag is
C (1) = 150 + 10(1) - 12 = 159 or N159. Also, the cost of producing 6 bags
is
C (6) = 150 + 10(6) - 62 = 174 or N174. Therefore, the average rate of
change in the cost of production of the bags is
C (6)  C (1) 174  159
=  15 .
6 1 5
On the average, the cost of production increases at the rate of N15 per bag as production
increases from 1 to 6 bags.

Given a function y = f(x), the derivative of the function f at x, written f (x) or dy/dx, is
define as
f ( x  x)  f ( x)
f’ (x) = lim if the limit exists, or
x 0 x
f ( x1  h)  f ( x )
f’(x) = lim
h0 h
Wheref’(x) is read “the derivative of fwith respect to x or f prime of x”. The derivative of
a function f’(x), or simply f’, is itself a function which that measures both the slope and
the instantaneous rate of change of the initial function f(x) at a point. Meanwhile, a
function is differentiable at a point if the derivative exists at a given point. Two
conditions must be met for a function to be differentiable: a) the function must be
continuous, and b) has a tangent at a given point.
For simplicity, a function is continuous when a curve is drawn without any break. That is,
a situation whereby a pen or pencil is used to draw a curve on a paper without lifting the
pen. A function
fis continuous at a point x = a only if: i) f(x) is defined, that is x = aii) limit of f(x)
existsand iii) the limit of f(x) = the limit of f(a).All polynomial and rational functions are
good examples of a continuous function. However, where a function is undefined, that is,
the denominator is equal to zero.
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3.2 Derivative Notations
Notations are generally used in mathematics and mathematical subjects alike. It is define
as a system of symbolic representations of expressions and ideas in mathematics.
Notations are used in mathematics, physical sciences, engineering, and economics. They
are simple symbolic representations, such as the numbers 0, 1 and 2, function symbols,
signs, conceptual symbols, such as lim, dy/dx, equations and variables.
In calculus, the notations of derivative of a function can be represented in many forms.
For instance, if y = f(x), the notations of the derivative of this function can be written as
follows
dy df d
f’(x) y’  f ( x)  or D  f ( x) 
X
dx dx dx
If we equate f to ɸ and we rewrite the function, you will have y = ɸ (j), the derivative
notations can be represented thus:
dy d d
ɸ’(j) y’
dj dj dj
 ( j ) or D  ( j)
j
dy
If y = f(x) and is estimated at x = z, the right derivative notation will be z and f’ (z).
dx
Let us use one or two examples worked based on all we have discussed concerning
derivative.
Example 1. If y = 2x2 + 7x – 18, write the derivative of the equation
y’
dy
dx
d
dx

2 x  7 x  18
2
 or Dx (2x2 + 7x – 18)
Example 2. Ifp= 6 z  12 , the derivative of the equation will be written thus
p’
dp
dz
d
dp
 6 z  12  or D p
6 z  12 
SELF ASSESSMENT EXERCISE 1
 Derivative is mainly concerned about the rate of change, discuss.
3.3 Rules of Differentiation

Recall that we have discussed two conditions that must be met before a function is
differentiable. When a function or a mathematical model is differentiable, we can observe
from the model or function how the endogenous variables change with respect to change
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in the exogenous variables.All these will be discussed in this section. Differentiation is
the process of determining the derivative of a function or a mathematical model. It is
about applying some basic rulesto a given function or mathematical model. In discussing
the rules of differentiation, authors or writers also use functions such as g(x) and h(x),
where g and h are both unspecified functions of x.
The variables f, g and h are used in any mathematical model to indicate the functional
relationship between left hand variable(s) and right hand variable(s). That is, any change
that is observed in the left hand variable(s)is dependent on the behaviours of the
variable(s) on the right hand of the model. For instance in the function y = f(x), the
variable y is dependent on the variable x which is on the right hand side of the model or
function. The dependability of the y on x can be determined using differential calculus
called derivative as already explained. To do this effectively, you differentiate the
function base on certain guarding rules. These rules are regard as rules for a function of
one variable.
Rule 1: The derivative of a Constant
The derivative of a constant function like p = k, or f (t) = k is zero. Note that k is constant
because it is a numerate standing alone without any variable attached to it, or multiplying
it.
If p = f (t) = k, and k is a constant, the derivative is
dp dk
= =0 or f’ (t) = 0
dt dt
Example 3: Find the derivative of the followings if:

i) p = f (t) = 12
ii) q = 42
iii) f(x) = π
dp
Solution: i) =0 or f’ (t) = 0
dt
dq
ii) =0
dk
iii) Dx [f(x)] = 0 or f ' ( x)  0
Rule 2: The Linear Function Rule

A linear function is a function that is to the power of one. If we have a model or a
function g(x) = mx + dwhich is a linear function, the derivative will be equal to m(the
coefficient of x). Note, the derivative of any variable to the power of one is all the time
18
equal to the coefficient of that variable, knowing fully well that the derivative of a
constant is always zero.
If g = mx + d, the derivative will be dg/dx or g’(x) equal to m.
Example 4. Find the derivative of the following functions
i) f(x) = 5x – 3
1
ii) f(x) = 10 + x
4
iii) g(t)= 13t
Solution: i) f’(x) = 5
1
ii) f’(x) =
4
iii) g’(t) = 12
Rule 3: The power Function Rule
The derivative of any power function is determined by multiplying the coefficient ofthe
function by the exponential and the alphabet variable to the power of the exponential
minus one. Let assume we have y = Mxn, where M is a constant, x an alphabetical
variable, and n is any real number which is in power.Now given that y = Mxn, to
dy n-1 n-1
differentiate this function (that is, the derivative) = m*n*x orf’(x) = mnx .
dx
Example 5. Differentiate the followings using power function rule.
i) y = x4
ii) y=
iii) Dx (x2/4)
dy
Solution: i) or Dxy = 4x4-1 = 4x3
dx
ii) In this case, you apply one of the laws of indices to get a negative
4
exponent, and rewrite the function thus: y = x-4; then f’(x) = -4x-4-1 = -4x-5 or 5
.
x
2 2/4-1 2 2/4
iii) Dx(x2/4) = x = x- =
4 4
19
Rule 4: The product of a constant and aFunction
Considering this rule, to differentiate any function or any economic model that has the
combination of a constant term and a function, is the product of the constant term and the
derivate of the function.
Given that k is a real number. If y = h(x) exist, then
dy
= kh’(x) 0rDx[kh(x)] = kh’(x).
dx
Example 6: Given that y is equal to the following functions below, find their respective
derivatives.
i) 7x3
8
ii)
x
iii) (-6x)
dy 3-1 2 2
Solution: i) = 7(3x ) = 7(3x ) = 21x
dx
8
ii) Applying one of the laws of indices, will now be 8x-1 then
x
8
f’(x) =8(-1x-1-1) = 8(-1x-2) = -8x-2 or 2
x
iii) Open the bracket, and you will have -6x, then
f’(x) = -6(1x1-1) = -6x0 = -6(1) = -6.
Recall that any number other than Zero raised to the power of Zero is equal to one.
Example 7: if z is a function of the function given below, determine the derivative.
(2k4 + 5)(3k5– 8).
dz
Solution: = (2k4 + 5) (15k4) + (3k5– 8) (8k3) – product rule (see unit 2, rule 2)
dk
= 30k8 + 75k4+ 24k8 – 64k3

= 54k8 + 75k4 - 64k3.
20
 Define and explain differentiation the way you will understand it.
 Write and explain in your own way, the rules of differentiation you have studied
thus far.
4.0 CONCLUSION
In this unit, you have learnt about derivative and some rules of differentiation.
Differentiation is vital instance in the discussion of derivative. In fact, we have identified
that differentiation is the process of determining the derivative of a function or a
mathematical model. One basic use of differentiation in the determination of derivative is
that, it helps to smootha function (curve) as well as making it to continue. Most functions
used in economics are specific, and have the property that they can be differentiated at
every point on the curve. Therefore, we can conclude that is vital to the understanding of
economics.
5.0 SUMMARY
Thus far, you have learnt about the concept of derivative as basic part of comparative -
static analysis. Recall that in the begin, we have said that the concept of derivative is a
significant aspect of comparative statics because it is the most basic part of mathematics
known as differential calculus, which is concerned about the rate of change. Concerning
the notion of rate of change, you have learnt that a moving object has both starting and
ending points. In-between these two points, there is either increase or decrease in speed
as time changes. This led us to comparison of various equilibrium states that are related
with sets of variables. For instance, distance and time are good examples of the said sets
of variable. In economics, the understanding of this concept will quicken the
understanding of certain aspect. For example, the study of an isolated market model in
economics will be made simpler with a good understanding of the concept of derivative.
6.0 TUTOR MARKED ASSIGNMENT
Determine the derivatives of these functions using any of the rules already studied.
9
 y = , f’(z) = 12 z and q = 8p3 + 11p-5.
z
 p = 7q3(5q –150), R = (t4 + 12) (t6 + 8).
 f(j) = 20j – 10, f(q) = -9q-6 and y = 150x.
7.0 REFERENCES AND FURTHER READINGS
Chinang, A.C. & Kevin, W. (2005). Fundamental Methods of mathematical Economics

21
(4th edition): McGraw-Hill/Irwin, New York, NY, USA.
Dowling, E.T. (2001).Introduction to Mathematical Economics (3rd): Schaum’s outline

series, McGraw-Hill, USA.
Lial, M.L, Greenwill, R.N, & Ritchey, N.P (2005). Calculus with Applications (8th
edition): Pearson Education, Inc., Boston, Massachusetts, USA.
UNIT 2 DERIVATIVES II
22
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Rules of Differentiation (cont.)
3.2 Higher Order Derivative
3.3
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In the just rounded up unit, you have seen the usefulness of the concept of derivative in
comparative static analysis. The concept of derivative is directly concerned with the
notion of rate of change in mathematical sciences which is applicable to other fields of
study such as Economics.Also, we have explained that, in the determination of derivative,
differentiation is used. In applying this, some fundamental guidelines were given. These
guidelines are referred to as “Rules of Differentiation.”
In this unit, we shall be starting off by continuing our discussion on the rules of
differentiation. Thereafter, we shall go further in our study by looking at higher order
derivatives.
2.0 OBJECTIVES
At the end of this unit, the student should be able to:
 Discuss other rules of differentiation.

 Apply these rules to solve problems.
 Have deep understanding of higher order derivatives.
3.0 MAIN CONTENT
3.1 RULES OF DIFFERENTIATION (CONT.)
Recall that we have stated that the rules of differentiation are like guiding principles
which help in the determination of derivatives of certain functions. You have learnt some
earlier in the preceding unit. The ones you are to study now are considered higher rules.
Rule 1: The sums or differences rules
23
Now we want to consider a situation where two or more components of a function are
differentiated separately, and their products either added or subtracted. This is a case of
sums and differences rules. The derivative of functions in this category is equal to the
sum or difference of the individual components.
Suppose we have a situation of f(x) = u(x)  g(x), and if the derivatives of the components
are u’(x) and g’(x), then f’(x) = u’(x)  g’(x).
Example 1: solve the following using the rules of sums and differences in derivatives.
i) y = 4x2+ 6x3
ii) p = 15q3 – 3q4
iii) R = 10t3- 3t2+8
Solution: i) In this problem, we have two components of a function these are 4x2
and 6x3, and it is case of summation. So, let u(x) = 4x2 and g(x) = 6x3; then y = u(x) +
g(x). Now, u’(x) = 8x and g’(x) = 18x2,
dy
= 8x + 18x2 or 18x2 + 8x.
dx
ii) This is a case of subtraction. So ifp = u(q) – g(q), we have =u’(q)

– g’(q) as the individual differentiable value in difference form. It therefore follows that,
dp 2 3
= 45q – 12q .
dq
iii) In (iii), it is a situation of more than two functions, and both addition
and subtraction signs are observed. So, R’ = u’(t) – g’(t) + h’(t) which is the difference
and sum of the individual differentiated functions. Appling the rule, we will have
dR 2
= 30t – 6t.(Since of a constant (8) = 0)
dt
Rule 2: The Product rule

This rule is about two or more components of a function that are being considered
wholly, neither added nor subtracted, but multiplied. Note that, whatever is product in
mathematics is considered multiplication. Assuming we have two components of a
function, the derivative will be the first component times the derivative of the second
component plus the second component times the derivative of the first component.
If f(x) = g(x) . h(x),where g(x) and h(x)are functions that can be differentiated. The
derivative will be:
dy
= g(x) . h’(x) + h(x) . g’(x)
dx
24
Example 2: if given the function y = (3x + 2) (4x3), determine the derivative using
product rule.
Solution:let 3x + 2 = g(x) and 4x3 = h(x) so, g’(x) = 3 and h’(x) = 12x2.
d
 [(3x + 2) (4x3)] = (3x + 2) (12x2) + (4x3) (3) = 48x3 + 24x2.
dx
Note: In performing mathematical operations as regards the use of the product rule,
students should remember that the derivative of a product of two functions is not mere
multiplication of two individual derivatives. Rather, it is a weighted sum of the functions
as demonstrated above.
Rule 3: The Quotient rule
Merely looking at the quotient rule, we can observe that this rule is the direct opposite of
the product rule just discussed. In this casetwo functions are involved; one is a numerator
and the other a denominator. The derivative in this situation is the product of the
denominator and the differentiated numerator, minus the product of the numerator and
the differentiated denominator, all over the square of the denominator.
Supposing we have y = g(x)/h(x) where g(x) is the numerator, and h(x) is the
denominator, then
dy h( x).g '( x)  g ( x).h '( x)
= 2
dx [h( x)]
4x  2
Example 3: let y= . Find the derivative y’
x2
Solution: let 4x-2 = u and x+2 = v , therefore, u’ = 4 and v’= 1. Appling the rule,
v.u ' u.v '
f’(x)= 2
v
( x  2)4  (4 x  2)1
=
( x 2)
2
4x  8  4x  2
=
( x  2)2
6
= 2
.
( x2)
Rule 4: An inverse Function rule
25
Before now, we have been dealing with functions in which one variable is directly
dependent on the other. In a situation where we have an inverse of a function, it indicates
the direct oppose of the formal.
Recall that, y = f(x) is a function which represents one on one mapping. That is, any
change in variable y( y ) is a result of change in x ( x ). In this instance, the relationship
shows in this function is a direct one. However, where x = f(y) or y = f -1(x), this is an
inverse function of the just considered function. The derivative of an inverse function as
already given is the reciprocal of the derivative of the direct function given.
dy 1
That is, = .
dx dy / dx
Example 4: q = 5p + 45, find the derivative of q-1

1
Solution: f’(p) = 5. But q-1 =
f '( p)
1
 q -1= .
5
Also, find the derivative of the inverse function of q, if q = p5 + p.

dq 1
Therefore, = 5p4 + 1 = 4
.
dp 5 p 1
Rule 4: The Chain rule

This rule comes up under the discussion of the derivative of a function of a function. It is
also known as the composite rule. In this, there is more than one function, and the
functions are dependent on one another. This is why it is referred to as a function of a
function. A good instance is where y is function of u and u in turn is a function of z so,
y = f(u) and u = h(z), then
y = f[h(z)].
The derivate of y with respect to z is equal to the differentiation of the 1st function with
respect to u multiply by the differentiation of the 2nd with respect to z.
dy dy du
 = . = f’(y)h’(z)
dz du dz
Example 5: If y = ( x2  5x)2 where y = u2 and u = x2  5x . Differentiate the function

using chain rule.
26
Solution: From the problem given, we can see that y is a function of x, and x is in turn a
function of u. using chain rule,
dy dy du
 .
dx du dx
dy
= 2u = 2 ( x 2  5 x) = (2 x 2  10 x)
du
du
= (2 x  5)
dx
dy
= (2 x 2  10 x) (2 x  5)
dx
Also, if y = (x3+4x-6)19, determine the dy/dx using chain’s rule. Note, without the use of
chain’s rule, solving the problem will be very cumbersome. With chain’s rule, solving the
problem becomes easier. To solve this, let the variables in bracket equal z to create two
components’ effects in a single function.
z = x3+4x-6
dy dy dz
Therefore, y = z19. It then follows that  .
dx dz dx
= 19z18 (3x2 + 4) = 19(x3 + 4x – 6)18(3x2 + 4).

Rule 5: The Implicit Functions rule
This form of differentiation is somehow cumbersome. But if given the required attention,
problems that arise from this form of differentials calculus are always easy to solve.
Meanwhile, implicit functions are the direct opposite of explicit functions. Thus far, we
have been looking at explicit functions where y is expressed as a function of x. There are
times when y cannot be solved explicitly, so, we use the rule of implicit differentiation to
solve the problem. For instance y = -2x + 4 is an explicit equation. Here, y is seen
explicitly in the function, say f of x. Bring in the principle of Economics to further
explain the function, y can be seen as an output that is determined by an input x. on the
other hand, the function could take the form 4x + 2y = 8. In this equation, the variable y
is not being seen as an explicit function of xrather, it is being displayed as an implicit
function of x. so, solving for y in the equation will make it an explicit of x.
2y = -4x + 8  y = -2x + 4.
However, there are times some functions become complicated to determine the explicit
function. In spite of the difficulties involved in solving it, it is surprisingly easy to find
the derivative of the equation implicitly without needing to solve the function itself.
27
Three basic steps are considered in determining the derivatives of an implicit function of
x. these steps are:
i) Consider y as an unknown function of x
ii) Determine the dy/dx in the function by differentiating the implicit function
term by term.
iii) Solve the equation that resulted from the derivative.
Example 6: assuming we have the function y3-2x2y2+x4 = 0. Find dy/dx
y3-2x2y2+x4 = 0
3 2 2
d( y ) d (2 x y )  d(x ) 4
d (2 x 2 y 2 )
Solution:  = 0(Note: was solved using the product
dx dx dx dx
rule)
3y2d/dx-4xy2-4yx2d/dx+4x3 = 0
3y2d/dx-4x2yd/dx = 4xy2-4x3
Factorize both sides of the equation, and we have
d
( y)(3 y  4 x 2 ) = 4 x( y 2  x 2 )
dx
dy
= (3 y  4 x 2 ) = 4 x( y 2  x 2 )
dx
Makedy/dx the subject of the equation, we will have

2
4 x( y  x )
2
dy/dx= .
y (3 y  4 x )
2
Also, consider this example: 4 x3  5 y3  20  0
d d
Solution: (4 x3  5 y 3  20)  (0)
dx dx
d d d d
= (4 x3 )  (5 y 3 )  (20)  (0)
dx dx dx dx
d
= 12 x 2  (5 y 3 )  0  0
dx
d dy d
But, note that ( y)   (5 y 3 )  12 x 2
dx dx dx
28
dy
= 5 y2  12 x 2
dx
Make dy/dx the subject of the equation, we will have
dy 12 x 2
 .
dx 15 y 2
 How can you differentiate a product rule from a quotient rule?

2
3z
 Differentiate the following functions: i) y = 3
2 3
, ii) y = (1/5x + 5)4x .
z
3.2 HIGHER-ORDER DERIVATIVES
Thus far all we have discussed concerning derivatives of functions can be called ‘first
derivatives.’ In this part, we shall be considering a higher version of derivatives called
‘second derivatives.’It is circumstance where the first derivative of the original function
is itself a differentiable function. We can then take the derivative of the first derivative as
we did to the initial function. If the function is further differentiable, a third derivative
exists and on like that. All these are referred to as higher-order derivatives. Higher-order
derivatives are estimated by the successive application of the guiding rules of
differentiation to the derivative of the preceding order.
As we have discussed in unit one concerning derivative notations, the same applies to
higher-order derivatives but with little difference. Suppose we have an equation of the
form
q = 4p3+ p2+ 20,
dq
= q ' = 8p2 + 2p + 0  1st differentiation (1st derivative)
dp
2
dq 2
= q '' = 16p + 2  2 differentiation (2 derivative)
nd nd
dp
3
d q = q ''' = 16
3
 3 differentiation (3 derivative)
rd rd
dp
4
dq 4
= q '''' = 0  4 differentiation (4 derivative).
th th
dp
29
Peradventure, we have a situation where you are required to find the nth derivative of a
function, we have
n
dq n
= q(n)or y(n)or f(n)(x).
dp
Example 7: find the 5th derivative of the function y = 4x4 + 7x3 + 2x2.
Solution: this is a case of higher-order derivatives. The way to go in this case is to
start the differentiation with the primitive or initial equation already given. Thus we have
the followings,
Dx[f(x)] = 16x3 + 21x2 + 4x
D2y = 48x2 + 42x + 4
D3y = 96x + 42
D4y = 96
D5y = 0.
Note that the notation used in this solution is not amongst the ones given above.
Meanwhile, it is one of the derivative notations use in calculus (see unit one).
Also, within the purview of higher-order derivatives, there is what is commonly referred
to as ‘higher-order partial derivatives.’ It is higher-order derivatives too, but with slight
differences. In calculus, the second derivative of any function would bring to fur the
relative extrema (maxima and minima) of that function. In this instance, the second
higher-order partial derivatives, that is, the partial differentiation of the initially partial
differentiated function, are used in a similar way for functions of two or more variables.
See unit two of module two for detailed account on partial differentiation.
 Briefly explain what you know by the term primitive function in higher-order
derivative.
 Which order of derivative is f’’’’’ in differential calculus?
4.0 CONCLUSION
In this part, we have discussed other rules of differentiation and their applicability to
solving mathematical problems. You have equally learnt that there are higher version of
derivatives refer to as “higher-order derivatives.” It allows for the differentiation of a
particular function for as many times as possible, if the need arises. Higher-order
30
derivative is vital in the discussion optimization in calculus. See discussion on
optimization in module two.
5.0 SUMMARY
In the unit you have leant about the followings:
i) Other rules of differentiations such as product rule, quotient rule, a function of
a function rule, and many more that were perceived more complicated than the
ones discussed in unit one.
ii) Higher-order derivatives. In this topic, you were exposed to the fact that an
equation can be differentiated more than one if circumstance surrounding it
demands it.
60
(3x5 + x )
d
 Compute
dx 60
d C ( x)
 Compute ( ) using quotient rule.
dx x
3
 Find the derivative of the function q = p  2 using thechain rule.
3
If y = Ak , compute d .
y
 a
3
dk

Chiang, A.C. & Wainwright, K. (2005). Fundamental Methods of mathematical

Dowling, E.T. (2001). Introduction to Mathematical Economics (3rd): Schaum’s outline

Lial, M.L, Greenwill, R.N, & Ritchey, N.P. (2005). Calculus with Applications (8th
Edition): Pearson Education, Inc., Boston, Massachusetts, USA.
Sydsaeter, K & Hammond, P. (2002). Essential Mathematics for Economic Analysis:

31
UNIT 3 INTEGRATION
CONTENTS
1.0 Introduction
2.0 Objectives
32
3.0 Main Content
3.1 Indefinite Integrals
3.2 Notation of Integration
3.3 Rules of Integration
3.3.1 Integration by Substitution
3.3.2 Integration by Parts
3.4 Definite Integrals
3.4.1 Properties of Definite Integral
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
We have seen in units one and two what differential calculus is all about. Recall, we have
mentioned that, it (differential calculus) measures the rate of change of a function or an
equation. This led us to the discussion on derivative of a function, which is an integral
part of differential calculus. To determine the derivative of a particular function, the
function (i.e. the original) would have to be differentiated. Often in economics, the rate of
change of a set of functions is given, and the onus is always on economists to determine
the initial function. Working from the rate of change to determine the original equation
amounts to revising the process of differentiation, this mathematical method iscalled
integration, antiderivative or antidifferentiation.
2.0 OBJECTIVES
At the end of this unit, the student should be able to do the followings:
 Define and explain integration.

 Learn the rules, and apply them accordingly.
 Know the difference between it and differentiation.
3.0 MAIN CONTENTS
3.1 Indefinite Integrals
In a simple understanding, integration is the direct opposite of differentiation. Here, F(x)
is the primitive function, and it is termed integral of F’(x). That is, F’(x) is a function that
has been differentiated, and F(x) is the integral of the differentiated form which serves as
the answer in this circumstance. To further understand the difference between integration
and differentiation, we consider this simple analogy. When descendants or group of
people find their ways back to their origin, what these people have done has can be
likened to integration and differentiation. It is integration when the descendants were
able to locate their origin (which is the primitive function). However, it is differentiation
33
when a lot of descendants came out from a single parent/origin.In a clearer form,
integration is movement backward while, the forward movement is differentiation.
Basically, the concept of integration is about the study of an under a curve. When a
function is specified say, y = f(x) = x4 this represents an area under a curve and is
between two distinct points b and a; which can be determined by integrating the function.
Let us assume we do not know the primitive function whose derivative f’(x) is given
above, and we want to compute the primitive function, we can do this through the process
of integration. For instance, ifx6 is differentiated, and it resulted to 6x5, it then means that
the derivative of will bex4. in this scenario,is the primitive function of the
derivative function x4. So, if we have the primitive function added to a constant i.e. +
c in this case, the c is a constant that will be equal to zero when differentiated. It therefore
means that,
f’(x) = x4(derivative function) f(x) = + c.
3.2 Notation of Integration

As we have seen in unit one, we stated some vital notations to represent differential
calculus such as f(x), dy/dx, and a lot more. Also in integral calculus, there is a notation
that symbolizes integration. That is, if you see and able recognize the sign or notation, it
then mean that the problem or mathematical issue is about integration. For indefinite
integral, we use  . The symbol as stated means integral notation, and it is an elongated S
which as some elements of summation in it. We have said it is an ‘integral sign’, whereas
f(x) which is always part of it is termed ‘integrand’, and the dx aspect is the
differentiation operator. Let see a typical integral sign based on the explanation done so
far.
 f ( x)dx
From the notation given above, three parts can be explained here. i) the elongated S, ii)
the f(x) and iii) the dx. If we decide to make two parts out of the three to be one (i.e.
f(x)dx), you will have an entity called differential of original function F(x) which mean d
F(x) = f(x) dx. So if we have
 f ( x)dx = F(x) + c
The variable cis an arbitrary constant integration that vanishes with differentiation. The
notation can be interpreted thus, ‘the indefinite integral of f(x) with respect to x is F(x)
added to a constant. Also, the integral symbol shows an instruction of what to do. That is,
to reverse the own process of differentiation.
34
 In your own understanding, distinguished between integration and differentiation.

 Explain the inclusion of an arbitrary constant in integration notation.
3.3 Rules of Integration
As we have rules in differential calculus that guide its operations, so it is integral

calculus. Recall we said in simple term that integration is the opposite of differentiation.
That is, if we work from the primitive function to get the derivative in the case of
differential calculus, for integration, we work from the derivatives to arrive at the initial
function (the primitive one). In the same vein, the rules guiding the operations of
integration are in away a reversal of the basic rules of differentiation. Note that, the rules
of integration are dependent on the rules of derivatives. Let us consider again the power
function rule in derivative, we have,
d x 
n 1
  = x (n  -1)
n
dx  n  1 
Primitive functionderivative function
We can see from the expression that xn+1/(n + 1) is the initial or primitive function for the
xn which is the derivative function. If we then substitute these in expression we had
earlier above, what we will have is integration rule.
Rule 1: The power rule
 xn dx =
1
n 1 x
n 1
 C (n  -1)
The expression as stated above is the power rule of integration. Let apply this to solve
some mathematical problems.
Example 1: use the power rule of integration to solve the following problems.
 x6 dx.
ii)  x
3
dx.
iii)  xdx.
35
Solutions: i) x6 is a derivative function, and to determine the primitive function
which is the integration itself, we shall apply the power rule already stated. Remember
that our n = 6, therefore
 x6 dx =
1 7
7
x +C
3
ii) Note that x is same as x3/2, where n in this case is 3/2 and n+1 = 5/2,
therefore
5/ 2
 x
3
dx = x
5
+C=
2
5 x
5
C
(Note that 1/(5/2) = 2/5)
2
iii) The derivative function in this instance is x, our n is equal to 1. If we

apply the power rule (see rule 3 under rules of differentiation), we have:
 xdx =
1 2
2x
C
Note that the derivative of the integral (primitive function) must be equal to the integrand
also known as the derivative function. This is a way of checking results in integration.
Rule 2: The constant rule
The integral of a constant say k is
 k dx = kx + C
Example 2: compute the integral of  10 dxand  -3 dx using the constant rule.
Solution: 10 and -3 are constant values and are expressed in the form of derivatives.
Reversing them to get the original functions use rule 2, we have
 10 dx = 10x + C, and
ii)  -3 dx = -3x+ C.
Rule 3: The integral of a constant and a function rule
 kf(x)dx = k  f(x) dx
36
In this case, outcome is constant value multiplied by the integral of the function.
Example 3:determine the initial functions of the followings:
i)  3x2dx
ii)
Solution: In applying rule 3 to solve this problem, we have to first identify the
constant value and the function. 3and x2 are the constant value and functional variable
respectively. Therefore:
 3x2 dx = 3  x2 dx, we now apply rule 1 at this point and

determine the initial function
1 3 
= 3 x C
3 
= x3 + C.
ii) Applying the method in solving above (i), we will have: =2 .
Therefore, we have 9 = .
Rule 4: The integral of x-1 rule

This is also known as logarithmic rule of integration. The integrand being considered is
1/x which is same as x-1. You will recall that under the power rule of integration i.e. rule
1, n = -1 is not accepted. However,under this rule, n = -1is welcomed based on the law of
indices.
 1
x
dx  ln x  C (x> 0)
The rule stated is applicable where x is positive that is x > 0. Where it is otherwise, that is
x is not equal to zero (x  0), which mean that x can take a negative value, we use
 1
x
dx  ln x  C (x  0)
Note that as a matter of notation, the integral of  1

x
dx can sometimes be stated thus
 dx
x
. Also, under this same rule, we have
37
 f '( x)
f ( x)
dx  ln f ( x)  C ,where f(x) is positive or
= ln f ( x)  C , in this case, f(x) not positive. (where

| f(x)| means the absolute value of the f(x) ).
Example 4: integrate thefunction  6

x
dx .
Solution: Note that the function is same as  1

6 dx . Therefore, applying rule 3 and 4,
x
we will have
 6
x
dx = 6  1
x
dx = 6 ln x + c.
Rule 5: The exponential rule

To find the integral of an exponential function using exponential rule, it is advisable to
understand derivative of an exponential function. Without much ado, the derivative of
exponential ex is the ex itself. Thus,
 e dx  e
x x
 C . More generally, (where e = exponential)
 e
ax
dx =
1 ax
ae
 C . Where ais a positive.
Rule 6: The sum or difference of two functions rule

The integral of sum or difference of two or more functions is the sum or difference of the
individual integral.
 [ f ( x)  h( x)]dx   f ( x)dx   h( x)dx Or

 [h( x)  g ( x)]dx =  h( x)dx   g ( x)dx
Example 6:compute the  (3x  x  2)dx .
3
Solution: To resolve this problem, we need the combined application of the rules we
have discussed thus far. In this case, we will combine rules 3 and 6, therefore,
 (3x  x  2)dx = 3 x dx   xdx   2dx 

3 3
rule 6
We shall then apply rule 1and have,
38
1 4 1 2
= 3( )  x  x  c , note that integral of dx is x + c
4x 2
3 4 1 2
=   2x  c
4x 2x
3.3.1 Integration by Substitution

This is another way of resolving some difficult problems in integral calculus. Integration
by substitution is useful when the integral function is becoming too large and difficult to
handle. Three main steps are involved in this method, these are: state another variable say
u to represent the function f(x),replacedx with du in the function and you arrive at answer
by putting the value of u in terms of x with the derived integral.
 ( x 2) dx .
3
Example 7: Compute the integral
Solution: To be able to tackle this problem, the method of integration by substitution will
be applied. In doing this, the three basic steps stated above shall be considered.
a) Equate u to x + 2 and (x +2)3 equals u3
du
b) Now that u = x+2,  1 and du =dx
dx
 ( x 2) dx =  u du .
3 3
Then We shall now use rule 1 (i.e. power rule) to
evaluate this stage, then you have:
4
= u c
4
c) We shall now put the value of u in the integral.
Doing that we therefore have,
( x  2)
4

1 4
 c or ( x 2) c.
4 4
3.3.2 Integration by Parts

Outside integration by substitution just discussed, one other method of solving
cumbersome mathematical problems is by using integration by parts. Integration by parts
is the process of reversing the processing of differentiation using product rule. It is
basically used when an integrand is a product or quotient of differentiable function and
cannot be stated as a constant multiple.
Assuming we have the following derivative function using product rule,
39
d
[ g ( x)h( x)]  g ( x)h '( x)  h( x) g '( x) ,
dx
Now taking the integral, we shall have,
g ( x)h( x)   g ( x)h '( x)dx   h( x) g '( x)dx
Then, we can solve the integrals algebraically. For instance, the second integral on the
right-hand side can be solved thus:
 h( x) g '( x)dx  h( x) g ( x)   g ( x)h '( x)dx

Example 8: Integrate the following function  x( x3) dx .
2/ 3
Solution: Unlike the problem in example 7, this very one is not solvable using the
method of substitution asearlier applied. This is because the problem is in the form (  vdu
), can only be solved using the method of integration by parts. Therefore, let v = x, and dv
3 4/3
= dx. Also, let u = ( x 3) , sincedu = (x+3)2/3 dx. We can now determine the integral
4
thus:
 x( x3)  h( x) g '( x)dx  h( x) g ( x)   g ( x)h '( x)dx

2/ 3
dx =
 x   ( x 3) dx
3 4/3 3 4/3
=
4
( x 3) 4
 x  ( x 3)  c .
3 4/3 9 7/3
=
4
( x 3) 28
It is important to note that arriving at the required answer, combination of integral rules is
very essential. And it depends on the student’s full grasp of the studied area or topic (e.g.
integration and its rules).There are complicated functions in integration. These are solved
using integration table. These can be found in many available mathematical books and
tables.
Determine the following integrals applying the rules discussed so far.
1 dx
 (5x  3x
4
  7.5dx ,  6x dx ,  3x  4 x)dx and 
3 3
dx , 4
x
40
dx 8x
  7 xe x  4dx ,  4 x  2 and 
7 2
dx .
( x 3)
3
3.4 Definite Integral
All we have discussed thus far in this section (integration) is about indefinite integral. It
is so, because the functions were dependent on a single variable and had no precise
numerical value. Now if fis a continuous function defined between the (p,q), and F is
continuous, and has a derivative with F’(x) = f’(x) for every x in (p, q). In this instance,
F(P) – F(q) is referred to as “definite integral” offover(p, q). In this instance, p is known
as the lower limit of the integration and q as the upper limit.
y
Y=f (x)
o a b x
q
As such, the already familiar integral sign is somehow modified to the form p
.Therefore, the definite integral of fover (p, q) or (a, b) is number that hinges only on the
functionfand the numbers p and q.we then have:
b
f ( x)dx Or  f ( x)dx .
q
 p a
The evaluation of a definite integral founded on the expression above is symbolized as

follows
F ( x)  F (b)  F (a) .
b

b
f ( x)dx = a
a
b
The notation a is a command that b and a should be substituted for x in the outcome of
the integration to determine F(b) and F(a), and subtract accordingly as indicated in the
symbol above.
Let see one or two examples of this method.

7
Example 9:Evaluate 
3
2 4x dx .
41
Solution: In the final outcome for this problem, we shall have a precise value as answer,
unlike the indefinite. For instance, the indefinite integral for this very function is x4 + c.
the definite integral will then be
 4x dx = x 
7 4 4
 (7)  (2)  2401  16  2385
3 4 7
2
2
2 1
Example 10:Evaluate  (  2 x)dx .
0 1 x
Solution: Note that the indefinite integral is ln 1  x  x  c , therefore the definite integral
2
will be
1
 2 x)dx = ln 1  x  x  20  (ln 3  4)  (ln1  0)  ln 3  4 (note
2

2
( that
0 1 x 
ln1is zero).
3.4.1 Properties of Definite Integrals
Definite integrals have the following properties for any function that is continuous:
q p
1)  p
f ( x)dx    f ( x)dx
q
p
2)  p
f ( x)dx  0
q q
3)  p
 f ( x)dx    f ( x)dx .
p
(where α is any arbitrary number)
q r q
4)  p
f ( x)dx   f ( x)dx   f ( x)dx
p r
q q
5)  p
 f ( x)dx    f ( x)dx
p
d b c d
6) 
a
f ( x)dx   f ( x)dx   f ( x)dx   f ( x)dx .
a b c
(Where a < b < c < d).
These properties of definite integration are vital to solving definite integral problems.
Students are advice to read more about them.
Evaluate the following integrals:

3 1 2 1 3 4 1
  x )dx and  (
3
 
1
xdx ,
2
(
2 x 3 2 z 1
 z )dz .
4.0 CONCLUSION
42
In this section, we have studied another aspect of calculus called integration. It is a topic
that is related to economic dynamics. Dynamics is term which has to do with the study of
the specific time paths of variables. It is to ascertain if these variables will tend to
converge towards a particular value given enough time. What integration as topic has
done in the body of mathematical science, is to fill the gap left by differential calculus,
which is the ‘time paths.’ Conclusively, if differentiation is about looking ahead to a
destination that is from point A to another point B or C, integration on the other hand is
about reversing the trend, which is tracing the journey back to where it started using point
B or C as the base.
5.0 SUMMARY
This unit is fundamentally about integral calculus. We have said earlier that integral
calculus is the direct opposite of differential calculus. All you have learnt in this unit is
about the reversal of you learnt in the previous units. Basically, what we did here was to
study some vital areas in integration. These are: indefinite integration, rules of
integration, definite integration, and properties of integration. All these we have fully
dealt with.
6.0 TUTOR MARKED ASSIGNMENTS
Find the following:
x
  (4cx  d )(cx  ax)5dx ,  3e2 x dx , and  4x
2
dx
2
7
Evaluate the followings:
2 x2  x  x  2

5 4
 0
( x  x3 )dx ,
1 x 1
dx and 4
(3x  2)dx


Dowling, E .T. (2001). Introduction to Mathematical Economics (3rd): Schaum’s outline

43

UNIT 4 ECONOMIC APPLICATIONS OF DERIVATIVES AND

INTEGRATION
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Marginal Concept
3.2 Production Function
44
3.3 Integration Applied
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
From unit one to unit three of this module, what we have done is to do a mathematical
study of both differential and integral calculus. That is, we looked at it the way people in
the field of mathematical sciences will do. Recall that we have stated that, differentiation
is the process of ascertaining the derivative of a function.That, derivative is about the rate
of change between two or more variables. You will also recall that, we stated insimple
understanding that integral calculus is the opposite of differential calculus. That the other
name of integration is antiderivative or antidifferentiation. A good instance is, if
derivative is movement from ‘G to g,’ the reverse process i.e. going from ‘g to G’ is
integration or antiderivative/antidifferentiation.
Therefore, the understanding of all these mathematics, and it’s applications in economics
by Economists make the subject interesting and grey areas in it are easy to resolve. So,
this unit is about the application of differential and integral calculus to Economics.
2.0 OBJECTIVES
One major objective of this unit is that, at the end of the unit, the student should be able
to see the need for mathematics in economics and also apply mathematical tools in
solving economic problems.
3.0 MAIN CONTENT
3.1 Marginal Concept
Theconcept of marginal in economics is divided into two. These are the concept of
marginal revenue and the concept of marginal cost. These concepts are best discussed
under profit maximization or cost minimization in either the principle or intermediate
economics. In any business organization (that is privately owned), the primary aim of
setting it up is to make gain/profit. Therefore, theonus is on the management team to
pursue this noble objective. To achieve this, the ideal of profit maximization or cost
minimization comes to mind. All this is about the concepts of total revenue and total cost.
The manipulations of the two (revenue and cost) mathematically in conjunction with
some economic principles bring about profit or loss in an organization. This is impossible
without a good understanding of the concept of marginal in economics.
Marginal revenue is defined as the change in total revenue as a result of change in the
sale of an additional unit of a particular product. In the same vein, marginal cost is the
45
change in total cost owing to the production of an additional unit of any product. Now, if
we are to construct a function or model in which marginal cost and marginal revenue can
be mathematically derived differentially respectively, total concepts and production
outputs will play a major role. So if TC is total cost and TR is total revenue are both
linearly related positively to the production output Q, then their function will be
expressed thus:
dTR
If TR = f(Q), then MR 
dQ
dTC
Also, if TC = f(Q), then MC 
dQ
In a nutshell, the marginal concepts of any function in economics are determined by

differentiating the total function.
Example 1: if the total cost function TC = 5Q2 + 7Q + 20, find the marginal function
and evaluate it at Q = 6 and Q = 9.
Solution:Given the total cost function, the marginal cost function is an expression of the
derivative of the total function, thus we have:
dTC
MC   10Q  7 .
dQ
To evaluate the marginal function based on the outputs given, substitute the output one
after the other and you will arrive at the results. That is
At Q = 6, MC  10(6)  7  67
At Q= 9, MC  10(9)  7  97 .
Also, determine the marginal revenue function if the total revenue function is TR = 15Q –
Q2. Estimate themarginal revenue(MR) function base on the outputs level given above.
Solution:as we have seen it done in example one, the marginal revenue (MR) function is
gotten by differentiating the total revenue (TR) function. Therefore
dTR
MR   15  2Q
dQ
Now, to estimate the marginal revenue function based on the level of outputs given,
substitute the output one after the other and you will get the marginal revenue at the
various levels of production. That is,
At Q = 6, MR = 15 – 2(6) = 3
46
Also at Q = 9, MR = 15 – 2(9) = -3.
You will recall that the primary aim of any businessman is to make profit. Meanwhile, all
other cost incurred would have been adjusted for to arrive at the expected profit. That
gain is what is referred to as profit. In economics, the gain/profit that accrued to the
business owner is sales made at the prevailing market price (total revenue TR) less all
expenses incurred (total cost TC). We can from this, formulate a function called profit
function. The profit function is a combination of the total functions (i.e. total revenue and
total cost).Note, that the notation for profit in economics is represented by the sign  , and
the function is expressed thus
   (Q)  TR  TC or PQ  CQ
What we have seen in the profit function is that, the amount any businessman would gain
or make as profit is dependent on the volume of sales or volume of production (Q).
Having known the total profit, we may decide to probe further mathematically the profit
made per unit item as the production progress. This brings us to the issue of additional or
marginal gain/profit. This (marginal profit) is an expression of the derivative of the profit
function. Note that, P and Cin the model PQ  CQ are per unit price and per unit cost
respectively.
Example 2:Determine and evaluate the marginal gain function of the profit function
  Q2  16Q  50 at Q = 4 and Q = 6.
Solution:Given the profit function, the marginal gain function is an expression of the
derivative of the total profit/profit function, thus we have,
d
M   2Q  16 . Note that the notation Mπ as used in the
dQ
expression denotes marginal profit/gain. To evaluate the function as required based on
the outputs given, substitute the output one after the other and you will arrive at the
answers. That is
At Q = 4, Mπ = 2(4) - 16 = -8
Also at Q = 6, Mπ = 2(6) - 16 = -4.
What we have seen with marginal concept is to estimate the additional cost or gain per
unit of any product produced in any firm. However, there is the average concept. This
concept estimate the total function to get either the cost of producing a unit of product or
the revenue per a unit of good sold. To determine the average function, divide the total
cost or total revenue function including the constant term with Q. That is, if we are to
determine for instance the average revenue (AR), we will have:
47
TR
AR 
Q
After you have determined the function, you can proceed to estimate the average function
by substituting for Q in the function.
 Determine and evaluate the marginal expenditure of the function P  Q3  4Q  3 at

Q = 4 and Q = 7. Hint: note that the TE = P*Q.
 If the total consumption function is C  1000  0.88Y , evaluate the marginal
propensity to consume (MPC).
3.2 The Production Functions
The theory of production is about input and output analysis in the production of goods
and services in any firm. It explains the combination of certain items or materials called
input to produce something valuable or special items tagged output. The basic inputs
considered in production theory are always factors of production that has been narrowed
down to Capital (K) and Labour (L), while the output is represented by (Q).By definition,
production is the process of combining raw materials input in certain required proportion,
and transform them into a different but useful form (output).
The transformation of these inputs into useful item is through a process called production
technique. This cannot be divulged from a mathematical representation known as
production function. Production function by any mean is a statement relating how inputs
can be combined to achieve various possible levels of output. Algebraically, production
function (FP) can be represented mathematically thus:
Q = f(K, L);
Where:
Q is output per time period,
K is the amount of capital employed, and
L is the number of labour employed.
From the information given above, we can determine the marginal and the average
products if the total production function is known.
3.3 Integration Applied
Integrals are vital to analyzing issues in Economics. These are done in several ways.
48
a) If net investment I is the rate of change in capital stock formation k over time
t(k(t)).Therefore, we determine net investment over time I(t) by the process of
differentiation.That is, I(t) = dK(t)/dt =K’t. Now that we know the net investment, the
level of capital stock formation can be computed. This we can do by integrating the
capital stock with respect to time of net investment:
Kt =  I (t )dt  K (t )  c  K (t )  K 0 .
C in the expression is equal to Ko, and it is the initial capital stock.

In the same vein, the total cost of a product can be determined from the marginal cost of
that product through the process of integration. If marginal cost is computed using total
cost parameter overtime as the output change, that is MC = dTC/dQ, then the TC will be
 MCdQ  VC  c  VC  FC .
Again in the expressionc (small lettered) is equal to fixed or initial cost.
Let see one or two worked instances where integration is applied.
Example 1: Assuming that marginal cost (MC) is 50 + 60Q – 18Q2, if fixed cost is
75; determine the total cost (TC).
Solution: The secret in this question for the students to discover is that, we want to
find the total cost given the marginal cost. The best way to do that is apply
integration. Thus:
TC = = )dQ
= 50Q + 30Q2 – 6Q3 + c
Our fixed cost (FC) is 75, and is also equal to c, because c denotes constant term
which in this case is equal to 75. Therefore,
TC = 50Q + 30Q2 – 6Q3 +75.
Assuming, the question requires you to find the cost per unit (i.e. AC) and variable
cost (VC), the way out is simple. The cost per unit (AC) will be:
AC = = 50 + 30Q – 6Q2+ .
However, VC = TC – FC = 50Q + 30Q2 – 6Q3.

49
 Find the consumption function (C) if marginal propensity to consume
(MPC) is 0.6, and consumption is 70 with income(Y)equal tozero.
 Determine the capital function (K) if the rate of net investment (I) is ,
and stock of capital at tequal to zero is 50.
4.0 CONCLUSION
In this unit, what we have done is to practically apply the principles of
differentiation and integration to issues as they relate to economics. So, what was
seen done in this part of the module, confirms that these two principles are
important in economic analysis of certain issues.
5.0 SUMMARY
This unit is fundamentally about the application of differentiation and integration into
economics. You will recall that, in unit three of this module we stated that integral
calculus is the direct opposite of differential calculus (derivative). All you have learnt in
this unit is basically about the application of differentiation and integration in resolving
some basic economic problems. We looked at marginal concept. It was discovered that,
given total cost/revenue function, the marginal cost/revenue can be ascertained applying
the principle of derivative. However, in a reverse manner, the total cost/revenue can be
determined from the marginal cost/revenue using integration.
6.0 TUTOR MARKED ASSIGNMENTS
 Find the total revenue function and the per unit price given that marginal
revenue (MR) is 40 – 4Q – Q3
 If marginal cost (MC) is 24e0.5Q, and the fixed cost is 50, ascertain the total
cost function.
 Find the marginal revenue (MR) function of the demand function Q = 72 –
4p.
 Assuming we have a consumption function (C) which is 600 + 0.4Yd, where
Yd is Y – T, and T is 200, find marginal propensity to consume (MPC).
Hints: note that the demand function is same as the price function.


Economics (4th edition): McGraw-Hill/Irwin, New York, NY, USA.
50

MODULE 2: OPTIMIZATION
Unit 1: Introduction to Optimization
Unit 2: Function of Variables
Unit 3: Optimization with Constraints
51
Unit 4: Differentials
UNIT 1 Introduction to Optimization

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Optimization of Functions
3.1.1 A case of Concave and Convex functions
3.2 Relative Extrema
3.2.1 Inflection Points
3.3 Fundamental Clues on Optimization Analysis
4.0 Conclusion
5.0 Summary
7.0 References and Further Readings
1.0 INTRODUCTION
The just concluded module (that is module one) to be exact, inthe first two units (units
one and two)where we have treated basically differential calculus, the study on derivative
was limited to functions of a single independent variable such as q = f(p).However, a lot
of economic models or functions involve more than one independent variable. For
example, we could have a situation where Q = f(L, K). In this case, we can define the
model as a function of two independent variables where Q is the endogenous variable; L
and K are the exogenous variables.
In this part, we are basically going to be discussing optimization which is about

equilibrium analysis (which is called goal equilibrium). By definition, equilibrium is the
state of optimum position for a given economic unit such as household, business entity,
or the entire economy, in which they strive to attain that equilibrium. Optimization by
understanding is the quest for the best. In a quest to have the best as mentioned, economic
agents try to understand the effect of one exogenous variable on the endogenous variable
which is basically measured using partial derivative and others that are discussed below.
2.0 OBJECTIVES
At the end of this unit, the Students should be able to:
 Discuss and explain optimization problem

 Understand what partial differentiation is all about
52
 Apply optimization to solve economic problems
3.0 MAIN CONTENT
3.1 Optimization of Functions
Recall we stated that optimization is about the quest for the best. However, by
definitionoptimization is the process of finding the relative maximum or minimum of a
function or model in mathematical sciences, business studies and economics. Without the
aid of a graph, this is done with the methods of relative extreme and inflection points and
a lot more. All these are discussed below.
An economicmodel or function of the nature is said to be rising or falling at x = a. If

in the immediate vicinity of the point the graph of the function rises or falls as it
goes from left to right. Recall that in unit one of module one, we stated that derivative
(that is the differentiation of the initial/original function) measures the rate of change and
slope of a function. A positive initial derivative at x = a shows that the function is rising
and a negative one means it is falling. See figure below:
y
y
o a x
o a x
Slope < 0
Slope > 0
Falling function at x = a
Rising function at x = a
(b)
(a)
> 0: rising function at x =a
< 0: falling function at x = a
When an economic model or function is rising or falling over its entire area is referred to
as amonotonic function.
3.1.1 A case of Concave and Convex functions
Still discussing optimization, a function is concave at x = a if in some small region

close to the point the graph of the function lies completely beneath its
tangential line.On the other hand, a function is convex at x = aif in an area very close to
the graph of the function is wholly above the tangential line. Meanwhile, a
53
positive second differentiation of the function or model at x = asignifies that the function
or model is convex at x = a(that is, g’’ (x)> 0); also, a negative second derivative of the
function or model at x = adenotes the function or model is concave atx =a (that is g’’ (x)<
0). It is important to note that, if > 0 for all x in the region, is convex.Also, if
g <0 for all x in the region, is concave. However, the sign of the first
differentiation does not matter for concavity. Again, see figures below for the graphs.
y y
a x
a x
(b) g’(x) < 0
(a) g’(x) > 0
g”(x) >0
g”(x) >0
Convex at x = a
y y
a x a x
(d) g’(x) < 0

g”(x) < 0
Concave at x = a
Supposing we have two functions g = -2x3 + 4x2 + 9x – 15 and g = (5x2 – 8)2, test for their
convexity and concavity at x = 3.
Solution:
i) g = -2x3 + 4x2 + 9x – 15
= - 6x2 + 8x + 9
= - 12x + 8
= - 12(3) + 8 = - 36 + 8 = - 28 < 0 (in line with the rules, this is
concave).
ii) = 2(5x2 – 8)(10x) = 20x(5x2 – 8) = 100x3 – 160x

= 300x2 – 160
= 300(3)2 – 160 = 300*9 – 160 = 2700 – 160 = 2540 > 0 (convex).
54
 From your understanding of the discussion on optimization, in your own language;
explain what you understand by optimization to mean.
 State if the function g(x)= 2x2 – 11x + 3 is rising, falling or static at x = 6.
 Also, state if the function g(x) = - 3x3 + 5x2 + 11x – 100 is either convex or
concave at x = 4
3.2 Relative Extrema
Recall that graph and relation are not the right tools to solve optimality problems, except
with the methods of ‘relative extreme and inflection.’(See optimization of functions
above).To start with, what is relative extrema is all about? It is a point at which any
economic model or function as we shall soon observe is at a relative maximum or
minimum. To be at either maximum or minimum at any point say a, the economic model
or function must be at a relativetable like form (i.e. flat) where the model or function is
not rising, and is not falling at a. If that is the case, the first derivative of the function at
ais either zero or be undefined function or equation. Any point in the region of a function
where the first differentiation is equal to zero or is undefined is known as‘critical point
orstationary value.’ this point is a standstill position. It is a point on the function or the
equation graph where its first derivative is always zero. The first test for Stationarity or
critical point can be established on either the peak or bottom of the business cycle (see
explanation below).
Now, it is vital to differentiate between a relative maximum and minimum functions. In

doing this, a mathematical approach will be required, and this is by taking the second-
orderderivative of the initial economic model or function. For instance, if = 0 at a
(that is at initial or first differentiation), at second differentiation commonly referred to as
the second-order derivative, one of the followings would be observed: a) If > 0 at
a. It shows that the model or function is convexand that, the graph of the function or
equation stays wholly above the tangential line at x = a, the function or model is at a
relative minimum (like the bottom of a business cycle graph), b) If < 0 at a, it
signifies that, the model or function is concave and that the graph of the function is
whollyunderneath the tangential line atx = a, the function or model is at a relative
maximum (like the peak of a business cycle graph), and c) If we have a situation
different from the two instances already discussed, that is where = 0, it means that
the test is inconclusive.
However, it is important for us to have it in our minds that, only functions whose first
differentiable value at all values of xis equal to zero ( = 0) are to be considered, if
there is the need to determine the critical points of the functions or equations.In other
words, if we subject it to further test the situation where the first derivative is zero, we
will arrived at any of the conclusionssummarized thus mathematically
=0 > 0: relative minimum at x = a
55
=0 < 0: relative maximum at x = a.
y y
0 a x
0 a x
g’(x) = 0 g’(x) = 0
3.2.1
g” (x)Inflection
>0 Points g” (x) < 0
Relative Minimum at x = a Relative Maximum at x = a
(a) (b)
Another possible method of looking at optimization apart from relative extrema just
discussed is ‘Infection Point.’ Most economic models or functions that are been studied
are often convex or concave in an interval at the second derivative. In the process of
testing for convexity or concavity, an economic model or function may change from
either convex to concave or vice versa. The point at which a function or model changed
from being concave to convex or vice versa are referred to as inflection point. By
definition, an inflection point is a point on the graph where the function crosses its
tangential line and changes from concave to convex, or vice versa. Or, an inflection point
for a function g(x) if there exists an interval about any point on the graph such that: i)
g’’(x)≥ 0 in say (a, c)and g’’(x) ≤ 0 in say (c, b), or ii) g’’(x) ≤ 0 in say (a, c) and g’’(x) ≥
0 in say (c, b). Let us assume that x = c and it is the inflection point.
Inflection point occurs only where the second derivative equals zero or is undefined.
However, note as stated earlier in this section that, when the first derivative is equal to
zero or undefined as in the second derivative, it calls for further test. This time, it is to
determine either the convexity or concavity of the graph. When the inflection point is to
be determined, the indication of the first derivative is irrelevant. In sum, for an inflection
point at c, as seen in Figure below, the followings are observed: 1) = 0 at c or is
undefined, 2) concavity changes at x = c, and 3) graph crosses its tangent line at x = c.
y y y y
c x c x x x
g' (x) = 0 g' (x) = 0 g' (x) < 0 g' (x) > 0
g”(x) = 0 g”(x) = 0 g”(x) = 0 g”(a) = 0
56
(a) (b) (c) (d)
Example 1: Determine the relative extrema for the following equations by (a) finding the
critical value(s) and (2) determining if it is at the critical value(s) (the equation is at
relative maximum or minimum).
a) g(x) = -5x2 + 130x – 50
Solution:This problem will be solved by way of following some steps. That is moving
from one step to the other.
i) Differentiate the primitive equation or function (take the first derivative),

set it equal to zero, and then solve for x to determine the critical value(s).
g’(x) = - 10x + 130 = 0
x = 13 this is the critical value
ii) Take the second-order derivative of the first derivative and estimate it using
the critical value already known.
g’’(x) = - 10
g’’(13) = - 10 < 0 this is concave, and is a relative
maximum.
3 2
b) h(x) = 3x – 36x + 135x – 20
Solution: Imitate the earlier steps followed in the solution to the above,
i) Take the first derivative, and set it equal to zero. solve for x
h’(x) = 9x2 – 72x + 135 = 0
= 9(x2 – 8x + 15) = 0
= 9(x – 3) (x – 5) = 0
x =3 x = 5 these are the critical values
ii) Take the second-order derivative and estimate based on the critical values
determined.
h’’(x) = 18x – 72
h’’ (3) =18(3) – 72 = - 18 < 0 concave, and is relative maximum
h’’ (5) = 18(5) – 72 = 18 > 0 convex, and is relative minimum
3.3 Fundamental Clues on Optimization Analysis
As we round-off this section on introduction to optimization, it is essential that students

should familiarize themselves with some facts on optimization which will assist them in
57
analyzing optimization problems. This is what werefer to as “fundamental clues on
optimization analysis.” Assuming you are given a primitive function, model or equation
that has an optimization problem and is differentiable, know these:
 Differentiate the primitive function, model or equation (1st derivative), set it equal
to zero, and solve for the critical value(s). This step is known as thenecessary
condition or the first-order condition. It locates the points at which the function,
model, or equation is neither risingnor falling, but at a leveled ground. The points
arrived at are possible relative extrema.
 After the step above, you then again differentiate the first derivative (2 nd
derivative), estimate the result using the critical value(s), and check for the sign(s).
Note the followings: (i) if the estimated result is less than zero, the function is
concave hence it is a relative maximum, (ii) if it is greater than zero, the function
is convex hence it is a relative minimum and (iii) if it is equal to zero, it shows that
the analysis is inconclusive.
 Where the necessary or first-order condition is met, the second step, calledthe
second-order derivative analysis is known as thesufficiency condition. In sum,
Relative maximum Relative

minimum
=0 =0
<0 >0
 Where the estimated result of 2nd derivative is equal to zero as mentioned in step
two, the second-derivative analysis is inconclusive. In such cases, the continuous
differentiation analysis is helpful: (a) If the first non-zero value of a higher-order
differentiation, when evaluated at a critical value, is an odd-number say 3, 5, 7
etc., then the model, function or equation is at an inflection point. (b) Also, if the
first non-zero value of a higher-order differentiation, when evaluated at a critical
value is an even number say 2, 4, 6, etc., then the model, function, or equation is at
a relative extrema. But, if the even number is negatively signed, it is shows that
the function or equation is concave and is relative maximum, and if vice versa it
shows that the equation is convex and is relative minimum.

58
Determine the critical values of the equation q = - p3 + 4.52 – 6p + 6, and test if it is
relative maximum or minimum or inflection points.
4.0 CONCLUSION
Under differential calculus in module one, we saw a case of a function of a single

variable, how to find the first derivative and that of the second derivative treated under
higher-ordered derivatives. In this part, which is about optimality of values by economic
agents, we seen how the two (the first and second derivatives)are combined to be used as
tools to resolve optimization problems.
5.0 SUMMARY
In a nutshell, in this unit, we have considered the followings:
 We have explained that optimization is about the quest for the best amongst
given alternatives by economic agents, such as households, firms, nations, and
many more.
 We also discussed convexity and concavity as a case in optimization. That at the
second derivative of any model or equation and when evaluated at their critical
value(s) it could be either positive or negative. If the sign is positive, it shows
that the model or equation is convex but, if otherwise, it means that the model or
equation is concave.
 We equally discussed relative extrema and inflection points. You will recall that
we said relative extrema and inflection points are modes of analyzing
optimization problems. That, relative extrema is of two extremes, the maximum
and the minimum. At a particular instance in the life of a function or model, there
is always a transformation that is, minimum changing to maximum, or vice versa.
At that very point where the transformation occurs on model or function, is
referred to as inflection point.
 Based on your understanding of optimization, sketch graphs to show the

followings: i) a rising function, ii) a falling function, iii) a concave model, and
iv) a convex equation.
 Given that y = 2x3 – 3x2 + 11x – 30. Examine the equation at x = 4, and show if
it is falling, rising, or static.
59
 Determine the critical values, relative extrema (i.e. maximum or minimum), or
possible inflection point of the equation z = - (a – 8)4.



UNIT 2 FUNCTION OF SEVERAL VERIABLES

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
60
3.1 Function of Several Variables
3.1.1 Partial Differentiation with Two Variables
3.2 Rules of Partial Differentiation
3.3 Second-Order Partial Derivatives
3.4 Multivariable Functions and Optimization
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In module one where we discussed basically derivatives and integration, and in the
preceding unit to this unit, you will discover that all the functions, equations or models
treated thus far, are mainly a case of one parameter or a variable, that is, y = g(x) or
 f ( x)dx , and so on. From the equations we have seen so far, there is always one
independent variable on the right-hand side of the equation or function deciding the fate
of the dependent variable on the left-hand side. This is what the author referred to as a
‘mono-variable/parameter function.’ In this section, we shall be looking at a situation
where we shall be having more than one variable or parameter as independent variables
on the right-hand side of the function or equation. Where we have two variables, say z =
g(x, y), it is called ‘functions of two variables’, where it is more than two variables like
Qd = g (px, i, ps, n), is referred to as, ‘functions of several variables.’When cases like
these are treated, any problem with multi-product organization can successfully be
resolved by applying it.
2.0 OBJECTIVES
At the end of this section, the students should be able to:
 See the difference between a single-variable function and a multi-variable

function.
 Discuss the essence of partial derivative in multi-variable models
 Understand the procedures for resolving problems with multi-variable models.
3.0 MAIN CONTENT
3.1 Functions of Several Variables
To restate the obvious, what you have done so far in the preceding units as mentioned in
the intro of this unit wererestricted to a function of a single variable (i.e. exogenous
61
variable) such as y = . In the field of economics, a lot of economic activities involve
models of more than one exogenous variable or parameter. For instance, in production
theory, the production function has more than one exogenous parameter, Q = g (L, K).
This modelis defined as a model of two exogenous or independent variables if there exist
one and only one value of Q in the range of for the pair of real numbers (L, K) in the
region of .Q is the endogenous variable (variable that is determined within the model);
L and K are exogenous variables (variable that are determined outside the model). This is
a typical example of ‘function of two variables.’ In the main time, we will be discussing
more of this.
Supposing we have a function or an equation like the one stated earlier in the
introduction, where z = g(x, y). This equation or function can be analyzed in a way that,
we can investigate the impact of the exogenous variables individually on the endogenous
variable. This analysis is most often referred to measurement of changes between the
endogenous and the exogenous variables. One basic mode of carrying out this
measurement is the use of a mathematical method called “Partial Differentiation.” It
measures the effect of a change in an individual exogenous variable (x or y) on the
endogenous variable (z) in a two-variable function. The partial differentiation of z with
respect to x measures the sudden rate of change of z with respect to x while the
exogenous variable y remains unchanged.
3.1.1 Partial Differentiation with Two Variables
When the rate of change between the endogenous and the exogenous variables in a two-
variable function is to be measured, partial differentiation is of paramount
importance.Unlike what we saw when we had y = f(x), a situation of one-variable
function. The notations for partial differentiation or derivative are as follows:
z f
, , f x ( x, y) , f x or z x  wherey is held constant
x  x
 z f
, , f y ( x, y) , f y or z y  wherex is held constant
y y
Therefore, if z=f(x, y), then z / x ( z / y )shows the derivative off(x, y) with respect to
x(y) when y(x) is held constant. Note, to find the partial differentiation of a function as
z
given above, say , assumes that the variable ydoes not exist in the function, and
x
z
differentiate the function with respect tox(w.r.t. x) only. The same operation goes for .
y
Partial differentiation is mathematically expressed thus:
With y held constant
62
With x held constant
Partial differentiation with respect to one of the exogenous variables in any function
follows the same rules as ordinary differentiation while the other exogenous variables are
treated as constant. Consider the examples below:
Example 1: The partial derivatives of a two-variable function such as z =5x2y4are

determined thus:
Solution:
(i) When differentiating with respect to x, treat the y variable as a constant term,
then:
z
= 10xy4
x
(ii) Now, differentiate with respect to y, treat the x variable as a constant term also,
and you will have:
z
=20x2y3
y
Example 2: To find the partial derivatives for this two-variable functionz = 7x3 – 3x2y2+
6y4:
Solution:
(i) When differentiating with respect to x, let the variable y be held constant as in
example 1, then:
z
= 21x2 - 6xy2
x
(ii) Now, differentiate with respect to y, treat the x variable as a constant term also,
and you will have
z
= - 6x2 + 24y3
y
Determine the partial differentiation of the followings:
 g(w, x, y) = 4w3 + 10wxy2 – y2 + x4

 h(p, n) = 10p3 + 6pn2 + 7n3
3.2 Rules of Partial Differentiation
63
In the worked examples just treated above, one part of the basic rules was taken into
cognizance. These rules are referred to as rules of partial differentiation, just as we have
in differentiation proper in unit one and two of the preceding module. Now, we are going
to consider these rules one after the other.
Rule1: Product Rule
This rule is similar to the earlier treated version in the previous module. The only and
remarkable difference is that, while this version is done with caution because of its nature
of multivariable case, the former is not.
Given z = g(x, y). h(x, y),
Wherey is held constant
Wherex is held constant
Example 1: ifz = (5x + 2)(4x + 3y), partially differentiate the model.
Solution:Using product rule as given above, first differentiate w.r.t to x, then w.r.t toy.
z
= (5x  2)(4)  (4 x  3 y)(5) =40x + 8 + 15y
x
z
= (5x + 2)(3) + (4x + 3y)(0) = 15x + 6
y
Rule 2: Quotient Rule
Again, the variation between this rule and the previous one treated in module one is in the
mode of application. Like we mentioned under rule one in this section, its application is
done with some measure of caution because of its multivariable nature. In this case, at
times a variable is held constant while the other is allowed to change and its rate of
change measured.
g ( x, y )
Given that z = where h( x, y) is not equal to zero.
h ( x, y )
–
where y is held constant
–
where xis held constant
64
Example 2: Given that z = (7x + 6y)/(3x + 5y), use rule 2 to partially differentiate the
model or equation.
Solution:Using the quotient rule as already indicated in the question; first differentiate
w.r.t to x, and then w.r.t to y thus:
Rule 3: Power-Function Rule Universalized
This rule is similar in operation to the version already seen in the previous module. The
main difference is in the number of exogenous variables in the function, in which the
operation will be done based on one variable in use, while the other is held constant as we
have observed in the already discussed rules.
If we havez = [h(x, y)]n,
where y is held constant
where x is held constant
Example 3: Supposing, z = (x2 -5y3)5, find the partial derivatives?
Solution:We can only find the partial derivatives of this function except the power-
function rule universalized is applied. First differentiate w.r.t to x and then w.r.t to y. thus
we have:
65
(Note that, the asterisk is
multiplication sign)
Use any of the rules just discussed to determine the 1st-order partial differentiation of the
following equations:
 q = 4p2(4p + 9i)
p2  i2
 q
2 p  3i
( x  9 y)4
 z .
2x  4 y
3.3 Second-Order Partial Derivatives
What we have done so far in this unit is the first-order derivative of the functions, models
or equations given. Now in this part, we want to see how the initial derivative (i.e. the 1st
derivative result) can be differentiated further (i.e. second time) to get another result that
will be different from the initial result.The differentiation of the first-order derivative’s
result is called second-order derivative. Given a function z = h(x, y), the second-order
(direct) partial derivative shows that the equation has been differentiated partly with
respect to one of the exogenous variables(x, y)twice while the other exogenous variable
has been held constant:
  z   2 z
 
x  x  x 2
  z   2 z
 
y  y  y 2
The notations above show that, in effect, ( x, x ) measures the rate of change of the
first-order partial derivative with respect to x while y is held constant. Also, (
y, y ) is exactly opposite of the previous one.
However, there are instances where we have what is fondly referred to as crossed partial
derivative and which means the first the initial equation has been partly
differentiated w. r. tone variable and then their partialderivative, have in turn been
partially differentiated with respect to the other exogenous variable:
66
  z   2 z
 
x  y  xy
  z   2 z
 
y  x  yx
In short, a crossed partial, derivative measures the rate of change of a 1st-order partial
derivative w. r. t the other exogenous variable. Let us see one or two worked examples.
Example 1: Determine the i) 1st -order, ii) 2nd -order, and iii) crossed partial derivatives
of the equation q = 5p3 + 11pi + 2i4.
Solution:In tackling this problem, what is required on the part of the leaners (students) is
patience and sense of reasoning.
So, .
3.4 Multivariable Functions and Optimization
In unit one of this module, we discussed optimization of functions in which the

exogenous variable [i.e. variable(s) on the right hand side of an equation] was just one,
that is, y = f(x). In that scenario, we have been able to determine the relative extrema,
inflection point, etc. The same goes for a function or equation with more than one
exogenous variable. For such a function where z = g(x, y), to be at a relative extrema,
three conditions must be fulfilled. These are:
a) The 1st-order partial must equal zero at the same time. This shows that at the given
point, often referred to as critical, the function is neither rising nor falling but is at
a relative table like form.
b) The 2nd-order partial, when estimated at the critical point, must both be negative
which shows it is at maximum and minimum when both are positive. This
67
indicates that from that table-like form, the function is concave when the curve
bends downward in the case of relative maximum and convex when it bends
upward in the case of minimum.
c) The product of the 2nd-order partialsestimated at the critical point shouldsurpass
the product of the crossed partials also calculated at the critical point. This
isrequired to rule out an inflection point. In summary:
Relative maximum Relative minimum
1. 1.
2. 2.
3. 3.
d) If , when and have the same signs, the function is at an

inflection point; when and have different signs, the function is at an
inflection point.
e) If , the test is inconclusive.
f) If the function is strictly concave (convex) in x and y, there will be only one
maximum (minimum), called an absolute or global maximum (minimum). If the
function is simply concave (convex) in x and y on an interval, the critical point is a
relative or local maximum (minimum).
Determine i) the 1st -order, ii) the 2nd -order, and iii) the crossed partial derivatives for the
equation
q = 4p2i3
Also, determine the critical values and if the function below is at a relative maximum or
minimum, given that,
q = 2i3 – p3 + 147p – 54i + 12.
4.0 CONCLUSION
We stated earlier at the starting of this unit that, what we studied in unit one was a case of
one endogenous parameter being impacted by just a single exogenous parameter too.
However, there are extreme cases where a single endogenous parameter is affected by
more than one exogenous parameter. That had led us to the study of two-
68
variable/multivariable functions. With what we have discussed thus far in this topic, we
can confidently apply this to solve problems associated with multi-products ventures.
5.0 SUMMARY
In sum, we have in this unit, considered the followings:
 We have studied functions of several variables. We realized that, a single

endogenous variable could be influenced by more than one exogenous variable.
This will assist researchers to tackle optimization problems in a multi-products
organization
 We also have discussed Partial derivatives. That is, it is about observing the
influence of the exogenous variables on the endogenous variable, while the rest
are held constant, and vice versa. In the application of partial derivatives, some
fundamental rules were studied.
 We equally discussed relative extrema and inflection points in multivariable
functions. We have discussed the conditions to be met to be able to determine the
relative extrema and inflection points in a function that has more than one
exogenous parameter.
Find the 2nd-partial and crossed partials of the followings:
 q = 3pi4 + 5p3i
 q = p0.7i0.3
Findthe critical values, and determine if these values/points in the function is at relative
extrema, inflection point, or inconclusive. Given that,
q(p, i) = 3p3 – 8i2 – 120p + 40i + 100


69

UNIT 3 OPTIMIZATION WITH CONSTRAINTS

CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Constraint: Its Effect
3.2 Constrained Optimization with the Lagrange Multiplier
3.2.1 The Method of Lagrange Multiplier
3.3 Lagrange Multiplier: it’s Implication to Economists
70
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In this section, we shall still continue our discussion on the concept of optimization, but
with a difference. In the preceding sections (that is, units one and two) of this module, we
studied optimization where we determined the relative extrema of an objective function
of two or more choice variables. One basic feature of this form of optimization is that all
the choice variables were independent of one another. Where this form of
undependability is found among the choice variables in optimization, this form is
generally referred to as free or unconstrained optimization.
However, in the field of economics, certain problems needed to be optimized. In some

cases, variables involved are often required to satisfy certain constraints. For instance, the
amounts of different items demanded by a buyer must fulfill the budget constraint of the
buyer (in this case, the buyer’s income can be seen as a constraint). This unit will
introduce us to optimization with constraint.In particular, the method of Lagrange
multipliers will be studied to understand how problems in optimization are resolved using
it.
2.0 OBJECTIVES
 Know the difference between unconstrained optimization and the constrained type.
 Understand the module operands pertaining to optimization with constraint.
 Study the usefulness of Lagrange multipliers in optimization discussion.
3.0 MAIN CONTENT
3.1 Constraint: It’s Effect
You will recall that, we have mentioned at the starting of this module that, optimization
denotes the quest for the best. No matter how bad any economic activity may look, there
will always be an optimum point, if we apply the concept of optimization. Basically in
economics, every economic activity is all about limiting factors which hinder or
constraint the ability or power of any economic agent to do certain things. So, in concept
of optimization these limiting factors are duly recognized as constraints.
71
Let us consider the popular utility concept in the theory of demand. This concept is about
the study of the satisfaction of consumer(s) subject to their income level, which is always
referred to as Budget constraint. Let us study a buyer with simple utility function:
U = x1x2 + 2x1
What we have stated above is a total utility function of a buyer. The marginal utilities can
be determined by taking the partial derivatives of the total utility function (U) w. r.t x1
and x2. In this case, the buyer’s utility is maximized without any constraint. Which
means, the buyer is able to any of good he/she deems fit. This scenario did not consider
the income of the buyer as a limiting factor. The case as presented has very little or no
pragmatic relevance in economics. To make the case relevant in economics, the income
of the buyer should be incorporated into the function. Assuming, the buyer intends to
expend a total amount of ₦ 120, on the two items (x1and x2), and if the prices of the items
are:x1 = 8 and x2 = 2, we can now express this limiting factors (income and prices) that
have been incorporated in a linear form thus:
8x1 + 2x2 = 120
With this constraint, the items x1 and x2 are now mutually dependent. The next thing is to
maximize the utility function stated earlier, subject it to the constraint just derived.
In trying to observe the relative extrema of both the constrained and unconstrained
optimization, the difference between the two can be illustrated in a three-dimensional
graph (see graph below). The unconstrained extremum is the peak point of the entire
dome, while, the peak point of the inverse u-shaped curve denote that of the constrained
extremum. Also, in terms of values, the value of the unconstrained maximum is expected
to be bigger than that of the constrainedmaximum. At rear instance, the two maxima may
have the same value. However, the constrained maximum is not expected to surpass that
of the unconstrained maxima.
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Free maximum
Constrained maximum
Constraint
(Adopted from Chiang and Wainwright, 2005).
 The optimization of a consumer’s utility without constraint amount to little or no

economic sense, discuss.
 State the limiting factors in the study of utility concept.
3.2 Constrained Optimization with Lagrange Multiplier

From our discussion under constraint, by now we should be able to explain what constrained
optimization is all about. In sum, constrained optimization is the quest for the best in the midst of
available (limited) resources. That is, a consumer who tries to maximize his/her level of
satisfaction bearing in mind the limiting factors. There are many ways constrained problem
optimization can be resolved. Ways such as through the method of substitution and elimination
of variables, etc. However, some constraints could be complicated function, or when there are
several constraints to be considered, the methods of substitution and elimination of variables
become ineffective. To resolve problems of this nature, a method that is best applicable is
Lagrange multiplier.
3.2.1 TheMethod of Lagrange Multiplier
The essence of the Lagrange multiplier is to convert a constrained-extremum problem

into a form that can be resolved applying the 1st-order condition.A typical economic
instance of a constrained optimization problem is about a buyer who decides how much
of his/her income I is to be spent on an item sayx whose price is px, and how much
income is to be left over for expenditure pyy on other item y. In this situation the
consumer is faced with some limiting factors, which in this case is represented with
budget constraint (Px X + PyY = I). Assuming the buyer’s preferences is represented by
the utility function U (x, y). Therefore, there is a problem of preference optimization
among the available items by the buyer subject to the limiting factor (budget constraint).
This can be expressed inmathematical terms as:
MaxU(x, y) subject to Px X + PyY = I
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Where U(x, y) is the utility function, Px X + PyY = I is the budget constraint. What we
have just seen, is a classic constrained maximization problem. In this instance, we can
solve for either y or x. When this happens, the problem becomes unconstrained
maximization which can be solved by the method of substitution and elimination.
However, where the constraint is complicated, or where there are several constraints to be
considered as mentioned earlier, the substitution technique becomes ineffective. In such
circumstance, other systems should be employed. Of particular interest to economists is
the Lagrange multiplier approach. Essentially, the same mode is often employed by
economists even for problems that are quite easy to express as unconstrained problems.
The major reason behind the use of Lagrange multipliers by economists is its clarity in
economic interpretation. Besides that, the introduction of Lagrange multipliers can be
modified in a number of more complicated constrained optimization problems, such as
those expressed in terms of inequalities.
Now, assuming we have the function f (x, y) subject to a constraint h(x, y) = k where k is a
constant item. From these, we can combine the objective function and the constraint
function to get a new function. This new function is arrived at thus:
(a)Set the constraint function to equal to zero, then
(b) Multiply the function in step (a) by λ (the Lagrange multiplier), and
(c) Add the product (the result) to the objective function.
(Note that the sign λ is a Greek letter often called lambdain mathematical sciences, and is
the Lagrange multiplier).
Thus we have:
F(x, y, λ) = f (x, y) + λ [k - h(x, y]
Objective function
Lagrange function Constraint function
From the equation stated above,F(x, y, λ) is the Lagrange function, f(x, y) is the objective/
original function, and h(x, y) is the constraint function. Note that the constraint function is
all the time equal to zero, with the multiplication of λ to form λ[k - h(x, y)] is equally set
to zero and its addition does not change the value of the original function.Meanwhile, x0,
y0, and λ0 are the critical values that optimize the function. They (the values) are
determined by partly (partial) differentiating the functionFw. r. t all the three mutually
dependent variables (x0, y0, and λ0),setting them equal to zero, and resolve
simultaneously, that is:
74
Fx(x, y, λ) = 0 Fy(x, y, λ) = 0 Fλ (x, y, λ) = 0.
Let us see one or two worked examples.
Example 1: Optimize the function q = 8p2 + 6pi + 12i2subject to the constraint p + i =

112.
Solution:To optimize the function, the steps given above need be followed strictly.
(i) Set the constraint equal to zero by subtracting the variables from the constant
value
p + i = 112, set this equal to zero thus, we have
112 – p– i = 0
Multiply the result in step (i) by λ and add the outcome of the two to the original function
to form the Lagrange function q. that is,
q = 8p2 + 6pi + 12i2 + λ (112 – p - i) (a)
(ii) Now, take the 1st-order partials, set each equal to zero, and solve
simultaneously
qp = 16p + 6i – λ = 0 (b)
qi = 6p + 24i – λ = 0 (c)
qλ = 112 - p - i = 0 (d)
Subtracting (c) from (b) to get rid of λ gives
10p – 18i = 0
p= 1.8i
Substitute p = 1.8i in (d),
112 – 1.8i – i = 0
2.8i = 112
i= = 40 i0 = 40
We then work with the value of i0 to get p0 and λ0, therefore
p0 = 72 λ0 = 1,392(this measures the effect of

increasing the constraint constant by a unit on q).
75
Now that we have determined our critical values, substitute them in (a) we will
have,
q= 8(72)2 + 6(72)(40) + 12(40)2 + (1,392)(112 – 72 - 40)
= 8(5,184) + 6(2,880) + 12(1,600) + 1,392(0) = 77,952.
Example 2: Optimize the function x2 + y2 + z2 subject to
Solution: Again, to optimize this function, follow the steps given above.
(i) Let the constraints be equal to zero

30 - x - 2y -z = 0
10 – 2x + y +3z = 0
Multiply the result in step (i) by λ and add the outcome of the two to the original function
to form the Lagrange function F. that is,
(x, y, z) = x2 + y2 + z2 – λ1(x + 2y + z - 30) – λ2(2x – y – 3z -10) (c)
(ii) Now, take the 1st-order partials, set each equal to zero, and solve
simultaneously
= 2x - λ1- 2λ2 = 0 (d)
= 2y - 2λ1+ λ2 = 0 (e)
= 2z - λ1+ 3λ2 = 0 (f)
In this instance, there are five unknowns x, y, z, and to be determined, so

simultaneously solving (d) and (e) for and gives
λ1 = x + y, λ2 = x - y
Inserting these expressions of and into (f) and rearranging yields
x–y+ z=0
This equation together with (i) and (ii) constitutes a system of three linear equations in
the unknowns x, y, and z. Solving this system by elimination gives
xo = 10, yo = 10, zo = 0, λo1 = 12 and λo2 = 4

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 Optimize the function f(x, y) = 8x2 – 4xy + 12y2 subject to x + y = 36
 Optimize the function f(x, y, z)=2xyz2 subject to x + y + z = 112
3.3 Lagrange Multiplier: It’s Implication to Economists
We have discussed extensively Lagrange multiplier a tool for resolving optimization with
constraint. Some examples have seen solved using this tool (Lagrange multiplier). The
question now is, of what interest is this method to economists in the analysis of economic
issues?The Lagrange multiplier λ as is commonly referred to helps to estimate the
marginal impact on the objective function as a result of any small change in the constant
of the constraint. In the worked examples,especially example one, our λ equals to
1,392.Means for instance, that any unit rise (drop) say a unit in the constant of the
constraint will influence q to rise (fall) by 1,392 units (see worked example below).
Lagrange multipliers are often referred to as shadow prices. In production optimization
subject to inputs constraint, Lagrange multiplier λ will help to estimate the marginal
productivity of an additional input.
Example 1: To prove that a unit change in the constant of the constraint will cause a
change of approximately 1,392 units in Q in the earlier worked example.
Solution: Reverse to the initial objective function q = 8p2 + 6pi + 12i2 and optimize it
subject to a new constraint x + y = 113 in which the constant of the constraint has risen by
one unit.
Q = 8p2 + 6pi + 12i2 + λ(113 – p – i)

Qx = 16p + 6i – λ = 0
Qy= 6p + 24i – λ = 0
Qλ = 113 - p - i = 0
By solving simultaneously, this gives:
p0 = 73.28 i0 = 40.72 λ0 = 1,416.8
Substituting these values in the Lagrange function gives Q = 79,351.6 which is 1,399.6 l
bigger than the old constrained optimum of 77,952, close to the approximation of the
1,392rise suggested by the Lagrange multiplier (λ).
 Discuss the impact of one unit change in constant constraint on the value of the
objective function.
4.0 CONCLUSION
We have seen the case of constraint optimization, and how the Lagrange multiplier was
used to resolve the problem. What we have discussed in this part, is a pure instance of
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pragmatism. In economics, indeed human wants are many, but, the resources to meet
them are limited (the limiting factors). With what we have studied thus far about
Lagrange multiplier, one can submit that, Lagrange multiplier is indeed a vital
mathematical tool useful in economics, and it is a measure of marginal impact in applied
economics.
5.0 SUMMARY
In sum, we have in this unit, considered the followings:
 We have studied constraint and its effect. That, constraints are the limiting
factors that would not allow a consumer or buyer to purchase all he/she desire to
get. For instance, the price of an item, the consumer’s income, and a lot more
constitute constraints.
 Also, we have discussed constrained optimization. What we have studied before
this very unit were cases of free or unconstrained optimization, so as to ascertain
the relative extrema. However, we have found out that that is not practicable. So,
with our discussion on constrained optimization, we have seen how real life
economic issues can be resolved.
 Lastly, we studied a method often used by Economists to resolve constrained
optimization problems. The method is Lagrange multiplier. It is about subjecting
the objective function to constant constraint, and by this mode, the variables are
made mutually independent with one another. This method helps Economists to
ascertain the marginal effect of a phenomenon.
 Optimize U(x, y) = xy subject to 2x + y = 50

 State the Lagrange function of f(K, L) subject torK + wL = I


78

UNIT 4 DIFFERENTIALS
CONTENTS
1.0 Introduction
79
2.0 Objectives
3.0 Main Content
3.1 Differentials and Derivatives
3.2 Total and Partial Differentials
3.3 Total Derivatives
3.4 Derivatives of Implicit and Inverse Functions
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
We have seen in the just concluded unit how real life issues can be mathematically
modeled based on our understanding of economics, and resolved some issues using a
mathematical method like Lagrange multiplier that has been incorporated in it these real
life issues. In unit two, our study was mainly on partial differentiation and its modus
operand. This has enabled us resolve simpler comparative-static issues, where
equilibrium of a model, function or equation can be stated in a reduced form. That is,
with partial differentiation, there exists no relationship among the exogenous parameters.
Still discussing comparative-static analysis, there are limits in which the partial
differentiation will no longer be effective. For instance, in a simple national-income
equation with two endogenous parameters (variables) Y & C:
Y = C + I o + Go
C = C(Y, To)
These equations can be reduced to a single equation
Y = C(Y, To) + Io + Go.
In this form of equilibrium condition where an explicit solution is not possible, partial
derivative will be ineffective in its application. Instead, total differential will be more
appropriate in resolving economic problem of this kind.
2.0 OBJECTIVES
At the end of this aspect of the module, the Students should be able to:
80
 Explain what differentials is all about
 See the use of differentials in resolving economic issues
 Distinguished between total and partial differentiation.
3.0 MAIN CONTENT
3.1 Differentials and Derivatives
At the startof module one precisely in unit one,derivative dy/dx was expressed as a single
notationrepresenting the limit of Δy/Δx as Δx approaches zero. The derivative dy/dxcan as
well be expressed as a ratio of differentials wherebydy is the differential of y and dx the
differential of x. supposing we have a model of one exogenous parameter/variable y =
f(x), the differential of y isdy, and it measures the rate of change in yas a result of a small
change in x, which is denoted bydx.
Differentials as a mathematical method as the some fundamental characteristics that

would help our understanding of its operations. (i) In differentials, while dy is an
endogenous variable, dx is exogenous. In this instance, dy is dependent on x and dx. This
is because the variable x has changed location. (ii) Since dy is dependent on dx, it
therefore means that if dx = 0, then dy = 0. But, where dx 0, we then divide dy by dx to
obtain f’(x) or multiply dx by f’(x) to have dy. (iii) the differential dy can only be
expressed in terms of other differential(s) like dx.
Now, assuming we have the equationq = 4p2 + 11p + 4, the differential of q will be
obtained by first differentiatingq w. r. tp, this measures the rate at which variableq is
influenced by a small change in the variablep.
= 8p + 11
Then multiply this outcome by a specific change in p (dp) to get the actual change in
q(dq).
dq = (8p + 11) dp a differential or simple change
Change in q = rate at which q changes for a small in p a small change in p.
Let us see a worked example.
Example 1: assuming we have the function q = 5p3 + 4p2 + 20, find the differentials?
81
Solution:To find the differentials, note that, it is the derivative of q w. r. t p multiply by
the little change in p.
Therefore,
dq
= 15p2 + 8p derivative of q w. r. t p,
dp
Then multiply it with the little change in p denoted by dp, and we have
dq
= dq = (15p2 + 8p) dp.
dp
Find the differential of the following functions:
 q = (8p – 30)4
18 p  4
 q
10 p
 q  (6 p  3)(5 p 12)
3.2 Total and Partial Differentials
Total differentials as a concept can be discussed in reference to a function of two or more

exogenous variables. Total differentials measure the rate of change in the endogenous
variable occasioned by a little/small change in the individual exogenous variables.
Supposing we have an economic model of the form Q = g(K, L), that is a production
function, where Q is output, K is capital, L is labour. We can measure the influence of K
or L on Q which is the endogenous variable individually by a process of partial derivative
( ) (see unit 2). This gives the marginal impact of the variables K and L
on the endogenous variable Q. For any change in any of the two exogenous variables, the
resulting change in Q can be estimated as (Q / K )dK , which is the same as dq = g’(k)dk.
The same goes for the variable L. therefore; the total influence of the two exogenous
variables on Q is their differentials, and is mathematically expressed thus:
Q Q
dQ  dK  dL
K L
Or, state differently as
dQ = QKdK + QL dL
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Where QKand QL are the partial derivatives of Q with respect to (w. r. t)K and L
respectively, and dK and dL are small changes in K and L. The partial derivatives have
played the role of a converter which helped in arriving at the total change in Q
occasioned by the individual change in the two exogenous variables. In sum, the total
differentials can thus be determined by partially differentiating the function w. r. t the
individual exogenous variable and substituting these values in the objective function.
Example 2: Determine the total differential for production functions below:
(i) Q (z1, z2) = xz1 + yz2 and (ii)Q (z1, z2) = . Note, x, yare greater
than zero
Solution:To find the total differential, take the partial derivative of the individual
exogenous variables, multiply it with little/small change in the individual left-side
variables, and then sum the outcomes thus,
Q Q
(i)  Q1  x and  Q2  y
z1 z2
Therefore,
dQ = Q1dz1 + Q2dz2 = xdz1 + ydz2.
Q Q
(ii)  Q1  2 z1  z2 again,  Q2  3z22  z1
z1 z2
Therefore,
dQ = Q1dz1 + Q2dz2 = (2 z1  z2 )dz1  (3z22  z1 )dz2 .
However, if one of the right hand variables in the production function earlier treated is
held constant(for instance, dL = 0), we then have a partial differential:
dQ = QK dK.
By definition, a partial differential measures the rate of influence on the endogenous

variable for a two or multivariable function occasioned by a small change in one of the
exogenous variables, assuming other right-hand variables are held constant.
Find the total differentials of the followings:
83
 q = 7p2 + pi – 3i3
 z = (2x – y)/(x + 2)
3.3 Total Derivatives
We have discussed instances of partial derivative, partial differential, and total

differential. Individually, these term mean different things in mathematical operations
though, theirpronunciations may sound similar. For total derivative, its modules operand
is not in any form similar to that of total differential. Let us assume we have a model or
function where q = g(p, i) and i= h(p), that is, when p and i are not exogenous, a change
in p will influenceq directly through the function g and indirectly through the function
h.This process is diagrammatically represented below for better understanding. To
measure the influence of a change in p on q when p and i are not exogenous, the total
derivative must be determined. The total derivative measures the direct effect of p on q, ,
plus the indirect influence of p on q through i, that is, . In a nutshell, the total
derivative is:
p h i g q
g
A channel map showing the directions of impacts between variables
Example 3:Find the total derivative dq/dp, given the function q = f (p, i) = 12p3+ 14i
Wherei= g (p) = 8p2 + 6p + 16.
Solution:We will apply the total derivative methodology to resolve this problem.
Therefore, the total derivative ofdq/dp with respect to p is
Where qp= 36p2, qi = 14, and di/dp = 16p + 6. Substitute all these into the model
above, we have,
84
36p2 + 14(16p + 6) = 36p2 + 224p + 84
As a check, we substitute the function g into the function f, to get
q = 12p3 + 14(8p2 + 6p + 16) = 12p3 + 112p2 + 84p + 224
Thus: 36p2 + 224p +84.
Find the total derivative of dz/dp for these functions:
 z = 12p2+30pi+3i2 where i = 14p2

 z = (11p-16i)2 where i = p+6
3.4 Derivatives of Implicit and Inverse Functions
Recall that in the beginning of this module, we treated the explicit function in which the
endogenous variable is on the left hand side of the equal sign, and the exogenous variable
is situated on the right hand side. For instance, the functionor equation of the form q = f
(p) express q explicitly in terms of p.However, as we advanced in the module often, we
came across implicit functions, in which the variables including the constant term are all
on the left hand side of the equal to sign (=). Consider the function of the form f (p, q) =0.
If an implicit function f (p, q) =0 exists and fp ≠ 0 at the point around which the implicit
function is defined, the total differential is simply fpdp + fq dq= 0.
We have stated earlier that a derivative is a ratio of differentials.Having said that, we can
then rearrange the total differentials to get the implicit function rule:
Notice that the derivative dq/dp is the negative of the reciprocal of the corresponding
partials.
If we have the function q = f (p), the inverse function will bep = f -1(q),if individual value
of q produces one and only one value of p. Assuming we have an inverse function, the
inverse function rule states that the derivative of the inverse function is the reciprocal of
the derivative of the original function. So, if Q = f(P) is the original function, the
derivative of the original function is dQ/dP, the derivative of the inverse function [P = f -
1
(Q)] is dP/dQ, and
85
only if .
Example 4: Find the derivative of the implicit function: 14x2 – 2y = 0
Solution: Remember the implicit rule of derivative. Therefore, the derivativeofthe

function is found as follows:
Here fx = 28x and fy = -2. Substitute this in the model above,
= 14x.
Example 4: Find the derivative for the inverse of the functionQ = 80 – 5P.
Solution:know that the derivative of an inverse function is the reciprocal of the

derivative.
Therefore,
dP 1

dQ dQ / dP
Where dQ/dP = -5. Thus,
4.0 CONCLUSION
In this unit, we have seen that differentials are not derivatives. While derivative is the
ratio of differentials, differential is the differential of the variables. For example,dy is the
differential ofy and dxis the differential of x.However, in a situation where an explicit
solution is not possible, partial derivative will be ineffective in its application.
Differentialbecomes more appropriate in resolving such economic problem. In sum,
differential is the mathematical method that assists economists to resolve economic issues
with implicit form.
5.0 SUMMARY
Thus far in this section, we have treated the following:
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 Differentials and derivatives. While derivatives are basically employed to tackle
functions, models or equations that are largely explicit in form, differentials work
where derivative is less effective.
 The derivative of implicit and inverse functions. Where the derivative of the
implicit function (dq/dp) is the negative of the reciprocal of the corresponding
partials, the derivative of the inverse function (p = f-1(Q))is the reciprocal of the
derivative of the original function.
 Find the derivative of the inverse function dx/dy. Where y = 1000 – 3x2
 Find the derivative of the function f(x, y) =4x2 + 3xy + 6y3, using implicit rule.



87
MODULE 3: LINEAR ALGEBRA
Unit 1: Matrix
Unit 2: Matrix Operations
Unit 3: Matrix Inversion
Unit 4: Matrix in Economics
UNIT 1 Matrix
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Systems of Equations (Linear)
3.2 Definitions and Terms
3.2.1 Linear Algebra: Its Roles
3.3 Matrix and Vector Operations
3.3.1 Multiplication of Vectors
3.4 Laws in Matrix
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In the just concluded module, that is module two, that centered on optimization, we have
learnt that optimization is about the quest for the best among the available few.
Optimization is basically of two categories, the constrained and the unconstrained. The
former is about factoring what is generally referred to as the limiting factors into the
optimization model in order to arrive at the solution. While the latterlooks at optimization
with the view that the quest for the best can be gotten without recourse to any limiting
factor. This category of optimization is not practicable in the real sense of life. We have
seen optimization in terms of two or more variables. We have also discussed Lagrange
multiplier as a tool that is always appliedto resolving issues which has to do with
constrained optimization.
In this part of the module, we shall be discussing matrix algebra. A lot of economic
models used in analyzing economic issues are derived from mathematical models that
ultimately involve a system of several equations. If eventually these equations are all
88
linear, the study of such systems of equations belongs to an area of mathematics called
linear (or matrix) algebra.Also in this part of the module, we shall be treating topics like
matrix and vector, matrix operations, matrix inversion, and many more.
2.0 OBJECTIVES
 Know what linear equation is all about

 Define certain matrix terms such as rows, columns, etc.
 State the laws in matrix.
3.0 MAIN CONTENT
3.1 Systems of Equations (Linear)
Perhaps in your elementary mathematics or in your mathematics for economists I, you
might have been introduced to systems of two simultaneous linear equations in two
variables. For the purpose of refreshing your memory, here is an example of such a
system, whereby the two unknowns are designated by x1 and x2,
2x + 4y = 4
4x –2y = 8
A solution to this system is a pair of numbers (x, y) which satisfies both equations. One
knowntechnique of resolving this form of mathematical issue is byelimination. Take on
the first equation, and make xthe subject of the equation. Then we havex = - 2y + 2. Then
insert x into the second equation, and we have4(- 2y +2) – 2y = 8. By way of simple
mathematical manipulation, we shall havey = 0, and then x1 = - 2(0) + 2 = 2. The only
solution is therefore (x, y) = (2, 0).
In sum, the notation for any system which has two linear equations with unknown
parameters x and y is always in the form below:
b11x + b12y = c1
b21x + b22y = c2
What we have seen is a case of two equations with two unknown parameters. However,
there are instances in matrix operations as we shall soon see in which we consider a large
number of equations with unknown parameters or variables, and then we shall be looking
at a notation that will be suitable for that instance. In such instance, we shall be exploring
a linear system of equations with m equations and n unknowns. In such a system of
equations, themis always larger than, equal to, or less than n. Assuming we have a case
where the unknowns are represented by x1……xn,such a system of equation will be
denoted thus:
b11x1 + b12x2 + . . . + b1nxn = c1
89
b12x1 + b22x2 + . . . + b2nxn = c2
………………………………………
bm1x1 + bm2x2 + … + bmnxn = cm
In this elaborate notation, b11, b22…., bmn are referred to ascoefficients, whilec1….cm are
known as the right-hand sides, and they are always real numbers or constants. It is very
important we notice the subscripts used in the notation. Universally, bij is the coefficient
in the ith equation of the jth parameters/variables (i stands for the row while j stands the
column). At times, most of these coefficients are always zero (0). Meanwhile, as we
progress in this study, the subscripts bij or bmn will be better explained in matrix
terminology.
3.2 DEFINITIONS AND TERMS
We have mentioned in section 3.1 of this unit that matrix and is another name for linear
algebra. In the real sense, what is matrix and its essence in mathematical sciences and
economics? By simple definition, amatrix is a rectangular array of numbers, parameters,
or variables, each m of which is placed orderly in the matrix. The numbers (parameters or
variables) are called elements of the matrix. These elements (numbers) are orderly placed
in rows and in columns (that is m and n as seen in section 3.1). The elements orderly
placed horizontally are referred to asrow elements; and the ones placed vertically are
known as column elements. The number of rows m and columns n shows the scopes of
the matrix (m × n),this is pronounced m by n, meaning m rows by n columns. It is vital to
note that in matrix, the row number always come before the column number. That is what
we have seen by the term m by n matrix.
However, there are instances where the rows and the columns are the same (that is
equal).Asquare matrix is a good example of such a case. Here (square matrix) the number
of rows equal the number of columns (that is, m = n). Another instance in matrix is a case
of single column matrix where the dimension is such that it is m by 1. In this case, it is
termed a column vector. Also, we can have a case of a single row, with 1 by n
dimension;this is a case ofrow vector. There are times we need to make some
manipulations in mathematics. Supposing in a matrix, we decide to make some
manipulations by way of transforming the rowsto columns and the columns to rows, what
we have just done is known astranspose matrix. Let us see one or two matrix examples.
Examples 1: Given
A= B= C= D=
3×3 2×3 3×1 1×3
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The matrices as shown above have given us some scopes or dimensions of matrices to be
exposed to, even larger ones not included in the scenario. Matrix A is more or less a
special one with 3by3 dimensions. By this, the matrix is thus a square matrix (see the
definition above).You will notice that all the elements in the matrix are arranged orderly
in horizontal and vertical dimensions having subscripts attached which gives the address
or placement of the individual element.The subscripts are the m n earlier discussed.
They tell us the row and column an element is placed. For instance, b32 is an element
which is placed in row 3, and column 2; b13 is an element sited in row 1, and column 3.
In the case of matrix B, its dimension is 2 by 3. That is, it has two rows and three
columns. The matrix has real numbers as it elements; therefore the site of the numbers
can easily be ascertained using the explanations above.For example, its b23 element is 7;
its b11 element is 1, and many more. The matrices C and D are column and row vectors
with dimensions of 3 by 1 and 1 by 3 respectively. Notice that, the composition or the
numbers of element in a matrix can be determined via the dimension of the matrix. A
matrix of 2 by 2has a composition of 4 elements or the numbers of element in that matrix
are 4.
Recall that, we have mentioned that a matrix is transposed when the rows are transformed
into columns, and columns into rows.Let us see practical instance using matrix B that has
a 2 by 3 dimension. The notation for transpose matrix in the case of matrix B is written
B’ (or BT). The transpose of matrix B as given above is:
= 3×2
In this situation (that is ), we can see that the dimension of the matrix has changed
upon the transformation that took place. Instead of the initial 2 by 3, what we now have is
a matrix of 3 by 2 dimensions. Also, the positions of the elements have changed except
for b11 that still maintained it initial site. Apart from a square matrix, the dimension of a
matrix changes anytime the matrix is transposed.
 What is matrix, andhow is itdifferent from a simple linear equation?

 On your own, design a five by four matrix, transpose it and state its dimension.
3.2.1 Linear Algebra: Its Roles
Recall we have stated before now that, we shall bediscussing the importance of matrix or
Linear algebrain mathematical studies. One can reliably or confidently state that, matrix
operation is a higher version of simple linear equation. As a result of this, matrix as a part
of mathematics fills the following gaps in mathematical studies:
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a) It allows complicated system of equations expressed in a form that is
understandable. That is, equations that are more than two or three system of
equations which look clumsy and difficult can be made simplified with matrix.
b) With matrix or linear algebra, one can easily determine if a particular
mathematical problem is resolvable before it is attempted. Like the case where we
have numerous systems of equations to solve could appear not solvable. But with
the understanding of matrix, one could determine if the situation is solvable.
c) Matrix provides a way by which systems of equations are dealt with. It can only be
applied to systems of linear equations. In most case, many relationships in
economics are basically linear equations and where they are not, can be easily
transformed into a form that is linear.
A good instance where matrix is applicable is a situation where a dealer in all forms
of airtime or recharge cards has a lot of shops, say 5 where he/she sells. He/she can
have a concise stock keeping of the items in those shops by means of matrix
operation. See details below:
SHOPS GLO MTN AIRTEL ETISALAT
A 100 150 80 200
B 250 300 100 150
C 234 200 120 220
D 350 270 300 400
E 450 250 275 356
From the matrix above, the dealer can have an ideal of all the stock of each network
airtime he/she has in the five shops. For instance, across a row of the matrix, the dealer
can ascertain the level of stock of each item in a particular shop. Then down and up of a
column in the matrix, gives the total stock level of any item in the five shops.
3.3 Matrix and Vector Operations
You will recall that matrix is about the arrangement of numbers horizontally and
vertically (that is, in rows and in column). Vectors are special forms of matrix that has its
feature direction and magnitude. As a result, vectors are suitable for the application of all
the algebraic tasks already discussed. There are two forms of vector matrix. These are the
row and the column vectors. The former is one in which the numbers are arranged
laterally. While the latter, is the arrangement of numbers in a matrix in vertical order.
3.3.1 Multiplication of Vectors
An m × 1 column vectora, and a 1 x n row vector b, yield a product matrix ab of
dimensionm×n.
For example, supposing that:
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a= and b = , going by the principle of multiplication,
we have matrix a times matrix b. we therefore have,
ab = =
Now, the dimension of outcome ab is a 2 by 3 matrix. Remember that matrix a is a2 by 1,

whilematrix bis a 1 by 3 matrix.When we compare these matrices dimensions with the
outcome’s dimension, we can see a sort of resemblance in the dimensions. In matrix
multiplication, the dimension/scope/magnitude of the resultant matrix is a combination of
the rows (m) and columns (n) of the individual matrix. Notice that in vector operation, a 1
by n row vector a and an n by 1 column vector b, the product ab will produce a matrix of
dimension 1 by 1.
It is important to note that for matrices to be conformable, the number of columns in the
lead matrix (matrix that comes before the other matrix in any matrix operation, e.g.
Matrixa as in the example above) must be equal to the number of rows in the lag matrix
(a matrix that comes after the lead matrix, e.g. matrix b).
Supposing we have
a= and b = , by matrix multiplication, the resultant matrix
will be
ab = = . The scope of this resultant matrix is 1
by 1 as already indicated. This outcome (that is, the 1 by1), is a good example of a scalar
matrix that has just magnitude only (matrix ab is known as singleton).
 What are vector matrices?

 Distinguished between a vector matrix and a scalar matrix.
3.4 Laws in Matrix

In matrix, there are laws that guide its operations. These are universally referred to as
laws in matrix. These laws are commutative, associative, and distributive in nature. Let
us understand how these laws work. It is important to note that both multiplication and
addition in matrix are done in line with commutative, associative, and distributive laws.
Firstly, with commutative law, matrix addition is (a + b = b + a). However, since the
addition is merely the summation of the corresponding elements of the matrices involved,
the order of their summation is immaterial. Still discussing commutative law, matrix
multiplication with vector is not commutative (that is, ab ≠ ba), just with few
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exemptions. But, in case of scalar multiplication, the law (i.e. commutative) is followed
(that is, cd = dc). Secondly, in the case of associative law, matrix addition is (a+b) + c =
a + (b+c). In the case of multiplication, the law(that is associative) is applied only when
the matrices are in order of conformability. That is (xy) z = x (yz). Lastly, as we have seen
in the laws already discussed, in the case of multiplication, the distributive law is x(y + z)
= xy + xz.
However, it is worthy of note to state that, matrix subtraction is also cumulative and
associative. This is so because of the convertibility principle involved. That is, matrix
subtraction (a – b) can be transformed to matrix addition a + (-b).
Let us consider some worked examples applying those laws.
Example 1: Giventhat:
a= b=
Show that the matrix addition and subtraction are commutative by (i) a + b = b + a, and
(ii) a – b = - b + a.
Solution:Note the calculations are done in conformity with law of commutative. See
workings below.
(i) a+b = =b+a= =
(ii) a–b = =-b+a= =
From the workings above, the matrix addition and subtraction in line with the
commutative law as discussed earlier has been shown using numbers.
Again, we want to show that the multiplication operation in matrix is not commutative as
stated at the beginning.
Example 2:Supposing we have:
a= b= . The dimensions of the two matrices
are very vital in matrix multiplication. For matrix a, it is a 2by3, while matrix b is 3by 2.
Solution: It is always advisable to check if the matrices involved are conformable. In this
case the two matrices are conformable in that, the numbers of columns in matrix a is
equal to the numbers of rows in matrix b, therefore:
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ab = =
2by2 2by2
ba = =
3by3 3by3
Considering these outcomes, we have been able to confirm that ab ≠ ba. In multiplication
operations, there is what we refer to as premultiply and postmultiply. In this instance (ab),
the matrix b is premultiplied by matrix a, while matrix a is postmultiplied by matrix b.
We have said concerning the associative law of matrix that, in multiplication operation, it
is applicable if the matrices order is in conformity. See below the applicability of the law
with numeric example.
Example 3: Given that we have,
x= y= z=
3by2 2by3 3by1
Solution:
xy = =
(xy) z = = =
yz = =
x (yz) = = =
From the calculation above, it therefore holds that the associative law in the case of
multiplication is true, if order of the matrices conforms.
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 Determine (i) a – b and (ii) – b + a if
a= b=
 Find (i) xy and (ii) yx if
x= y=
4.0 CONCLUSION
At the start of this part, we defined matrix as an array of numbers in rows and in columns.
We further stated that, these numbers are located in a particular position in the matrix.
This location can be found by simply tracing the rows and the columns in the matrix.
This shows that the placement or location of number in a matrix is very vital in matrix
operation.
5.0 SUMMARY
In this module which is basically about linear algebra, we started by treating matrix as
one of the units that forms part of the entire module. In sum, in the unit we have
considered the following:
 Systems of linear equations. We discussed in this part simultaneous equation with

two models or functions, and how issues in it could be resolved by the method of
elimination. However, there are instances where the equations are more than two,
and three; in that case, matrix algebra comes handy as a way out.
 We have defined matrix and some basic terms in line with matrix operations.
Terms such as square matrix, rows and columns, transpose matrix, and a lot more.
 Also, we discussed the roles of matrix in economic studies. We emphasized that
matrix amongst others helps economists to simplify complicated systems of
equations.
 We equally considered the laws in matrix operations. These laws are commutative,
associative and distributive in nature. And we also have discussed their
applicability to economic issues.
 Discuss the rows and column in matrix. What roles do they perform in matrix
operation?
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 What does dimension/scope/size of matrix mean in matrix operation?
 In a four by three matrix, how many columns and rows are there in the matrix, and
what does this say about the matrix?
 Design a 3by2 matrix on your own using numbers, find the transpose of the
matrix, and state its dimension.



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UNIT 2 MATRIX OPERATIONS
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Linear Dependence
3.2 Addition and Subtraction of Matrices
3.3 Matrix Multiplication
3.4 Identity and Null Matrices
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
We rounded up the preceding unit, by considering the laws in matrix. These laws are
commutative, associative and distributive in nature. These laws guide whatever any
mathematical operation that needs to be done in matrix operation. We have treated some
worked examples in line with these laws. In this unit, we shall continue our discussion
looking at more mathematical explorations under matrix operations. Under this topic, we
shall be considering sub-topics such as linear dependence, scalar and vector operations,
transpose of matrix, and many more.
You will recall that, we had earlier defined matrix as a rectangular array of numbers in
rows and in columns. That a matrix will always have an m-by-n(also written as m×n)
order or dimension. Recall also that, in matrix operations, m stands for the number of
rows a particular matrix is having, while n indicates the number of columns in that same
matrix. For instance, a 3-by-2 (3 × 2) ordermatrix has three rows and two columns. With
the order or dimension of matrix, we can compare two or more matrices to determine if
they are equal or not. This brings us to equality of matrices.
Equalityof matrices states that, two or more matrices are equal if they possess the same
order/dimension and if all their corresponding elements are equal. That is if we have two
matrices X and Y, and their orders are 3- by- 3 (i.e. X3×3and Y3×3), it then means that
matrix X is equal to matrix Y(X = Y).
2.0 OBJECTIVES
At the end of this unit the student should be able to
 Discuss linear dependence amongst matrices

 Explain and conduct operations as regard transpose of a matrix
 Distinguish between identity matrix and null matrix.
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3.0 MAIN CONTENT
3.1 Linear Dependence
In matrix operation, a set of vectors x1 to xncan be said to be linearly dependent if and
only if any of the set of vectors can be expressed as a linear combination of the other
vectors; if not, the set of vectors will belinearly independent. In other words, if two or
more vectors (either row or column) are examined mathematically to be equal to a
particular vector matrix, it means that there is linear dependence among the set of vectors.
See theexample below:
Supposing we have three vector matrices x, y and z, where one say z is a linear
combination of x and y. if:
x = , y = , and z= . Matrix z is linearly dependent on the

remaining two matrices x and y. I know for sure someone will ask how:
2x – y = - = = z. to further verify our result, we can

again work on these matrices to have a zero or null matrix, which shows that these
matrices are linearly dependent. How?
2x – y – z = 0 that is . This is a null or zero vector matrix.
Also, we can have row vector matrices say two that can be linearly dependent. Assuming,
a = and b = , these vector matrices are linearly
dependent because
4a = 4 = = b.
The concept of linear dependence has a simple interpretation. Two vectors a and 4a –one
being a multiple of the other –are obviously dependent. When more than two vectors in
the 2-space are considered, there emerges this significance conclusion: once we have
found two linearly independentvectors in the 2-space (say, x and y) all the other vectors in
the space will be expressed as a linear combination of these (x and y). Furthermore, by
extending, shortening, and reversing the given vectors xand yand then combining these
into various parallelograms, we can generate avast number of new vectors, which will
exhaust the set of all 2-vectors. Because of this, any set of three or more 2-vectors (three
or more vectors in a 2-space) must be linearly dependent. Two of them can be
independent, but then the third must be a linear combination of the first two.
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3.2 Addition and Subtraction of Matrices
Addition (subtraction) of two matricesx + y (x – y) entails that the matrices be of equal
dimensions or order. For instance two or three matrices to be added or subtracted must be
uniform in their scope (i.e. X3×3, Y3×3, etc.). In this case, the matrices have equal numbers
of rows and columns. Therefore, this enables each entry of one matrix to be added to
(subtracted from) the corresponding element of the other matrix. In the worked example
below, x11 in X will be added to (subtracted from) y11 in Y; x12 to y12; etc.
Example 1: Given matrices x and y below, determine the sum of matricesx and y.
Solution: Ensure that the matrices are of the same dimensions or order.
x= y= then x+y = =
3by3 3by3 3by3 3by3
Example 2: Given two matrices k and j of the same order, the entries of the two matrices
can be subtracted thus:
k= j= then k-j = =
Note that in matrix operations for addition and subtraction, the order/dimension of the
matrices involved, and the place of the elements in the matrices are important.
3.3 Matrices Multiplication
In matrix operations, the multiplication of two or more matrices with dimensions
(mbyn)1, (mbyn)2 . . . , (mbyn)nnecessitates that the matrices concerned be conformable.
That is, n1 = m2, or the number of columns in matrix 1, the lead matrix, equal the number
of rows in matrix 2, the lag matrix. The analysis in matrix operations as regard
multiplication is simple. Each row vector in the lead matrix is then multiplied by each
column vector of the lag matrix, in accordance with the rules for multiplying row and
column vectors already discussed in unit one Section 3.3.1. The row-column products,
referred to as inner products or dot products, are then used as entriesto form the product
or resultant matrix, such that every entry of the product of the new matrix is a scalar
derived from the multiplication of the ith row of the lead matrix and the jth column of the
lag matrix.
One quick way for test for conformability in matrix operations as regards multiplication,
before undertaking any operation, is to place the dimensions/scope in the order in which
matrices are to be multiplied, then see if the number of columns in the lead matrix is the
same with the number of rows in the lag matrix. If the numbers are equal (i.e. the same),
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it means the two matrices are conformable. Then, the multiplication can take place as
proposed.
For instance if two matrices x and yof order 4by3 and 3by4 respectively, are to the
multiplied. The first thing is to determine the conformability of the matrices. In this case
of matrices x and y, the number of columns of the lead matrix x is equal to the number of
rows in the lag matrix y. Therefore, they are conformable, and are said to be defined.
However, if we have a case of matrices x and yhaving a dimension 3by4 and
2by3respectively, here, these matrices are not conformable because the lead matrix
number of columns is not equal in number to the number of rows in the lag matrix. These
forms of matrices are not right for multiplication, and not defined.For worked example as
regard matrices multiplication, see worked example 3 in unit one section 3.4.
 Find the sums of matrix a and matrix b below:
a= b=
 Find the difference between matrix c and matrix d below:
c= d=
 Show if xy is defined, indicate the scopes of the product matrix, and determine the
product of the matrix if possible.
x= y=

Identity Matrix
An identity matrix is a square matrix with 1s in its principaldiagonal fromleft to right and
0s everywhere else. It is designated by the signI, orIn, where the subscript nassists to
show its row (as well as column) dimension (nbyn). Therefore,
I2 = I3 = . However, we can simply represent the
two by I instead of I2 and I3.
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This class matrix is very special because of the fact that it plays a role similar to that of
the number 1 in scalar algebra. For instance, for any number say x, we have 1(x) = x(1) =
x.in the same vain, for any matrix sayZ,if we multiply by an identity matrix, we have
IZ = ZI = Z
Example 1: if Z = and I = , estimate IZ
Solution: Remember that matrix Iis an identity matrix and a special form of matrix that
has the features of number one in algebra. Therefore,
IZ = = = =Z
This has proved that special feature about identity matrix is right as stated. That, any
matrix multiply by an identity matrix, equals that matrix.
Identity matrix, because of its special nature, during process of multiplication, it can
beinsertedor deleted from the matrices, and the product matrix will not be affected.For
instance,
= (AI)B =
This shows that the inclusion or absence of an identity matrix in the operation above did
not change product matrix. Observe that dimension conformability it preserved whether
or not an identity matrixappears in the product.
Assuming we have Z to be equal to In, then we will have:
ZIn = (In)2 = In
This tells us that an identity matrix squared is equal to itself. Universally written as,
(In)k = In (k = 1,2,…,n)
This is a case of idempotent matrix. A situation where an identity matrix remains the
same when multiplied by itself any number of times (ZZ = Z).
Null Matrix
Just as seen in matrix operation with identity matrix where itplays the role of the number
1 in algebra, a null matrix or zero matrixrepresented by 0, also plays a role in matrix
operations.In this matrix, all elements are0 unlike that of identity matrix which is 1. A
null matrix is simply a matrix whose entries are all zero. Unlike identity matrix, the zero
matrix is not a square matrix. Therefore,
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= and = .
A square null is idempotent, but a non-square one is not. This is becausenull matrices
obey the rules of operation (subject to conformability) as stated below with regard to
addition and multiplication:
+ + =
and =
Note that, in multiplication, the null matrix to the left of the equals sign and the one to the
right may be of different dimensions.
Example 1: Z + 0 = + = =Z
Example 2 = = =
 State the main distinguishing differences between a null matrix and an identity
matrix.
4.0 CONCLUSION
Basically, this unit is wholly about exploring fully the operations as regards the earlier
stated laws in matrix in unit one. We have also looked at some special forms of matrix
such as identity and null matrices. Indeed going by what we have discussed concerning
these classes of matrices, one can conclude that these matrices are in a class of theirs.
5.0 SUMMARY
In this unit which centres on matrix operations, we have treated the followings:
 First, we discussed linear dependence. We discovered that certain matrices are

somehow a product of the combinations of one or more matrices through a process
of some mathematical manipulations.
 Second, welooked at addition and subtraction in matrix. This we did bearing
inmind the laws in matrix. We saw that for addition or subtraction to be possible in
matrix, the dimensions/orders of the matrices matter. The same applies to
multiplication in matrix. The order of the matrices must conform before any
mathematical computation can start.
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 Furthermore, we treated identity and null matrices. That an identity matrix is one
in which the diagonal of the matrix from left to right is 1 and zero anywhere else.
On the other hand, a null matrix unlike an identity matrix has all the entries to be
zeros.
 Lastly, welooked at transpose and inverse matrices. In the case of transpose, it is
like having the direct opposite of the initial matrix. While an inverse matrix, when
multiplied by any matrix results in an identity matrix.
 Givenx = ,y= , and z = , verify that

(i) (x + y) + z = x + (y + z)
(ii) (x + y) – z = x + (y – z)
 Given x = ,y= , and z = :
(i) Determine: a) XI b) IXc) IZ, and d) ZI. Where‘I’ is an identity matrix.



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UNIT 3 MATRIX INVERSION
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Determinants and Nonsingularity
3.1.1 Determinants of 3rd Order
3.2 Matrix Multiplication
3.4 Transpose and Inverse Matrices
4.0 Conclusion
5.0 Summary
1.0 INTRODUCTION
In unit two, we discussed basically the mathematical operations (addition, subtraction,

and multiplication) involved in matrices. We have seen the intricacies involved in matrix
operations. For instance, we saw the case of the special forms of matrix (that is, the
identity and null matrices) where their inclusion or exclusion from matrix operation make
the product matrix unchanged or changed. Still treating linear algebra, we shall continue
our discussion by looking at “matrix inversion”.
Matrix inversion in linear algebra is primarily about Determinants and Nonsingularity of

matrices. We do know that matrix inversion or inverse matrix is the reciprocal of the
matrix in question. And it is (i.e. matrix inversion) required to put mathematical
operations right in linear algebra for easy application. For example in economics, some
models are required to be formulated by means of matrix inversionbefore any matrix
operation can be fully applied.
2.0 OBJECTIVE
 Define and explain determinants

 Also discuss what nonsingularity means in matrix
 Explain other terms in matrix such as minor, cofactor, adjoint, and many more.
 Lastly, apply Cramer’s rule to matrix operations.
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3.0 MAIN CONTENT
3.1 Determinants and Nonsingularity
A determinant is a scalar specially associated with a square matrix. For a given matrix,
say Z, The determinant of it has a notation Determinant is only operational when we
have a square matrix. The determinant for a 2by2 matrix, which is a square matrix,
also refers to as second-order determinant. This is arrived at bymultiplying the two
entries on the principal diagonal and subtracting from it the product of the two entries off
the principal diagonal. Assuming we have a 2by2 matrix
Z=
The determinant is =
From the calculation above, the matrix determinant is gotten by the product of z11 and z22,
minus the product of z12 and z21. Note that z11 and z22 elements are on the principal
diagonal while z12 and z21 are on the off the principal diagonal.
The determinant is a scalar and is found only for square matrices. If the determinant of a
matrix is zero, it means that the determinantvanishes and such matrix is referred to
assingular matrix. By definition, asingular matrix is one in which there exists linear
dependence between at least two rows or columns. So, if the determinant of matrix is not
equal to zero, the matrix is said to be nonsingular and all matrix rows and columns are
not linearly dependent.
If linear dependence exists in a system of equations, it shows that the system has more
than one possible solution, making a unique solution impossible. Hence, our duty is to
see that linearly dependence does not arise in our models. To do this, we follow the
simple determinant test to finish out potential hitches. Assuming we have a system of
equations with coefficient matrix Z, to test for linear dependence of the equation, find the
determinant, and observe the followings:
(i) If = 0, the matrix is singular and there is linear dependence among the
equations. Therefore, solution to it is not possible.
(ii) However, If ≠ 0, the matrix is nonsingular and there is no linear
dependence among the equations. Therefore, the matrix is solvable through a
unique solution.
This brings us to the issue of matrix ranking. For understanding and clarity, therank of a
matrix is defined as the highest number of linearly independent rows or columns in a
matrix. The rank of a matrix can also be tested for too. To do this, we assume a square
matrix of dimensionn, we therefore observe the followings:
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(i) If (Z) = n, Z is nonsingular and there is no linear dependence.
(ii) If (Z) <n, Z is singular and there is linear dependence.
Example 1: Evaluate the following matrices below, and determine the singularity and
nonsingularity of the matrices:
= = ,
Solution: Going be the rules of determinant,
= 12(18) – 8(14) = 104
The determinant of the matrix is non-zero, meaning ≠ 0. Therefore, the matrix is

nonsingular, and there is no existence of linear dependence between any of its rows, or
columns.
However,
= 8(18) – 12(12) = 0
In this case, the determinant of matrix Y is zero, indicating = 0.It therefore shows that
matrix Y is singular, and there is the existence of linear dependence between its rows and
columns.
3.1.1 Determinant of 3rd Order
We have just treated how to find the determinant of a 2by2matrix, otherwise known as
second-order determinant. Now, we want to consider a3by3 matrix, commonly called
‘third-order determinant.’ If we have matrix Y as shown below,
+ - +
Y=
It is called a third-order determinant, which is the addition of three products. These three
products are derived thus:
(i) Take the first entry of the first row, , and mentally erase the rest entries in the
row and column in which is located. See (1) below. Then multiply by the
determinant of the remaining entries, which is a 2 by 2 matrix.
(ii) Take the second entry of the first row, , again mentally erase the remaining
entries in the row and column in which is sited. See (2) below. Then multiply
by -1 times the determinant of the rest entries.
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(iii) Finally, take the third entry of the first row, , mentally delete as usual the
rest entries in the row and column in which appears.Again multiply by the
determinant of the remaining entries.
(1) (2) (3)
From the outcome we have above the determinant of the matrix Y is estimated thus:
= + (- 1) +
= ( )– ( )+ ( )
= a scalar.
Warning: In calculating the determinant of any matrix of third-order, before commencing

the estimation of the products, you are to mentally allocate the signs (+ and -) to the
entries on the first row of the main matrix such as you see it done in case of matrix Y as
shown above. The same goes for the case of 4by4 and so on. Also, the determinants of
4by4 and 5by5 matrices are the sum of four and five products respectively.
Example 1: Given matrix X, find the determinant
X=
Solution:This a 3by3 matrix, the warning holds. Remember to mentally allocate the plus
(+) and minus (-) signs. Therefore, the determinant is determined thus below:
= + (- 1) +
= 4[2(1) – 3(3)] – [6(1) – 3(2)] + 5[6(3) – 2(2)]
= 4(-7) – (0) + 5(14) = 42.
The matrix X’s determinant is a non-zero number, which indicates that the matrix is
nonsingular.
 Distinguished between a second-order matrix and a third-order matrix.
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 What is the rank of a matrix?
3.1.2 Main Properties of Determinants
We can now define and discuss the term with our friends and colleagues. We have
equally seen how determinants are estimated from a given matrix. The onus on us now, is
to discuss the main properties of determinants. These properties will provide us with the
ways in which matrices can be explored to simplify the entries to zero, before
determining the determinant:
(i) The interchange of rows and columns does not have implication on the
determinant’s value. That is, if matrix Yis given, the determinant of matrix Yis
not different from the determinant of matrix Y transpose.
(ii) When any two columns or rows are interchanged, the value of the determinant
remains the same, except for the signs that will change.
(iii) Multiplying the entries of any column or row by a constant will alter the value
of the determinant by the constant.
(iv) Adding (subtracting) any non –zero multiple of one column or row from
another column or row, will not affect the value of the determinant.
(v) The determinant of a triangular matrix, that is a matrix with zero entries
everywhere above or below the principal diagonal, is the same as the product
of the entries on the principal diagonal.
(vi) If in a matrix, the entries of any row or column are zero, the value of that
matrix determinant will be zero.
3.2 Minors and Cofactors
In section 3.1 subsection 3.1.1, we discussed that, in finding the determinant of a third-
order matrix, the entry in the first row of the matrix as we have in matrix Y will be taken,
while the rest entries in the row and column where the first entry (y11) as in matrix Y
above will be deleted. The entries of the matrix remaining after the deletion form a
subdeterminant of the matrix often referred to asminor. And the first entry y11, will
therefore turn M11, M12and so on, see detail below.Thus, a minor is the determinant of the
submatrix formed by deleting the ith row and jth column of the matrix. Using the matrixY
in section 3.1 subsection 3.1.1 as our guide, we have:
Observe that, is the minor of , the minor of , and the minor

of . The determinant is therefore as stated below,
= + (-1) + -
+
109
A cofactor is a concept that is related to the concept of minor. The notation for a cofactor
is , and is a minor with a prescribed sign. The rule for the sign of a cofactor is
Thus if the sum of the subscripts is an even number, , since -1 raised to an

even power is positive. If i + j is equal to an odd number, , since – 1 raised
to an odd power is negative.
The cofactors of , , and for the matrix Y in Section 3.1 subsection 3.1.1 are as
follows:
1)
Since = = 1,
Note the superscript 1+1 above. It means row 1, column 1.
2)
Since = = -1,
= =
Also, the superscript 1+2, means row 1, column 2.
3)
Since = =1
= =
The superscript 1+3, again means row 1, column 3.
110
 Define a cofactor and a minor; state the main difference between the two.
3.3 Cofactor and Adjoint Matrices
In section 3.2, we looked at the concepts of minor and cofactor as they relate to matrix
determinant. At the end of the section, we saw how a cofactor was worked from a minor.
There is just a tiny line of difference between the two concepts. Still we continue our
study on matric inversion; we shall be looking at cofactor and adjoint matrices. A
cofactor matrix is a matrix in which every entriesxij is substituted with its cofactor . If
it happens that this matrix (the cofactor matrix) is transposed, whereby the rows are
transformed to columns, and the columns to rows, the new matrix so formed is known
asadjoint matrix. See example below:
C= Adj X = =
Example 1: Given matrix X, estimate the cofactor and the adjoint of the matrix.
X=
Solution:
Hints:
In find the cofactor of a matrix, the allocation of the signs is very important. Meanwhile,
see the section on minor and cofactor concerning signs determination and allocation.
There is a short cut as regards signs distribution in a cofactor matrix. Once the minors
(Mij) are determined using the first row of the matrix, and the signs of these minors are
known via the cofactor, needless calculating the minors of the remaining rows. The sign
already determined will be used. Supposing we used for the first row + - +, the second
row will definitely be, - + -, and so on.
Therefore, replacing the elements with their cofactors according to the laws of cofactors,
C= =
111
The adjoint matrix Adj X is the transpose of C ( ).
Adj X = =
 Structure a third-order matrix; find the minors, the cofactor matrix, and the
adjoint matrix.
3.4.1 Transposes and Inverses Matrices

Recall we had mentioned in the starting of the module, precisely in the first unit a little
about matrix transpose, and we equally mentioned that it will be discussed fully in the
latter part of this module. When the rows and columns of any matrix are interchanged,
such that its first row becomes the first column, and vice versa, the transpose of that
matrix is obtained. Universally, the notation for any transposed matrix say A is
represented by or .
Example 1: Find the transpose of the matrix below:
A= 2by3
Solution: The transpose of this matrix is to transform the rows to columns, and columns
to rows. See the transposed matrix below:
or = 3by2
From the solution, the initial 2by3 matrix, after transposed, is now a matrix of dimension
3by2. This shows that, if a matrix is of the order mbyn, after transpose, the matrix must be
nbym. For a square matrix, the dimensions remain the same.
We have seen how a matrix can be transposed. We shall continue our study in this part by
looking at the inverse of a matrix. For any given matrix, the transpose is always
derivable. In the same vein, the inverse of a matrix also a “derived” matrix, may or may
not exist. The inverse of a matrix has a notation represented thus, assuming we are
dealing with matrix A, and is defined only if A is a square matrix, in which case the
inverse is the matrix that satisfies the condition.
AA-1 = A-1 A = I
112
That is, whether A is pre- or postmultiplied by A-1, the product will be the same identity
matrix. This is another exception to the rule that matrix multiplication is not
commutative.
4.0 CONLUSION
This section is concerned about matrix inversion. In the start of this part, recall we
mentioned that in economics, certain models could be cumbersome, making evaluations
difficult. However, with inversion of matrix, these models are made less cumbersome,
and estimation becomes easy. We have seen how determinants of matrices are
determined, minors of matrix estimated, cofactors, adjoint matrix, and many more. One
can emphatically submit that, this has made simple the cries about matrix inversion.
5.0 SUMMARY
In summary, in this unit, we have done justice to the followings:
 We started by looking at determinant of a nonsingular matrix. That a matrix is

nonsingular when there is no linear dependence between the rows or columns.
Only a matrix that is nonsingular has determinant.
 We treated the concepts of minor and cofactors. We found out that, the
difference between the two concepts lies in the algebra signs.
 Finally, we took a swift at cofactor matrix and adjoint matrix. In that part, we
saw that adjoint matrix is a transpose of a cofactor matrix.
 Find the determinants for the matrices below:
(i) X= (ii) X=
 Find the minors and the cofactors of the entries in the second row of the matrix
below:
Z= .
113



114
UNIT 4 MATRIX APPLICATION
CONTENTS
1.0 Introduction
2.0 Objectives
3.0 Main Content
3.1 Matrix Inversion
3.2 Linear Equations with Matrix Algebra
3.3 Cramer’s Rule with matrix Solutions
4.0 Conclusion
5.0 Summary
1.0 INRODUCTION
The just rounded off unit (unit three to be precise) was mainly on matrix inversion. It
basically opened up the way to resolve real issues in matrix algebra. It is in fact, the
climax in linear or matrix algebra discussion. In that section, we started by looking at
how to find the determinants of matrices, such matrix as 2nd order and 3rd order. We also
discussed Nonsingularity matrix, and discovered that, only a nonsingular matrix has
determinant. We equally treated other vital areas like minors and cofactors, cofactor and
Adjoint matrices, etc.
However, we shall continue our study in this last unit of this module by applying what we
have learnt so far in the module, most especially in unit three to solving some basic
economic issues. Meanwhile, we shall be starting our discussion in this section by
looking at inverse matrices, and its applications.
2.0 OBJECTIVES
At the end of this unit, the students should be able to do the followings:
 Discuss inversion of matrix based on their understanding of the topic.

 Apply it (matrix inversion) into solving matrix equation.
 Define and explain Cramer’s rule, and
 Use matrices it to resolve simple systems equations.
3.0 MAIN CONTENT
3.1 Matrix Inversion
For a given matrix, A, an inverse of the matrix which is represented by may or may
not be found. A necessary but not sufficient condition for the existence of an inverse
matrix is that such a matrix say matrix A must be a square matrix, which means that the
115
dimension or order of matrix A should be Amxn, where m = n (that is, the number of rows
equal the number of columns in matrix A). We have seen a case of necessary but not
sufficient condition for the existence of an inverse matrix. However, there is a necessary
and sufficient condition for the existence of an inverse matrixrequires that a matrix must
be squared, and that the set of vectors that make up the matrix must be linearly
independent.
When a matrix has no inverse, the matrix is referred to as a singular matrix. Recall that,
for singular matrix, the determinant is always zero. The formula for deriving the inverse
of a matrix is
= Adj A.
Note that if the determinant of an inverse matrix is zero, that is = 0. It therefore shows
that a singular matrix has no inverse.The inverse of matrix A, is represented by A-1, is
defined only if A is a square matrix, in which case the inverse is the matrix that satisfies
the condition.
AA-1 = A-1 A = I
That is, whether A is pre- or postmultiplied by A-1, the product will be the same identity
matrix I. This is another exception to the rule that matrix multiplication is not
commutative.
About four (4) steps are involved in the estimation of an inverse matrix. These steps are
as follows:
 Estimate the determinant of the given matrix, such as matrix |A|

 Evaluate the minors and cofactors of the matrix in question
 Based on the outcome of step two above, get the Adjoint matrix from the cofactor
matrix.
 Finally, divide the Adjoint matrix so derived in step three by the determinant in
step one to arrive at the inverse of the matrix in question (i.e. = A-1).
Let us see one or two worked examples.
Example 1:Assuming Z = determine
Solution:What we shall be doing here is to determining the inverse of the matrix by

following the steps stated above:
(i) =4 -2 -2
116
= 4(12-0) -2(0-6) -2(0-4)
= 4(12) -2(-6) -2(-4)
= 48 + 12 + 8
= 68
(ii) Minor & cofactor matrix =
(iii) Adjoint matrixZ =
a. = = = =
 Find the inverse of the matrix below:
X= .
 State how the outcome of an inverse matrix can be confirmed.

3.2 Linear Equations with Matrix Algebra
We have just discussed inverse matrix, and how it works. One vital role of inverse matrix
in matrix algebra is that, it is used to resolve matrix equations. Assuming
ZnxnXnx1 = Ynx1
If the inverse of matrix Z exists, then multiply both sides of the equation by the matrix
inverse ( ), having in mind the conformability laws and we will have
117
ZnxnXnx1 = Ynxn. Remember that, the multiplication of an inverse matrix with the
matrix produces an identity matrix. Therefore,
InxnXnx1 = Ynxn. Also recall that, an identity matrix multiply by a matrix equal
to that matrix. In that sense,
Xnx1 = Ynxn or Xnx1 = ( Y) nx1.This implies that the coefficient of the
inverse matrix multiplied by the column vector of Y produces the equation’s solution.
Supposing we have a system of equations as shown below, with more than two unknown,
how do you go about this? The way out is simple, express the equation in a matrix form,
determine the Adjoint of the matrix, and multiply it by the column vector on the right
hand side of the equation.
12x1 -12x2 +10x3 = 10
6x1+ 28x2 -12x3 = 14
-4x1 +4x2 + 8x3= 9
Therefore, in matrix form, we have
If the determinant is 68, therefore:
= =
= 0.6176, = 5.0588 and = 1.294.
118
3.3 Cramer’s Rule for Matrix Solutions
Cramer’s rule provides a simplified method of solving a system of linear equations

through the use of determinants. It is also employed to solve n linear equations in n
unknowns. The rule states
Where is the ith unknown variable in a series of equations, is the determinant of

the coefficient matrix, and is the determinant of a special matrix formed from the
original coefficient matrix by replacing the column of coefficients of with the column
vector of constants.
Example 1: Cramer’s rule is used below to solve the system of equations
6 +5 = 49
3 +4 = 32
1. Express the equations in matrix form

AX = B
2. Find the determinant of A

= 6(4) – 5(3) = 9
3. Then to solve for , replace column 1, the coefficients of , with the vector of
constants B, forming a new matrix .
=
Find the determinant of ,
= 49(4) – 5(32) = 196 – 160 = 36
and use the formula for Cramer’s rule,
= = =4
4. To solve for , replace column 2, the coefficients of , from the original matrix,
with the column vector of constants B, forming a new matrix .
=
Take the determinant,
= 6(32) – 49(3) = 192 – 145 = 45
and use the formula
119
= = =5
 Use Cramer’s Rule to solve the following equations

(i) 2x + y = 4
x + 2y = 8
(ii) 4x + 3y = 12
3x – y = 10
(iii) 2x + y – z = 10
x- 2y +3z = 14
2x – 2y – z = 9
4.0 CONCLUSION
This unit concludes our study of linear or matrix algebra. We have seen that our
statement at the start of this module that, the essence of linear algebra is to proffer
solutions to cases where some systems of equations maybe complex and applying simple
elimination method to solving it may be impossible. However, with matrix operations,
that complex systems of equations, is solvable. That is basically what matrix inversion
and Cramer’s Rule is all about.
5.0 SUMMARY
In summary, in this unit, we have done justice to the followings:
 We started by treating inversion of matrix. In our discussion, we found out that,the

necessary and sufficient condition for the existence of an inverse matrix is that a
matrix must be squared, and that the set of vectors that make up the matrix must
be linearly independent.
 We considered linear equation with matrix algebra. In our study, we discover
that, to solve systems of equations with matrix algebra, the inverse of the matrix
derived from the equation is crucial to solving the problem.
 Finally, our discussion in this unit culminated in studying of Cramer’s rule. The
method is one of the several methods of solving equations in algebra. The rule
is a simplified method of solving a system of linear equations through the use of
determinants.In short, it is commonly referred to as a rule of ‘determinant over
determinant.’

 Find the inverse of matrix D below:
120
D=
 Apply Cramer’s rule to solve the unknown variables in the equation below:
10p1 – p2 – p3 = 30
-p1 + 4p2 -2p3 = 26
-p1 – 3p2 + 9p3 = 20



121
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NATIONAL OPEN UNIVERSITY OF NIGERIA

MATHEMATICS FOR ECONOMISTS II

SCHOOL OF ARTS AND SOCIAL SCIENCES

 Basic concepts in Mathematics for Economists at year two undergraduate studies.

 To familiarize students with the basic topics in the course.

 To stimulate students’ understanding in the applications of mathematics in

 Define and explain the concept of derivative.

 State the rules of differentiation

 Define and understand integration

 Differentiate between integration and differentiation.

 Learn the rules of integration, and apply it accordingly

 Know the difference between function of single variable and multi-variables

 Define and explain linear/matrix algebra.

 State and apply the laws of matrix and, its operations.

 Use matrix to solve complex systems of equations, and a lot more.

Working through the Course

Module 3 Linear Algebra

Chinang, A.C. & Wainwright, K. (2005). Fundamental Methods of mathematical

Dowling, E. T. (2001). Introduction to Mathematical Economics (3rd): Schaum’s outline

Sydsaeter, K.,& Hammond, P. (2002). Essential Mathematics for Economic Analysis:

Tutor-Marked Assignments (TMAs)

Final Examination and Grading

Course Marking Scheme

Assignments (Best three assignments out of four that is 30%

Final Examination 70%

Units Title of Work Week’s Assessment

 Define and explain the concept of derivatives

3.0 MAIN CONTENTS

Rate of change = = = , note, let b represent rate of change.

Example 2. Ifp= 6 z  12 , the derivative of the equation will be written thus

 Derivative is mainly concerned about the rate of change, discuss.

3.3 Rules of Differentiation

Example 3: Find the derivative of the followings if:

iii) Dx [f(x)] = 0 or f ' ( x)  0

Rule 2: The Linear Function Rule

= 30k8 + 75k4+ 24k8 – 64k3

Chinang, A.C. & Kevin, W. (2005). Fundamental Methods of mathematical Economics

Dowling, E.T. (2001).Introduction to Mathematical Economics (3rd): Schaum’s outline

 Discuss other rules of differentiation.

Rule 1: The sums or differences rules

ii) This is a case of subtraction. So ifp = u(q) – g(q), we have =u’(q)

Rule 2: The Product rule

Example 4: q = 5p + 45, find the derivative of q-1

Also, find the derivative of the inverse function of q, if q = p5 + p.

Rule 4: The Chain rule

Example 5: If y = ( x2  5x)2 where y = u2 and u = x2  5x . Differentiate the function

= 19z18 (3x2 + 4) = 19(x3 + 4x – 6)18(3x2 + 4).

Makedy/dx the subject of the equation, we will have

Also, consider this example: 4 x3  5 y3  20  0

SELF ASSESSMENT EXERCISE 1

 How can you differentiate a product rule from a quotient rule?

SELF ASSESSMENT EXERCISE 2

7.0 REFERENCES AND FURTHER READINGS

Chiang, A.C. & Wainwright, K. (2005). Fundamental Methods of mathematical

Dowling, E.T. (2001). Introduction to Mathematical Economics (3rd): Schaum’s outline

Sydsaeter, K & Hammond, P. (2002). Essential Mathematics for Economic Analysis:

 Define and explain integration.

f’(x) = x4(derivative function) f(x) = + c.

3.2 Notation of Integration