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    Chapter (1) The Nature of Mathematical Economics

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    YAHIA ADEL
    This document discusses mathematical economics. It begins by defining mathematical economics as using symbols and mathematical techniques beyond simple geometry, like differentiation and integration, to describe and solve economic problems. It then compares mathematical economics to non-mathematical economics and econometrics. Mathematical economics allows assumptions and conclusions to be stated precisely with equations rather than words, and uses mathematical theorems in reasoning. While criticism of unrealistic assumptions is invalid, mathematical analysis provides a framework to study relationships between economic variables.

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    Chapter (1) The Nature of Mathematical Economics

    Uploaded by

    YAHIA ADEL
    557 views18 pages
    This document discusses mathematical economics. It begins by defining mathematical economics as using symbols and mathematical techniques beyond simple geometry, like differentiation and integration, to describe and solve economic problems. It then compares mathematical economics to non-mathematical economics and econometrics. Mathematical economics allows assumptions and conclusions to be stated precisely with equations rather than words, and uses mathematical theorems in reasoning. While criticism of unrealistic assumptions is invalid, mathematical analysis provides a framework to study relationships between economic variables.

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    Mathematical Economics chapter 1 summary.

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    Chapter [1] the Nature of Mathematical Economics

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    This document discusses mathematical economics. It begins by defining mathematical economics as using symbols and mathematical techniques beyond simple geometry, like differentiation and integration, to describe and solve economic problems. It then compares mathematical economics to non-mathematical economics and econometrics. Mathematical economics allows assumptions and conclusions to be stated precisely with equations rather than words, and uses mathematical theorems in reasoning. While criticism of unrealistic assumptions is invalid, mathematical analysis provides a framework to study relationships between economic variables.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    557 views18 pages

    Chapter (1) The Nature of Mathematical Economics

    Uploaded by

    YAHIA ADEL
    This document discusses mathematical economics. It begins by defining mathematical economics as using symbols and mathematical techniques beyond simple geometry, like differentiation and integration, to describe and solve economic problems. It then compares mathematical economics to non-mathematical economics and econometrics. Mathematical economics allows assumptions and conclusions to be stated precisely with equations rather than words, and uses mathematical theorems in reasoning. While criticism of unrealistic assumptions is invalid, mathematical analysis provides a framework to study relationships between economic variables.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 18

    Mathematical Economics

    Dr. Hossam E. M. Abdelkader

    Human resources slide 1


    Chapter [1]
    Alpha Chiang &
    The Nature of Mathematical Kevin Wainwright
    Economics
    Fundamental Methods in
    Mathematical Economics
    System of the Lecture
    “The chief use of pure mathematics in
    economics questions seems to be in
    helping a person to write down quickly,
    shortly and exactly, some of his
    thoughts for his own use: and to make
    sure that he has enough, and only
    enough, premises for his conclusions.”

    (Alfred Marshall, 1920, P.xvi)


    Human resources slide 2
    AGENDA

    Mathematical versus
    Nonmathematical
    Economics

    Mathematical
    Economics versus
    Econometrics
    o Mathematical Economics is not distinct branch of economics,
    but it is an approach to economic analysis.

    o Mathematical Economics is using symbols instead of the


    statement to describe economic problems and to solve it.

    o Mathematical Economics is using mathematical techniques


    beyond simple Geometry like matrix algebra, differentiation,
    integration, exponential & logarithmic functions.
    Human resources slide 3
    Mathematical
    versus
    Nonmathematical
    Economics
    o Mathematical Economics is an approach to economic analysis so
    fundamentally it does not differ from nonmathematical approach,
    because the purpose of any theoretical analysis [regardless Math.
    or NonMath.] is to drive conclusions or theorems from given
    assumptions via a process of reasoning.

    o The major differences between these two approaches are :


    a) In Math assumptions and conclusions are stated in mathematical
    symbols instead of words, and in equations rather than
    sentences.
    b) In place of literary logic , use is made of mathematical
    theorems, of which there exists an abundance to draw upon in
    reasoning process.
    Why it is necessary to go
    Human resources slide 6
    beyond Geometric methods?
    6

    Visual but limited dimensions


    What are the determinants of aggregate
    consumption?

    𝐶 1= 𝑓 ( 𝐼𝑛𝑐𝑜𝑚𝑒 )

    𝐶 2 = 𝑓 ( 𝐼𝑛𝑐𝑜𝑚𝑒 , 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 )

    𝐶 3 = 𝑓 ( 𝐼𝑛𝑐𝑜𝑚𝑒 , 𝐼𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 , 𝑇𝑎𝑠𝑡 , 𝐸𝑑𝑢𝑐𝑎𝑡𝑖𝑜𝑛 , 𝑇𝑎𝑥𝑒𝑠 , 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑟𝑎𝑡𝑒 , …)

    Which functions you can draw graphically?


    Two Dimensions: Three Dimensions:
    (Consumption & Income) (Consumption, Income, & Inflation)

    900
    900

    0.0 2.5 5.0 7.5


    0.0 2.5 5.0 7.5
    INFLAT
    880

    INFLAT
    880

    860 CONS ´ INC


    860 CONS ´ INC
    870 880 890 900 910
    870 880 890 900 910
    Advantages of Mathematical Approach
    Human resources slide 4
    There exists a Forcing us to state
    wealth of
    mathematical
    2 3 explicitly all our
    assumptions as a
    theorems at our prerequisite to the use of
    services the mathematical
    theorems.

    Language
    used is more 1 4
    Allow us to treat
    the general n-
    concise and variable case.
    precise
    Criticism
    Human resources slide 5
    Mathematically
    derived theory
    is inevitably
    unrealistic!
    Unrealistic cannot be used in criticizing Economic Theory
    Human resources slide 7

    1 2 3 4

    Theory is an We can not use real world case with all of So, theory
    abstraction complication to find out all reasons for lacks realism
    from real the issue under study, but we should be cannot be
    world. very selective for the most important few accepted as a
    reasons valid criticism.
    Human resources slide 3
    Mathematical
    Economics versus
    Econometrics
    Econometrics [metric the
    Human resources
    measurement slide
    of economic 8
    data]
    Dealing with empirical observations
    using statistical methods of
    estimation and hypothesis testing

    Mathematical Economics
    Dealing with application of
    mathematics to the purely theoretical
    aspects of the economic analysis.
    Human resources slide 5 The relation
    Theory
    between theory
    [mathematical

    Empirical
    economics] &
    Validation
    & Study
    Feedback empirical study
    [econometrics]
    Human resources slide 10

    Thank You

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