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Tae ee Third Edition EDWARD T. DOWLING, Ph.D. 710 fully-solved problems Straightforward explanations of calculus and its applications to economics Supplements all topics in leading economics textbooks ls Perfect for pre-test review Use with these courses: (2 ntrodoction to Economics (% Economies (1 Econometrics (1 Microeconomics A Nacrveconanis (A Ecomnic Theres, (1 NathenaialFrnonics (2 Wat for zoonit A Wath for Social Sciences To the memory of my parents, Edward T. Dowling, M.D. and Mary H. Dowling EDWARD T. DOWLING is professor of Economies at Fordham Univer- sity, He was Dean of Fordham College from 1982 to 1986 and Chairman ‘of the Economies Department from 1979 to 1982 and again from 1988 to 1994. His Ph.D. is from Comell University and his main areas of professional interest are mathematical economies and economic develop- ment. In addition to journal articles, he is the author of Schaum's Outline of Calculus for Business, Economics, and the Social Sciences, and Schaum's Outline of Mathematical Methods for Business and Economics. A Jesuit priest, he is a member of the Jesuit Community at Fordham. Copyright © 1980 by McGraw-Hill. tne. Under the ttle Schaum's Quiline af Theory and Problems of Mashemacics for Econcomints All rights reserved, ‘Schaum's Outline of Theory and Problems of INTRODUCTION TO MATHEMATICAL ECONOMICS ‘Copyright © 2001, 1992 by The McCraw: ill Companies Inc. All rights reserved. Printed in the United Statcs of America. Except is permitted under the Copyright Act of 1976, mo part ‘of this publication may be reprodhiced or dintributed in any form or by any’ meant or stored in a data base of retrieval system, without the prior written permision of the publisher. 791010 1219 14 18 16:17 18.19.20 PRT PET OORT HS43210 ISBN 0.07-138506. ‘Spomoring Editor: Burbars Cibo Production Supervisor: Tina Cameron Editing Supervisor: Maureen B. Walker ‘Componitor; Keyword Poblishing Services Ld Library of Congress Cataloging-in-Putslicthon Date Dowling, Edward Thomas 1938. Schaum's outline of theory and problems of introduction 1o mathematical econarnics / Edward T. Dowling. — Jed ed Rem Includes index. ISBN 0.07-138896-% 1, Economicy Mathematical 2. Mathematica. 1. Tithe: Theory and problema of ‘introduction 10 mathematical economics 11. Title Introduction to mathematical economics It. Tite HLS. 1992 S10'24°33—e2t o.osssns McGraw-Hill x A Ditsion of The McGrane Hill Comparis| yomics and b The mathematics needed for the study of ¢ siness continues to grow with cach passing year, placing ever more demands on students and faculty alike. Introduction to Mathematical n, introduces three new chapters one on comparative statics and concave timal control on had to Economics, third edi ns, and one on ¢ theory, To keep the book manageable in size, some chapters and sections of the second edi be excised, These include three chapters on linear programming and a number of sections dealing basic clements such as factoring and because they can now be found in one of my more recent Schaum books designed as an easier, more detailed al Methods for Business and Economics. programming, one on simultaneous differential and difference eq) ed topics were chosen in p mpleting the square. The del mics and business, namely, Mathemat The objectives of the book have not changed over the 20 years since the introduction of the first edition, originally called Mathematics for Economists Introduction to Mathematical Economics, thitd edition, is designed to present a thorough, casily understood introduction to the wide array of mathematical topics economists, social scientists, and business majors need to know today, such as linear algebra, differen equations, the calculus of va al and integral calculus, nonlinear programming, differential and difference mas, and optimal control theory. The book also offers a brief review ‘of basic algebra for those who are rusty and provides direct, frequent, and practical applications to everyday economic problems and business situations The theory.and-solved-problem format of each chapter provides concise explanations illustrated pics and related by cxamples, plus numerous problems with fully worked-out solutions. T | operations to sophisticated applications. No problems range in difficulty from simpler mathem mathematical proficiency beyond the high school level is assumed at the start. The learning-by-doing pedagogy will enable students to progress at their own rates and adapt the book to their own eds Those in need of more time and help in ge feel more comfortable beginning with or working in conjunction with my Schaum's Outline of Mathematical Methods for Business and Econ kinder, gentler approach to the discipline. Those who prefer more rigor and theory, on the other hand, might find it enriching to work along with my Schawn's Outline of Caleulu: for Business, Economies, and the Social Sciencey, which devotes more time to the theoretical and structural underpinnings ing started with some of the elementary topics may mies, which offers Introduction to Mathematical Economics, third edition, can be used by itself or as a supplement to other texts for undergraduate and graduate students in econom It is largely self-contained. Starting with a basic review of high school algebra in Chapter 1, the book consistently explains all the concepts and techniques needed for the material in subseq chapters Since there is no universal agreement on the order in which differential calculus and lineai *, business, and the social sciences should be presented, the book is designed so that Chapters 10 and 11 on linear algebra can be © 2, if so desired, without loss of continuity: immediately after Chapter This book contains over 16 book, students should strive as soon as possible to work independently of the solutions. This can be done by solving problems on individual sheets of paper with the book closed. If difficulties arise, the solution can then be checked in the book ) problems all solved in considerable detail, To get the most from the wv PREFACE a For best results, students should never be satisfied with passive knowlcdge—the capacity merely to follow or comprehend the various steps presented in the book. Mastery of the subject and doing well on exams requires active knowledge—the ability to solve any problem, in any order, without the aid ‘of the book. Experience has proved that students of very different backgrounds and abilities can be successful in handling the subject matter presented in this text if they apply themselves and work consistently through the problems and examples In closing, 1 would like to thank my friend and colleague at Fordham, Dr, Dominick Salvatore, for his unfailing encouragement and support over the past 25 years, and an exceptionally fine graduate student, Robert Derrell, for proofreading the manuscript and checking the accuracy of the solutions 1 am also grateful to the entire staff at McGraw-Hill, especially Barbara Gilson, Tina Cameron, Maureen B. Walker, and Deborah Aaronson, Eowarn T. Dowiine CHAPTER 1 CHAPTER 2 CHAPTER 3 CHAPTER 4 CHAPTER 5 CHAPTER 6 Review 1 LI Exponents. 1.2 Polynomials 1.3 Equations: Linear and Quadratic, 1.4 Simultaneous Equations. 1.5 Functions. 1.6 Graphs, Slopes, and Intercepts Economic Applications of Graphs and Equations 14 2.1 Isocost Lines 2.2 Supply and Demand Analysis. 2.3 Income Determination Models 2.4 IS-LM Analysis, The Derivative and the Rules of Differentiation 32 31 Limits 3.2 Continuity, 3.3 The Slope of a Curvilinear Function. 3.4 The Derivative. 35 Differentiability and Continuity. 3.6 Derivative Notation. 3.7 Rules of Differentiation. 3.8 Higher-Order Derivatives 3.9 Implicit Uses of the Derivative in Mathematics and Economics 58 4.1 Increasing and Decreasing Functions 4.2 Concavity and Convexity. 4.3 Relative Extrema, 4.4 Inflection Points. 4.5 Optimization of Functions 4.6 Successive-Derivative Test for Optimization. 4.7 Marginal Concepts. 4.8 Optimizing Economic Functions, 4.9 Relationship among Total, Marginal and Average Concepts Calculus of Multivariable Functions 82 5.1 Functions of Seve nd Partial Derivatives 5.2 Rules of Partial Differentiation. §.3 Second-Order Partial Derivatives $.4 Optimization of Multivariable Functions 5.5 Constrained Optimization with Lagrange Multipliers. 5.6 Significance of the Lagrange Multiplier. 5.7 Differentials 58 Total and Partial Differentials §.9 Total Derivatives $.10 Implicit and Inverse Function Rules Calculus of Multivariable Functions in Economics 110 6.1 Marginal Productivity, 6.2 Income Determination Multipliers and Comparative Statics. 6.3 Income and Cross Price Elasticities of Demand. 6.4 Differentials and Incremental Changes. 6.5 Optimization of Multivariable Functions in Economics. 6.6 Constrained Optimization of Multivariable