Mathematical Economics

Review of some basic Mathematics….

• 1 Exponents.
• 1.2 Polynomials.
• 1.3 Equations: Linear and Quadratic.
• 1.4 Simultaneous Equations.
• 1.5 Functions.
• 1.6 Graphs, Slopes, and Intercepts.
Definition……
• Mathematical economics is a discipline of economics that utilizes
mathematic principles and methods to create economic theories and
to investigate economic quandaries.

• Mathematics permits economists to conduct quantifiable tests and

create models to predict future economic activity.
 1.1 Numbers
• Classifications of Numbers
Natural numbers {1,2,3,…}
Whole numbers {0,1,2,3,…}
Integers {…-2,-1,0,1,2,…}
Rational numbers – can be -1.3, 2, 5.3147,
p
expressed as q where p 7 23
13 , 5
and q are integers
Irrational numbers – not
rational 5 , 47 , 
 1.2 Fundamental Operations of Algebra

• Subtraction: x  y  x  ( y )

• To subtract signed numbers:

Change the subtraction to adding the number with the
opposite sign
5  (7)  5  (7)  12
 1.2 Fundamental Operations of Algebra

• Multiplication by zero:
For any number x, x0  0
• Multiplying numbers with different signs:
For any positive numbers x and y,
x( y )  ( x) y  ( xy)
• Multiplying two negative numbers:
For any positive numbers x and y,
( x)(  y )  xy
 1.2 Fundamental Operations of Algebra

• Reciprocal or multiplicative inverse:

If xy = 1, then x and y are reciprocals of each other.
(example: 2 and ½ )
• Division is the same as multiplying by the reciprocal:

x
y  x 1
y
 1.2 Fundamental Operations of Algebra

• Division by zero:
0  undefined
x
For any number x,
• Dividing numbers with different signs:
For any positive numbers x and y,
x
y  x
y  ( ) x
y
• Dividing two negative numbers:
For any positive numbers x and y,
x
y  x
y
 1.2 Fundamental Operations of Algebra

• Division by zero:
0  undefined
x
For any number x,
• Dividing numbers with different signs:
For any positive numbers x and y,
x
y  x
y  ( ) x
y
• Dividing two negative numbers:
For any positive numbers x and y,
x
y  x
y
 1.2 Fundamental Operations of Algebra

• Commutative property (addition/multiplication)

ab  ba
ab  ba
• Associative property (addition/multiplication)
(a  b)  c  a  (b  c)
(ab)c  a(bc)
 1.2 Fundamental Operations of Algebra

• Distributive property

a (b  c )  ab  ac
(b  c ) a  ba  ca
 1.2 Fundamental Operations of Algebra

• PEMDAS
1. Parenthesis
2. Exponentiation
3. Multiplication / Division
(evaluate left to right)
4. Addition / Subtraction
(evaluate left to right)
• Note: the fraction bar implies parenthesis
 Exponents
• Example……

m
a
• Where; a = base and m = exponent
 1.4 Exponents

• Power Rule (a) for exponents:

a  m n
 a nm
• Power Rule (b) for exponents:
ab  m
a b
m m

• Power Rule (c) for exponents:

m
a
m
a
   m
b b
 1.4 Exponents

• Definition of a zero exponent:

a 0  1 (no matter wha t a is)

• Definition of a negative exponent:

n
n 1 1
a  n  
a a
 1.4 Exponents
• Changing from negative to positive exponents:
a m bn
n
 m
b a
• This formula is not specifically in the book but is used often:
p p
a m
 b n


 bn 
 
 am 

   
 1.4 Exponents

• Quotient rule for exponents:

m
a mn
n
a
a
 1.4 Exponents

• A few tricky ones:

 2   2  2  2  8
3

 2  2   2  2  2  8
3 3

 2   2  2  2  2  16

4

 2  2   2  2  2  2  16

4 4
 1.4 Exponents
• Formulas and non-formulas:
 a  b n  a  n  b  n (distributive property)

 a  b   a  b
n n n
( power rule b)

 a  b n  a n  b n , a  b n  a n  b n
 a  b 2  a 2  b 2 , a  b 2  a 2  b 2
 a 2  b2  a  b
 1.4 Exponents

• Examples (true or false):

t t  t
4 3 12

( t 4 ) 3  t 12
s  t  3
 s t3 3

s  t 2
 s2  t 2
 1.4 Exponents

• Putting it all together (example):

2

3xy 2 x y 2
 3

 3xy2 23 x 6 y 3
1 6 23
 3(8) x y
 24 x y 7 5
 1.4 Exponents

• Another example:
3 3
 2x y 
2 1
 3xy  2
 2 
   2 1 
 3xy   2x y 
3 3 6
3 x y 27 3 6 6  3
 3 6 3  8 x y
2 x y
9
3 27 y
27
8 x y  9
3
8x
 1.5 Scientific Notation
• Writing a number in scientific notation:
1. Move the decimal point to the right of the first non-zero digit.
2. Count the places you moved the decimal point.
3. The number of places that you counted in step 2 is the exponent (without
the sign)
4. If your original number (without the sign) was smaller than 1, the exponent
is negative. If it was bigger than 1, the exponent is positive
 1.5 Scientific Notation
• Converting to scientific notation (examples):
6200000  6.2 10?
.00012  1.2 10?

• Converting back – just undo the process:

6.203 1023  620,300,000,000,000,000,000,000
1.86 105  186,000
• Monomial – polynomial with one term
3
5x
• Binomial - polynomial with two terms
5y  y
2

• Trinomial – polynomial with three terms

5 x  3x  100
3 2
• Degree of a term – sum of the exponents on the variables
5a b degree  3  2  5
3 2
• Degree of a polynomial – highest degree of any non-zero
term

5x  3x  2 x  100 degree  3
3 2