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5.1 Conditions for Nonsingularity of a Matrix
3.4 Solution of a General-equilibrium System (p. 44)
x+y=8 1 1 x 8
x+y=9 1 1 y 9
(inconsistent &
dependent)
2x + y = 12 2 1 x 12
4x + 2y= 24 4 2 y 24
(dependent)
2x + 3y = 58 2 3 x 58
y = 18 0 1 y 18
x + y = 20
(over identified & 1 1 20
dependent)
2
5.1 Conditions for Non-singularity of a Matrix
3.4 Solution of a General-equilibrium
y
System (p. 44)
x+y=9
Sometimes equations
are not consistent, and
x+y=8
parallel lines. y
(contradict) 12
of the other.
(redundant)
3
5.1 Conditions for Non-singularity of a Matrix
Necessary versus sufficient conditions
Conditions for non-singularity
Rank of a matrix
4
5.1 Elementary Row Operations (p. 86)
5
5.1 Conditions for Nonsingularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 86)
0 11 4 1 0 0
2 6 2 0 1 0 swap rows 1 & 3
4 1 0 0 0 1
4 1 0 0 0 1 *1 4
2 6 2 0 1 0
0 11 4 1 0 0
1 1 4 0 0 0 1 4 * 2
2 6 2 0 1 0
0 11 4 1 0 0
1 1 4 0 0 0 1 4
0 11 2 2 0 1 1 2 * 2 11
0 11 4 1 0 0
1 1 4 0 0 0 1 4
0 1 4 11 0 2 11 1 11 *11
0 11 4 1 0 0
1 1 4 0 0 0 1 4
0 1 4 11 0 2 11 1 11
0 0 0 1 2 1
6
5.1 Conditions for Non-singularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 96)
Elementary row operations
4 1 2 1 0 0 1 0 3 0 0 1
5 2 1 0 1 0 swap rows 1 & 3
0 1 7 0 1 2 5 2
1 0 3 0 0 1 0 0 3 1 1 2 3 2 * 1 3
1 0 3 0 0 1 * 5 1 0 3 0 0 1
5 2 1 0 1 0 1 7 0 1 2 5 2
0
4 1 2 1 0 0 0 0 1 1 3 1 6 1 2 * 7
1 0 3 0 0 1 1 0 3 0 0 1
0 2 14 0 1 5 *1 2 1 0 7 3 5 3 1
0
4 2 1 0 0 0
1 0 1 1 3 1 6 1 2 * 3
1 0 3 0 0 1 * 4 1 0 0 1 1 2 1 2
0 1 7 0 1 2 5 2 1 0 7 3 5 3
0 1
4 0 0
1 2 1 0 0 1 1 3 1 6 1 2
1 0 3 0 0 1
0 1 7 0 1 2 5 2 * 1
0 1 10 1 0 4
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5.1 Conditions for Nonsingularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 96)
4 1 2
1 0 3 0 0 1
A 5 2 1
0 1 7 0 1 2 5 2
1 0 3
0 0 3 1 1 2 3 2 * 1 3
Determinan t of A 6
1 0 3 0 0 1
6 - 14 - 2
1 7 0 1 2 5 2
Cofactors of A - 3 10 1 0
0 0 1 1 3 1 6 1 2 * 7
- 3 6 3
6 - 3 - 3 1 0 3 0 0 1
Adjoint A - 14 10 6 0 1 0 7 3 5 3 1
- 2 1 3 0 0 1 1 3 1 6 1 2 * 3
6 -3 - 3 1 0 0 1 1 2 1 2
1
Inverse of A - 14 10 6
0 1 0 7 3 5 3 1
6
- 2 1 3 0 0 1 1 3 1 6 1 2
8
5.1 Conditions for Non-singularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 96)
9
5.2 Test of Non-singularity by Use of Determinant
Determinants and non-singularity
Evaluating a third-order determinant
Evaluating an nth order determent by Laplace expansion
a11 a12
A a11a22 a21a12 scalar
a21 a22
a11 a12 a13
A a21 a22 a 23
a 31 a 32 a 33
a11a 22a 33 a12a 23a 31 a13a 21a 32
a11a 32a 23 a12a 21a 33 a13a 22a 31 scalar
n
A a1 j C2 j scalar
j 1
12
5.2 Test of Non-singularity by Use of
Determinant : 4 x 4 permutations = 24
13
5.2 Evaluating a third-order determinant
Evaluating an 3 order determent by Laplace expansion
Laplace Expansion by cofactors;
if /A/ = 0, then /A/ is singular, i.e., under identified
14
5.2 Determinants
Pattern of the signs for cofactor minors
Cij 1
i j
M ij
15
5.1 Conditions for Nonsingularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 96)
4 1 2
1 0 3 0 0 1
A 5 2 1
0 1 7 0 1 2 5 2
1 0 3
0 0 3 1 1 2 3 2 * 1 3
Determinan t of A 6
1 0 3 0 0 1
6 - 14 - 2
1 7 0 1 2 5 2
Cofactors of A - 3 10 1 0
0 0 1 1 3 1 6 1 2 * 7
- 3 6 3
6 - 3 - 3 1 0 3 0 0 1
Adjoint A - 14 10 6 0 1 0 7 3 5 3 1
- 2 1 3 0 0 1 1 3 1 6 1 2 * 3
6 -3 - 3 1 0 0 1 1 2 1 2
1
Inverse of A - 14 10 6
0 1 0 7 3 5 3 1
6
- 2 1 3 0 0 1 1 3 1 6 1 2
16
5.1 Conditions for Non-singularity of a Matrix
Conditions for non-singularity, Rank of a matrix (p. 96)
17
5.2 Evaluating a determinant
Laplace expansion of a 3rd order determinant
by cofactors. If /A/ = 0, then singular
9 8 7
5 4 6 4 6 5
A 6 5 4 9 8 7
2 1 3 1 3 2
3 2 1
95 8 86 12 7 12 15 27 48 21 0
18
5.2 Test of Non-singularity by Use of
Determinant
1 2 3 P(3,3) = 3!/(3-3)! = 6
A 4 5 6
|A| = 1(5)9 + 2(6)7 + 3(8)4
-3(5)7 – 6(8)1 – 9(4)2
7 8 9 Expansion by cofactors
|A|= (1)c11 + (2)c12 + (3)c13
C11 = 5(9) – 6(8)
C12 = -4(9) + 6(7)
C13 = 4(8) – 7(5)
Expansion across any row or
column will give the same
# for the determinant
19
5.3 Basic Properties of Determinants
Properties I to III (related to elementary row operations)
20
5.3 Basic Properties of Determinants
Properties IV to VI
21
5.3 Basic Properties of Determinants
Properties I to V
22
5.4 Finding the Inverse
aka “the hard way”
Steps in computing the Inverse Matrix and
solving for x
1. Find the determinant |A| using expansion by
cofactors.
If |A| =0, the inverse does not exist.
2. Use cofactors from step 1 and complete the
cofactor matrix.
3. Transpose the cofactor matrix => adjA
4. Divide adj.A by |A| => A-1
5. Post multiply matrix A-1 by column vector of
constants d to solve for the vector of variables x
23
1 1 1 Y 1 1 1 I0
A= b 1 0 C 1 b 1 g b a bT
1 b g 0
g 0 1 G g g 1 b 0
1 1 1
A b 1 0 1 b g
g 0 1 I 0 a bT0
Y
1 b g
1 b g
1 1 g g bI 0 1 g a bT0
C
1 b g
C=
1 b 1 b
g I 0 a bT0
1 1 1 G
C’= b 1 g b 1 b g
g g 1 b
24
5.4 Finding the Inverse Matrix
Expansion of a determinant by alien cofactors,
Property VI, Matrix inversion
Expansion by alien n
This property of
determinants is
important when
defining the inverse
(A-1)
25
5.4 A Inverse (A )
-1
Inverse of A is A-1
if and only if A is square (nxn) and rank
=n
AA-1 = A-1A = I
We are interested in
A-1 because x=A-1d
26
5.4 matrix A: matrix of parameters from the
equation Ax=d
27
C: Matrix of cofactors of A
28
C' or adjoint A: Transpose matrix of the
cofactors of A
29
AC'
30
Matrix AC'
n n n
a1 j C1 j a1 j C2 j a1 j Cnj
j 1 j 1 j 1
n n n
a2 j C1 j a2 j C2 j a2 j Cnj
j 1 j 1 j 1
AC
nxn
n
a C
n n
nj 1 j a nj C 2j a nj C nj
j 1 j 1 j 1
31
A 0 0 1 0 0
0 1 0
0 A 0
AC A A In
0 0 A 0 0 1
32
Inverse of A
C
AC A I n 1 1
A A A I
A
AC C
I A 1
A A
C C
A I x d
*
A A
33
Solving for X using Matrix Inversion
adjA
x
*
d
A
34
5.4 A Inverse, solving for P
P1 1 2 c 2 co
P c c
2 1 2 2 1 1 c1 o
co 2 c 2 o
P1
c1 2 c2 1
c0 1 c1 0
P2
c1 2 c2 1
35
Cramer’s rule
I0 1 1
I 0 a bT0
AY a bT0 1 0 I 0 a bT0
AY
Y
*
A 1 (b g )
0 0 1
1 I0 1
bI 1 g a bT0
AC b a bT0 0 bI 0 1 g a bT0 C * C 0
A
A 1 (b g )
g 0 1
1 1 I0
AG g a bT0 I 0
AG b 1 a bT0 g a bT0 I 0 G
*
A 1 (b g )
g 0 0
36
I0 1 1
AY a bT0 1 0 I 0 a bT0
0 0 1
AY I a bT0
Y
*
0
A 1 (b g )
1 I0 1
AC b a bT0 0 bI 0 1 g a bT0
g 0 1
AC bI 0 1 g a bT0
C
*
A 1 (b g )
1 1 I0
AG b 1 a bT0 g a bT0 I 0
g 0 0
AG g a bT0 I 0
G
*
A 1 (b g )
37
I0 1 1
AY a bT0 1 0 I 0 a bT0
0 0 1
1 I0 1
AC b a bT0 0 bI 0 1 g a bT0
g 0 1
1 1 I0
AG b 1 a bT0 g I 0 a bT0
g 0 0
38
Deriving Cramer’s Rule
n
d i Ci1
x1 d1 C11 d 2 C21 d n Cn1 x1 in1
x x d C
1 d1 C12 d 2 C22 d n Cn 2
2
1 i i 2
2
i 1
A
A
d C d C d C
xn 1 1n 2 2n n nn
xn n
d i Cin
i 1
39
5.4 Finding the Inverse
aka “the hard way”
Steps in computing the Inverse Matrix and
solving for x
1. Find the determinant |A| using expansion by
cofactors.
If |A| =0, the inverse does not exist.
2. Use cofactors from step 1 and complete the
cofactor matrix.
3. Transpose the cofactor matrix => adjA
4. Divide adj.A by |A| => A-1
5. Post multiply matrix A-1 by column vector of
constants d to solve for the vector of variables x
40
Derivation of matrix inverse formula
A(adj.A)/|A| = I
41
5.4 Finding the Inverse
aka “the hard way”
Steps in computing the Inverse Matrix and
solving for x
1. Find the determinant |A| using expansion by
cofactors.
If |A| =0, the inverse does not exist.
2. Use cofactors from step 1 and complete the
cofactor matrix.
3. Transpose the cofactor matrix => adjA
4. Divide adj.A by |A| => A-1
5. Post multiply matrix A-1 by column vector of
constants d to solve for the vector of variables x
42
5.4 A Inverse
n
A(adjA) = |A|I A a1 j C1 j
j 1
A(adjA)/|A| = I
( |A| is a scalar)
A-1A(adjA)/|A|= A-
1I
x A d adj A d
1 1
A
adjA/|A|= A-1
43
Finding the Determinant
Y = C+I0+G 1Y – 1C–1G = I0
C = a + b(Y-T0) -bY+1C+ 0G = a-bT0
G = gY -gY+0C+ 1G = 0
1 1 1
D b 1 0
g 0 1
1(1)(1) 1(0)(0) (1)(1)( b) (1)( g )(0) (1)( b)(0) (1)( g )(1)
1 b g
44
Derivation of matrix inverse formula
A(adj.A)/|A| = I
45
5.4 Finding the Inverse
aka “the hard way”
Steps in computing the Inverse Matrix and
solving for x
1. Find the determinant |A| using expansion by
cofactors.
If |A| =0, the inverse does not exist.
2. Use cofactors from step 1 and complete the
cofactor matrix.
3. Transpose the cofactor matrix => adjA
4. Divide adj.A by |A| => A-1
5. Post multiply matrix A-1 by column vector of
constants d to solve for the vector of variables x
46
5.4 A Inverse
n
A(adjA) = |A|I A a1 j C1 j
j 1
A(adjA)/|A| = I
( |A| is a scalar)
A-1A(adjA)/|A|= A-
1I
x A d adj A d
1 1
A
adjA/|A|= A-1
47
5.4 Inverse, an example
c1 P1 c 2 P2 co 2
C
1
c 2 c1
1 P1 2 P2 o
2 c2
c1 c2 P1 co adjA
P 1 c1
1 2 2 o
c1 c2 P1 1 2 c 2 co
A c1 2 c2 1 P c c c1 o
2 1
1 2 1 2 2 1
48
Finding the Determinant
Y = C+I0+G 1Y – 1C–1G = I0
C = a + b(Y-T0) -bY+1C+ 0G = a-bT0
G = gY -gY+0C+ 1G = 0
1 1 1
D b 1 0
g 0 1
1(1)(1) 1(0)(0) (1)(1)( b) (1)( g )(0) (1)( b)(0) (1)( g )(1)
1 b g
49
The macro model
Y=C+I0+G 1Y - 1C – 1G = I0
C=a+b*(Y-T0) -bY + 1C + 0G = a-bT0
G=g*Y -gY + 0C +1G = 0
1 1 1 Y I0
b 1
0 C a bT
0
=
g 0 1 G 0
50
Macro model
Section 3.5, Exercise 3.5-2 (a-d), p. 47
Section 5.6, Exercise 5.6-2 (a-b), p. 111
Given the following model
(a) Identify the endogenous variables
(b) Give the economic meaning of the parameter g
(c) Find the equilibrium national income (substitution)
(d) What restriction on the parameters is needed for a
solution to exist?
Find Y, C, G by (a) matrix inversion (b) Cramer’s rule
51
The macro model
Y=C+I0+G 1Y - 1C – 1G = I0
C=a+b*(Y-T0) -bY + 1C + 0G = a-bT0
G=g*Y -gY + 0C +1G = 0
1 1 1 Y I0
b 1
0 C a bT
0
=
g 0 1 G 0
52
1 1 1 Y 1 1 1 I0
A= b 1 0 C 1 b 1 g b a bT
1 b g 0
g 0 1 G g g 1 b 0
1 1 1
A b 1 0 1 b g
g 0 1 I 0 a bT0
Y
1 b g
1 b g
1 1 g g bI 0 1 g a bT0
C
1 b g
C=
1 b 1 b
g I 0 a bT0
1 1 1 G
C’= b 1 g b 1 b g
g g 1 b
53
3.4 Solution of General Eq. System
(1)(1)-(1)(1) = 0 1 1 x 8
(inconsistent & 1 1 y 9
dependent)
2 1 x 12
(2)(2)-(1)(4) = 0 4 2 y 24
(dependent)
(2)(1)-(1)(3) = -1
2 3 x 58
(independent as 1 1 y 20
rewritten)
54
5.7 Leontief Input-Output Models
Structure of an input-output model
The open model, A numerical example
Finding the inverse by approximation, The closed model
A x d x
ij i i i
A x d I x
ij i i i
d I x A x
i i ij i
I x A x d
i ij i i
I A x d
ij i i
x I A d
*
i ij
1
i
57
.15 .25 x1 d1 x1
.20
.05 x2 d 2 x2
.15 .25 x1 d1 1 0 x1
.20 x
.05 x2 d 2 0 1
2
d1 1 0 x1 .15 .25 x1
d 0 1 x .20 .05 x
2 2 2
1 0 x1 .15 .25 x1 d1
0 1 x .20 .05 x d
2 2 2
1 .15 .25 x1 d1
.20
1 .05 x2 d 2
1
x1 .85 .25 d1
x .20 .95 d
2 2
58
5.8 Limitations of Static Analysis
59
3.4 Solution of General Eq. System
(1)(1)-(1)(1) = 0 1 1 x 8
(inconsistent & 1 1 y 9
dependent)
2 1 x 12
(2)(2)-(1)(4) = 0 4 2 y 24
(dependent)
(2)(1)-(1)(3) = -1
2 3 x 58
(independent as 1 1 y 20
rewritten)
60
5.6 Application to Market and National-Income Models
Market model
National-income model
Matrix algebra vs. elimination of variables
61