Mathematical

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Mathematical
Mathematical Economics
Economics

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Table of Contents
Set theory ..................................................................................................................................... 3
Functions ...................................................................................................................................... 6
Continuity ..................................................................................................................................... 7
Sequence & series ........................................................................................................................ 8
Series ............................................................................................................................................ 9
Differential calculus and its applications ................................................................................... 11
Integration ................................................................................................................................. 12
Linear algebra :matrices, vector spaces ..................................................................................... 14
Vectors ....................................................................................................................................... 18
Input -output model, Linear programming ................................................................................ 24
Linear Programming................................................................................................................... 27
Differential equations ................................................................................................................ 30

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SET THEORY
Sets
• A well-defined collection of objects, is called a set.
• Sets are usually denoted by the capital letters A, B, C, X, Y, Z etc.
• The elements of a set are represented by small letters a, b, c, x, y, z etc. If a is an element of
a set A, then we say that a belongs to A. The word 'belongs to' denoted by the Greek symbol
ε (epsilon).
• Example, If A = {1, 2, 3, 4, 5} then 3 ε A.

Types of Sets

Finite Sets

Infinite Sets

Empty or Null Sets

Singleton Sets

Equal Sets

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Equivalent Sets

Finite Set:
A set which is empty or consists of a definite number of elements, is called a finite set.

Example, A = {1, 2, 3, 4} is a finite set, because it contains a definite number of elements, i.e. only
4 elements.

Infinite Set:
A set which consists of infinite number of elements is called an infinite set.

Example, A = {1,2,3,4………}
Empty Set or Null Set:
A set which does not contain any element, is called an empty set or null set or void set. It is
denoted by φ or {}.
Example, A= {x: x is a natural number less than 1}

Singleton Set:
A set consisting of a single element, is called a singleton set.

Example, A = {0}

Equal Sets:
Two sets A and B are said to be equal, if they have exactly the same elements and we write it as
A = B, Otherwise, two sets are said to be unequal and we write A≠ B.Example, Let A = {a, b, c, d}
and B = {c, d, b, a} , then A = B

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Equivalent Sets:
Two sets A and B are said to be equivalent, if their cardinal numbers are same i.e. if n(A) = n(B).

Example, Let A = {a, b, c, d} and B = {1, 2, 3, 4} then n(A) = 4 and n(B)=4

Sets Relationship
• Subset: Let A and B be two sets. If every element of A is an element of B, then A is called a
subset of B.
A⊆B
• Proper Subset: If A ⊆ B and A ≠ B then A is called a proper subset of B, written as A⊂ B and B
is called superset of A.
A⊂ B
• Universal Set: If there are some sets under consideration, then a set can be chosen arbitrarily
which is a superset of each one of the given sets. Such a set is known as the universal set and
it is denoted by U.
Example, Let A = {2, 4, 6}, B = {1, 3, 5} and C = {0, 7} Then, U = {0, 1, 2, 3, 4, 5, 6, 7} is a universal
set.
• Power Set: The collection of all subsets of a set, say A, is called the power set of A’s and it is

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denoted by P(A).
Operations on Set
Union of Sets
• The union of A and B is the set of all those elements which belong to either A or B or both. It
is denoted by A ∪ B and read as A union B. The symbol 'U' is used to denote the union.
• Example, Let A = {2, 3} and B = {3, 4, 5}
Then, A ∪ B = {2, 3, 4, 5}

Laws of Union:
For any three sets A, B and C, we have
• A∪φ=A
• U∪A=U
• A∪A=A
• A ∪ B=B ∪ A
• (A ∪ B) ∪ C = A ∪ (B ∪ C)

Intersection of Sets
The intersection of A and B is the set of all those elements which belong to both A and B. It is
denoted by A ∩ B and read as A intersection B. The symbol '∩' is used to denote the
intersection.
Example, Let A = {2, 3, 4, 5} and B = {1, 3, 6, 4} Then, A ∩ B = {3, 4}
Laws of Intersection:
For any three sets, A, B and C, we have

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• A∩φ=φ
• U∩A=A
• A∩A=A
• A ∩ B=B ∩ A
• (A ∩ B) ∩ C=A ∩ (B ∩ C)

Difference of Sets
The difference of sets A and B in this order is the set of all those elements of A which do not
belong to B. It is denoted by A - B and read as A minus B. The symbol '-' is used to denote the
difference of sets.
Example, A = {1, 2, 3, 4, 5} and B = {3, 5, 7, 9}
A - B = {1, 2, 4}
Laws of Difference:
For any two sets A and B, we have,
• A - B =A ∩ B’
• B - A =B ∩ A’
• A –B ⊆ A
• B –A ⊆ B
• A - B =A → A ∩ B= φ

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• (A - B) ∩ B=A ∩ B
• (A - B) ∩ B = φ
• (A - B) ∩ (B-A) = (A ∩ B) - (A ∩ B)

Complement of a Set
Let U be the universal set and A be any subset of U, then complement of A with respect to U is
the set of all those elements of U which are not in A. It is denoted by A' and read as, 'A
complement'.

Example, Let U = {1, 2, 3, 4, 5, 6} and A = {2, 4}

Then, A' = U - A = {1, 2, 3, 4, 5, 6} - {2, 4} = {1, 3, 5, 6}

Laws of Complements:
• (A')' = A = U - A'
• A ∪ A' = U
• A ∩ A' = φ
• φ ‘= U
• U' = φ
• (A U B)’ = U- (A U B)

DE Morgan’s Law
• (A ∪ B)’ = A’ ∩ B’
• (A ∩ B)’ = A’ ∪ B’
Sets Formulas
For any three sets A, B and C

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• n (A∪ B) = n(A) + n(B) – n (A ∩ B)

• If A ∩ B = ∅, then n (A∪ B) = n(A) + n(B)
• n (A – B) + n (A ∩ B) = n(A)
• n (B – A) + n (A ∩ B) = n(B)
• n (A – B) + n (A ∩ B) + n (B – A) = n (A ∪ B)
• n (A ∪ B ∪ C) = n(A) + n(B) + n(C) – n (A ∩ B) – n (B ∩ C) – n (C ∩ A) + n (A ∩ B ∩ C)

Important points

• The set of all rational numbers is a subset of the set of all real numbers
• If the two given sets happen to be the subsets of each other, then these two sets are
equal.
• The complement of Universal set U must be empty. Thus U’ = Φ.
• Law of double complement is (P’) = P.

FUNCTIONS
Function
•

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A special type of relation is called function.
• The word 'function' is derived from a Latin word meaning operation.
• Function is a very important concept in Mathematics and it shows the correspondence
between two sets.
• A function is also known as mapping or map.

Relation

• A Cartesian product of two sets A and B is the collection of all the ordered pairs (a, b) such
that a in A and b Є B.
• A relation F is said to be a function if each element in set A is associated with exactly one
element in set B.

Domain
The set of all possible values which qualify as inputs to a function is known as the domain of the
function, or it can also be defined as the entire set of values possible for independent variables.

Example, the domain of the function F is set A i.e. {India, Pakistan, Australia, Sri Lanka}.

Range
The set of all the outputs of a function is known as the range of the function or after substituting
the domain, the entire set of all values possible as outcomes of the dependent variable.

For example, the total cost C of a firm per day is a function of its daily output Q: C = 150 + 7Q. The
firm has a capacity limit of 100 units of output per day. What are the domain and range of the
cost function?

In as much as Q can vary only between 0 and 100, the domain is the set of values 0 ≤ Q ≤ 100,

Domain = {Q | 0 ≤ Q ≤ 100}

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As for the range, since the function plots as a straight line, with the minimum C value at 150(when
Q = 0) and the maximum C value at 850 (when Q = 100), we have,

Range = {C | 150 ≤ C ≤ 850}

Types of Functions

Types of Function

Constant Polynomial Continous

Fuction Function Function

Constant Functions
A function whose range consists of only one element is called a constant function.

As an example, we write the function Y = f(x) = 7 which is alternatively expressible as y = 7 or f(X)

= 7, whose value remains the same regardless of the value of x. In the coordinate plane, such a
function will appear as a horizontal straight line.

Polynomial Functions:

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The constant function is actually a degenerate case of what are known as polynomial functions.
The polynomial function of a single variable x has the general form: 𝑌 = 𝑎0 + 𝑎1 𝑥 + 𝑎2 𝑥 2 + ⋯ +
𝑎𝑛 𝑥 𝑛 in which each term contains ac coefficient as well as a non- negative integer power of the
variable x.

Continuous Function
In calculus, a function is continuous at x = a, if and only if - all three of the following conditions
are met:

o The function is defined at x = a; that is, f(a) equals a real number

o The limit of the function as x approaches a exists
o The limit of the function as x approaches a is equal to the function value at x = a.

CONTINUITY
Continuity, in mathematics, is a rigorous formulation of the intuitive concept of a function that
varies with no abrupt breaks or jumps. A function is a relationship in which every value of an
independent variable—say x—is associated with a value of a dependent variable—say y.

Types of Discontinuity

Types of Discontinuity

Removable Discontinuity Infinite Discontinuity Jump Discontinuity

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Removable Discontinuity:
This is a category of discontinuity in which the function has a well-defined two-sided limit at x =
a, but either f(a) is not defined or f(a) is not equal to its limit.

Infinite discontinuity
The function goes toward positive or negative infinity. Imagine a road getting closer and closer to
a river with no bridge to the other side.

Jump discontinuity
The graph jumps from one place to another. Imagine a superhero going for a walk: he reaches a
dead end and, because he can, flies to another road.

Limx→a+ f(x) = Limx→a− f(x)

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Some Important Continuous Functions
• Every polynomials function is always continuous function.
• Every invariable function is always continuous function.
• Every identity function is always continuous function.
• Every rational function is continuous.
• Every modulus function f(x) = |x| is continuous.
• All trigonometric and inverse trigonometric function is continuous in self defined domain.

SEQUENCE & SERIES

A sequence is an ordered list of objects or events. For instance, the sequence of events at a crime
scene is important for understanding the nature of the crime. Let’s look at some examples of
sequences.
Example, Emily flips a quarter five times, the sequence of coin tosses is H T T H T where H stands
for “heads” and T stands for “tails”. As a side remark, we might notice that there are 25 = 32
different possible sequences of five-coin tosses.

Types of Sequence

Types of Sequence

Arithmetic sequence Geometric sequence

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Arithmetic Sequence:
• This is a sequence of the forma, a +d, a +2d, a +3d…, where each term is obtained from the
preceding one by adding a constant, called the common difference and often represented by
the symbol d.
• Note that d can be positive, negative or zero.
Nth term of sequence:
∞

∑ 𝒂𝒏 = 𝒂𝟎 + 𝒂𝟏 + 𝒂𝟐 + ⋯ + 𝒂𝒏 + ⋯
𝒏=𝟎

Geometric Sequence
• A geometric sequence has the form, a, ar, ar2, ar3, ...in which each term is obtained from the
preceding one by multiplying by a constant, called the common ratio and often represented
by the symbol r.
• Note that r can be positive, negative or zero.
• The terms in a geometric sequence with negative r will oscillate between positive and
negative
Nth term of sequence:
𝒂𝒏 = = 𝒂𝒓𝒏 − 𝟏

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SERIES
• Series in math is simply the sum of the various numbers, or elements of a sequence.
• For example, to make a series from the sequence of the first five positive integers 1, 2, 3, 4,
5, just add them up. So, 1 + 2 + 3 + 4 + 5 = 15 is a series.

Types of Series

Finite Seires Infinite Series

Types of Series
• Finite Series: When the series is made from a finite sequence—and therefore contains a finite
number of terms, it is called a finite series.
• Infinite Series: Infinite series are sequences that keep on going and going. It is the sum of
infinitely many numbers related in a given way and listed in a given order.

Some Other Types

• Harmonic Series: This is an example of divergent series. Harmonic series is divergent because
its sequence of partial sums is rather unbounded.
∞
1 1 1 1 1
∑ = 1 + + + + ⋯+ + ⋯
𝑛 2 3 4 𝑛
𝑛=1

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∞
1 1 1 1 1 1 1 1
∑ = 1 + + ( + )+( + + + )+ ⋯+
𝑛 2 3 4 5 6 7 8
𝑛=0
1 1 1 1 1 1 1 1 1
<1+ +( + )+ ( + + + ) +⋯+ = 1 + + +⋯
2 4 4 8 8 8 8 2 2
Thus,
∞
1
∑ =∞
𝑛
𝑛=0

The alternative harmonic series converges to the natural logarithm of 2.

∞
(−1)𝑛−1
∑ ln 2
𝑛
𝑛=1

• Arithmetic Series: An arithmetic series is a series in which the terms form an arithmetic
sequence. That is, each term is obtained from the preceding one by adding a constant.
The series 1+2+3+··· +n, is an arithmetic series with common difference 1.
• Geometric Series: A geometric series is a series in which the terms form a geometric
sequence. That is, each term is obtained from the preceding one by multiplying by a constant.

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(𝒓𝒏 − 𝟏)
𝑺𝒏 = 𝒂 , 𝒇𝒐𝒓 𝒓 ≠ 𝟏
(𝒓 − 𝟏)
∞

∑ 𝒂 + 𝒂𝒓 + 𝒂𝒓𝟐 + 𝒂𝒓𝟑 + ⋯ + 𝒂𝒓𝒏 + ⋯

𝒏=𝟎

A geometric series may converge or diverge depending on the value of the common ratio.
If the common ratio is greater than or equal to 1, the series diverges while if the value of the
common ratio is between 0 and 1, it converges and the sum is given by:
∞
𝒂
∑ 𝒂𝒓𝒏 =
𝟏−𝒓
𝒏−𝟎
• P- series: P-series is a series where the common exponent p is a positive real constant number.
∞
𝟏 𝟏 𝟏 𝟏
∑ 𝑷
= 𝟏 + 𝒑 + 𝒑 + ⋯+ 𝒑 + ⋯
𝒏 𝟐 𝟑 𝒏
𝒏=𝟎

• Alternating Series: An alternating series is a series in which the terms alternate in sign. Such
series will only converge if and only if its terms decrease in absolute value with respect to zero
as a limit.
∞
𝟏 𝟏 𝟏 𝟏 (−𝟏)𝒏+𝟏
∑ (−𝟏)𝒏+𝟏 = 𝟏 − + − + ⋯± ∓⋯
𝒏 𝟐 𝟑 𝟒 𝒏
𝒏=𝟎

• Power Series: A power series has each term as a distinct constant.

∑ 𝒂𝒏 𝒙 𝒏 = 𝒂𝟎 + 𝒂 𝟏 𝒙 + 𝒂𝟐 𝒙 𝟐 + ⋯ + 𝒂𝒏 𝒙 𝒏 + ⋯
𝒏

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DIFFERENTIAL CALCULUS AND ITS APPLICATIONS

Derivatives
In mathematics, the derivative is a way to show rate of change: that is, the amount by which a
function is changing at one given point.

To find the derivative of a function y = f(x) we use the slope formula:

𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝒀 ∆𝒀
𝑺𝒍𝒐𝒑𝒆 = =
𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝑿 ∆𝑿

And (from the diagram) we see that:

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• X changes from 𝑥 𝑡𝑜 𝑥 + ∆𝑥
• Y changes from f(x) to 𝑓(𝑥 + ∆𝑥)
∆𝒀 𝒇(𝒙 + ∆𝒙 ) − 𝒇(𝒙)
=
∆𝑿 ∆𝒙

Example: the function 𝒇(𝒙) = 𝒙𝟐

We know 𝑓 (𝑥 ) = 𝑥 2 , and we can calculate 𝑓(𝑥 + ∆𝑥)

Start with: 𝑓(𝑥 + ∆𝑥 ) = (𝑥 + ∆𝑥 )2
Expand (𝑥 + ∆𝑥)2 : 𝑓 (𝑥 + ∆𝑥 ) = 𝑥 2 + 2𝑥 ∆𝑥 + (∆𝑥 )2
𝑓(𝑥+∆𝑥)−𝑓(𝑥)
The slope formula is: ∆𝑥
𝑥 2+2𝑥 ∆𝑥+(∆𝑥)2−𝑥 2
Put in 𝑓(𝑥 + ∆𝑥 ) and 𝑓 (𝑥 ): ∆𝑥
2 2 2𝑥 ∆𝑥+(∆𝑥)2
Simplify (𝑥 𝑎𝑛𝑑 − 𝑥 𝑐𝑎𝑛𝑐𝑒𝑙 ): ∆𝑥
Simplify more (divide through by ∆𝑥) ∶ 2𝑥 + ∆𝑥
Then as ∆𝑥 heads towards 0 we get: 2𝑥
Result: the derivative of 𝑥 2 𝑖𝑠 2𝑥
In other words, the slope at 𝑥 is 2𝑥.
Differentiation Rules
• The constant rule: This is simple. f (x) = 5 is a horizontal line with a slope of zero, and thus its
derivative is also zero.
• The power rule: To repeat, bring the power in front, then reduce the power by 1. The power
rule works for any power: a positive, a negative, or a fraction.

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𝒊𝒇 𝒇(𝒙) = 𝒙−𝟐 , 𝒕𝒉𝒆𝒏 𝒇′ (𝒙) = −𝟐𝒙−𝟑

𝟐 𝟐 −𝟏
𝒊𝒇 𝒈(𝒙) = 𝒙𝟑 , 𝒕𝒉𝒆𝒏 𝒈′ (𝒙) = 𝒙 𝟑
𝟑
𝒊𝒇 𝒉(𝒙) = 𝒙, 𝒕𝒉𝒆𝒏 𝒉′ (𝒙) = 𝟏

• The constant multiple rule: A coefficient has no effect on the process of differentiation. You
just ignore it and differentiate according to the appropriate rule. The coefficient stays where
it is until the final step when you simplify your answer by multiplying by the coefficient.
Note: Constants in problems, like c and k, behave like ordinary numbers.
• The sum rule: When you want the derivative of a sum of terms, take the derivative of each
term separately.
• The difference rule: If you have a difference (that’s subtraction) instead of a sum, it makes no
difference. You still differentiate each term separately.
Rules in trigonometry:

INTEGRATION Mathematical Economics

Integration
Integration can be used to find areas, volumes, central points and many useful things. But it is
often used to find the area underneath the graph of a function like this:

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Integration Rules:

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Sum, Difference, Constant Multiplication and Power Rule

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Rule of Trigonometry

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LINEAR ALGEBRA :MATRICES, VECTOR SPACES
Matrices
A matrix is an ordered rectangular array of numbers functions. Such an array is enclosed by [ ] or
(). The numbers (real or complex) or functions are called the elements or the entries of the
matrix.

Example, given the linear equation system

𝟔𝒙𝟏 + 𝟑𝒙𝟐 + 𝑿𝟑 = 𝟐𝟐
𝒙𝟏 + 𝟒𝒙𝟐 − 𝟐𝒙𝟑 = 𝟏𝟐
𝟒𝒙𝟏 − 𝒙𝟐 + 𝟓𝒙𝟑 = 𝟏𝟎
We can write,
𝟔 𝟑 𝟏
𝑨 = [𝟏 𝟒 −𝟐]
𝟒 −𝟏 𝟓
𝒙𝟏 𝟐𝟐
𝒙 = [ 𝒙𝟐 ] 𝒅 = [𝟏𝟐]
𝒙𝟑 𝟏𝟎

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Types of Matrices

Row Matrix

Column Matrix

Zero/ Null Matrix

Square Matrix

Diagonal Matrix

Scalar Matrix

Unit or Identity Matrix

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• Row Matrix: A Matrix having only one row is called a row matrix. The left side matrix is a row
D matrix as it has 1 row and 4 columns.
[𝟐 𝟐 𝟏]

• Column Matrix: A matrix having one 1 column is called a column matrix. The right-side matrix
is a column matrix as it has 1 column and 4 rows.
𝟐
[𝟏]
𝟓

• Zero Matrix: If all the elements of a matrix are 0, then it is called a zero or null matrix. It is
denoted by letter O.
𝟎 𝟎 𝟎
[𝟎 𝟎 𝟎]
𝟎 𝟎 𝟎

• Square Matrix: A matrix in which the number of rows and the number of columns are equal,
is called a square matrix.
𝟐 𝟐
[ ]
𝟑 𝟒

• Diagonal Matrix: A square matrix is said to be a diagonal matrix if all the elements lying
outside the diagonal elements are zero. E matrix is a diagonal matrix.
𝟏 𝟎 𝟎
𝑬 = [𝟑 𝟎 𝟎 ]
𝟎 𝟎 −𝟐

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• Scalar Matrix: A diagonal matrix in which all the diagonal elements are equal, is called scalar
matrix. F is a scalar matrix.
𝟑 𝟎 𝟎
[𝟎 𝟑 𝟎]
𝟎 𝟎 𝟑
• Unit or Identity Matrix: A square matrix in which all diagonal elements are 1 and rest are 0,
is called an identity matrix.
A scalar matrix is an identity matrix, when k=1 and every identity matrix is always a scalar
matrix. The figure below shows two identity matrices one of order 2x2 and the other of
order 3x3.
𝟏 𝟎
[ ] = 𝟐 × 𝟐 𝒎𝒂𝒕𝒓𝒊𝒙
𝟎 𝟏

𝟏 𝟎 𝟎
[𝟎 𝟏 𝟎] = 𝟑 × 𝟑 𝒎𝒂𝒕𝒓𝒊𝒙
𝟎 𝟎 𝟏
Operations on Matrices
Equality of Matrices
• Equal Matrices: Two matrices are said to be equal, if their order is same and their

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corresponding elements are also equal. Two matrices A and B are said to be comparable if
they are of the same order. Two matrices A and B are equal and we write it as A = B.
𝟏 𝟐 𝟑 𝟏 𝟐 𝟑
𝑨 = [ 𝟖 𝟒 𝟔] = 𝑩 [𝟖 𝟒 𝟔]
𝟒 𝟓 𝟕 𝟒 𝟓 𝟕

• Addition of Matrices: Two matrices of the same order, say 𝒎 × 𝒏 then the sum of these two,
matrices is obtained by adding the corresponding elements of A and B. When we add the
matrices A and B, we get the resultant 𝐴 + 𝐵 matrix.
𝟐 𝟏
𝑨= [ ]
𝟓 𝟒
𝟐 𝟎
𝑩 =[ ]
𝟕 𝟑
𝟐 𝟏 𝟐 𝟎 𝟒 𝟏
𝑨+𝑩 =[ ]+[ ]=[ ]
𝟓 𝟒 𝟕 𝟑 𝟏𝟐 𝟕
• Difference of Matrices: Two matrices of the same order, say 𝒎 × 𝒏 then the difference of
these two matrices is obtained by subtracting the corresponding elements of B from A. When
we subtract the matrices B from A, we get the resultant A- B matrix.
𝟏𝟐 −𝟑 𝟔 𝟏
𝑨= [ ] 𝒂𝒏𝒅 𝑩 = [ ]
𝟐 𝟏𝟓 𝟏𝟏 −𝟖

𝟏𝟐 − 𝟔 −𝟑 − 𝟏 𝟔 −𝟒
𝑨−𝑩 = [ ]=[ ]
𝟐 − 𝟏𝟏 𝟏𝟓 − 𝟏𝟖 −𝟗 𝟐𝟑

• Multiplication of Matrice: The product AB of two matrices A and B is defined, if number of

columns of A is equal to the number of rows of B.

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Let A = [𝑎𝑖𝑗 ] be the 𝑚 × 𝑛 matrix and B =[𝑏𝑗𝑘 ] be the 𝑛 × 𝑝 matrix. Then, the product AB of
the matrices A and B is matrix C of order 𝑚 × 𝑝.
𝟏𝟑 𝟗 𝟕 𝟏𝟓
[𝟑 𝟒 𝟐] × [ 𝟖 𝟕 𝟒 𝟔 ] = [𝟖𝟑 𝟔𝟑 𝟑𝟕 𝟕𝟓 ]
𝟔 𝟒 𝟎 𝟑
• Scalar Multiplication of Matrices: Let 𝐴 = [𝑎𝑖𝑗 ] 𝑚 × 𝑛 be a matrix and k be a scalar, then Ka
is another matrix which is obtained by multiplying each element of A by the scalar k.
𝟒 𝟎 𝟖 𝟎
𝟐×[ ] =[ ]
𝟏 −𝟗 𝟐 −𝟏𝟖
• Transpose of a Matrix: The matrix obtained by interchanging the rows and columns of matrix
A is called the transpose of matrix A. The transpose of matrix A is represented by A’.
𝟔 𝟏
𝟔 𝟒 𝟐𝟒
[ ]=[𝟒 −𝟗]
𝟏 −𝟗 𝟖
𝟐𝟒 𝟖
• Symmetric Matrix: Square matrix A is called a symmetric matrix, if the transpose of matrix A
is equal to the matrix B, i.e. B’=B. In other words, let 𝐵 = [𝑎𝑖𝑗 ] n*n then B is said to be
symmetric, if [𝑎𝑖𝑗 ] = [𝑎𝑖𝑗 ] for all possible values of i and j.

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𝟐 𝟑 𝟔
𝑩 = [𝟑 𝟒 𝟓 ]
𝟔 𝟓 𝟗

𝟐 𝟑 𝟔
𝑩′ = [𝟑 𝟒 𝟓]
𝟔 𝟓 𝟗

• Skew-symmetric Matrix: A square matrix A is said to be skew-symmetric matrix, if the

transpose of matrix A is equal to the negative of matrix A. i.e. A’ = - A. In other words, let
𝐴 = [𝑎𝑖𝑗 ] 𝑛 × 𝑛, then A is said to be skew-symmetric matrix, if [𝑎𝑗𝑖 ] = −[𝑎𝑖𝑗 ], for all values
of i and j.
𝟎 𝟐 𝟒
𝑩 = [−𝟐 𝟎 𝟑 ]
−𝟒 −𝟑 𝟎

𝟎 −𝟐 −𝟒
𝑩′ = [𝟐 𝟎 −𝟑]
𝟒 𝟑 𝟎

• Invertible Matrix: A square matrix A of order m is said to be invertible, if there exists another
square matrix B of the same order m, such that 𝐴𝐵 = 𝐵𝐴 = 𝐼 , where I is a unit matrix of same
order m.
The matrix B, is called the inverse of matrix A and is denoted by 𝐴−1 .

Rank of a Matrix
• The number 'r' is called the rank of the matrix A if,
o There exists at least one non-zero minor of order r of A
o Every minor of order (r + 1) of A is zero.

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• The rank of a matrix A is denoted by p(A)

• Steps:
o The given matrix should be a square matrix. If it is not so, the matrix should be made a
square matrix by deleting the extra row or the column.
o Find the determinant of the square matrix given or obtained after deleting extra row or
column.
o if determinant of the matrix is zero, then take the sub-matrices of the given matrix. If the
determinant of any one of the sub- matrices is not zero, then the order of that sub matrix
would be the rank of the given matrix.

Inverse of a Matrix
Suppose A is a non-zero square matrix of order n and there exists matrix B of same order n such
that AB = BA =I, then such matrix B is called an inverse of matrix A. It is denoted by A-1.
𝟏
𝑨−𝟏 = × 𝑨𝒅𝒋 𝑨
|𝑨|
Important Points!
• Non-commutativity Matrix: Multiplication is not commutative i.e. if AB and BA are both
defined, then it is not necessary that AB ≠ BA.
•

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Associative law: For three matrices A, B, and C, if multiplication is defined, then A (BC) = (AB)
C.
• Multiplicative identity: For every square matrix A, there exists an identity matrix of the same
order such that IA = AI = A.
• Distributive law: For three matrices A, B, and C,
o A (B + C) = AB + AC (A + B) C = AC + BC
o (A’)’ = A
o (A + B)’ = A’ + B’
o (kA)’ = A’, k being any number
o (AB)’ = B’A’
o AB = 0 i.e., Null Matrix, does not necessarily imply that either A or B is a null matrix.
Determinants and no singularity
• The determinant of A is denoted by either det(A) or, more usually, by |A|. For the special case
of order 2 determinants, the rule for calculating
• |A| is: (a) multiply the elements on the main diagonal; (b) multiply the off- diagonal elements;
(c) subtract the product of the off-diagonal elements from the product of the diagonal
elements.
• For order 3, determinant is given by the sum of product of elements of any row or column by
their cofactors.
Example, 𝐴11 𝐶11 + 𝐴12 𝐶12 + 𝐴13 𝐶13 in case of order 3 matrix by taking its 1st row.

VECTORS
Vector
Those quantities which have magnitude as well as direction are called vector quantities or vectors.

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Example, A football player hit the ball to give a pass to another player of his team.
Scalars
Those quantities which have magnitude but no direction, are called scalar quantities or scalars. A
scalar quantity is represented by a real number along with a suitable unit.

Types of Vectors

Zero or Null Vector

Unit Vector

Coinitial Vector

Collinear Vector

Equal Vector

Negative Vector

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Copanar Vectors

• Zero or Null Vector: A vector whose magnitude is zero, i.e. whose initial and terminal points
coincide, is called a null vector or zero vector. It is denoted by 0 and it cannot be assigned a
definite direction, as its magnitude is zero. Otherwise, it may be regarded as having any
direction. Thus, 𝑣𝑒𝑐 𝐴𝐴 𝑣𝑒𝑐 𝐵𝐵 represent the zero vectors.

• Unit Vector: A vector whose magnitude is one unit (i.e. unity) is called a unit vector. The unit
vector in the direction of a is denoted by â and read as 'a cap'.

• Coinitial Vectors: Two or more vectors having the same initial point are called coinitial
vectors.

• Collinear or Parallel Vectors: Two or more vectors are said to be collinear, if they are parallel
to same line, irrespective of their magnitudes and directions.

• Equal Vectors: Two vectors are said to be equal, if they have same magnitude and direction
regardless of the positions of their initial points. Symbolically if a 𝑣𝑒𝑐 𝑏 are equal, then it is
written as 𝑣𝑒𝑐 𝑎 = 𝑣𝑒𝑐 𝑏 .

• Negative of a Vector: A vector whose magnitude is same as that of a given vector but the
direction is opposite to that of it, is called negative of the given vector.
Example, let 𝑣𝑒𝑐 AB be a vector, then −𝑣𝑒𝑐 AB or 𝑣𝑒𝑐 BA is its negative vector.

• Coplanar Vectors: Three or more vectors, which either lie in the same plane or are parallel to
the same plane, are called coplanar vectors.

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Note:
• Two vectors are always coplanar.
• If the value of a vector depends only on its magnitude and direction and is independent of
its position in the space, it is called free vector. Throughout this chapter, we will be dealing
with free vectors only.

Operations on Vector
Since a vector is just a special type of matrix, the algebraic operations introduced for matrices are
equally valid for vectors. So:

• Two n-vectors a and b are equal if and only if all their corresponding components are equal;
we then write a = b.
• If a and b are two n-vectors, their sum, denoted by a + b, is the n- vector obtained by adding
each component of a to the corresponding component of 𝑏2.
• If a is an n-vector and t is a real number, we define ta as the n-vector whose components are
t times the corresponding components in a.
• The difference between two n-vectors a and b is defined as a − b = a + (−1) b.
• If a and b are two n-vectors and t and s are real numbers, the n- vector ta +sb is said to be a

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linear combination of a and b. In symbols, using column vectors.
Scalar (or Dot) Product of Two Vectors
Let 𝑣𝑒𝑐 a and 𝑣𝑒𝑐 b be two non-zero vectors inclined at an angle θ. Then, the scalar product or
dot product of𝑣𝑒𝑐 a and𝑣𝑒𝑐 b is denoted by𝑣𝑒𝑐 𝑎 × 𝑣𝑒𝑐 𝑏 and
defined as:

⃗ . ⃗𝒃 = |𝒂
𝒂 ⃗ | 𝐜𝐨𝐬 𝜽, 𝟎 ≤ 𝜽 ≤ 𝝅
⃗ ||𝒃
𝒐𝒓 ⃗𝒂. ⃗𝒃 = 𝒂𝒃 𝒄𝒐𝒔𝜽, 𝟎 ≤ 𝜽 ≤ 𝝅
𝒘𝒉𝒆𝒓𝒆 𝒂 = |𝒂 ⃗|
⃗ | 𝒂𝒏𝒅 𝒃 = |𝒃

Vector Operation
• If we represent vectors by directed line segments, the vector
operations 𝑎 + 𝑏 , 𝑎 − 𝑏, and ta can be given interesting
geometric interpretations.

• Let a = (a1, a2) and b = (b1, b2) both start at the origin (0, 0)
of the coordinate system

• The sum a + b shown in figure below is the diagonal in the

parallelogram determined by the two sides a and b.

• The geometric reason for this can be seen from figure below, in which the two right-angled
triangles OSR and PTQ are congruent.

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• Thus, OR is parallel to PQ and has the same length, so OPQR is a parallelogram. The
parallelogram law of addition is also illustrated in figure below.

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• One way of interpreting this figure is that if a takes you from O to P and b takes you on from
P to Q, then the combined movement a + b takes you from O to Q. The combined movement
b + a takes you from O to Q. Of course, this verifies that a + b = b + a. Figure below gives a
geometric interpretation to the vector a−b.

3- Space and N-Space

• The plane is often also called 2-space and denoted 𝑅2
• Any 3-vector (a1, a2, a3) can be considered in an obvious way as a geometric vector or
movement in 3-space 𝑅3.
• As with ordered pairs in the plane, there is a natural correspondence.
• The set 𝑅 n of all n-vectors has no natural spatial interpretation.
• Nevertheless, geometric language is sometimes still used to discuss properties of 𝑅𝑛, because
many properties of 𝑅2 and 𝑅3 carry over to 𝑅𝑛

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Lengths of Vectors and Cauchy-Schwarz Inequality

• If a = (a1, a2, . . ., an), we define the length (or norm) of the vector a, denoted by ∥a∥, as ∥a∥
= √𝑎. 𝑎, 𝑜𝑟 ||𝑎|| = √𝑎2 + 𝑎2 + ⋯ + 𝑎2 … (1)
1 2 𝑛
||𝑎||′ is the distance from the origin (0, 0, … , 0) 𝑡𝑜 (𝑎1, 𝑎2, … 𝑎𝑛).
• Using the notation, we have just introduced, this inequality can be expressed as
(𝑎. 𝑏)2 ≤ ||𝑎||2||𝑏||2, 𝑜𝑟 𝑒𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡 𝑎𝑠, |𝑎. 𝑏| ≤ ||𝑎||. ||𝑏||(𝑪𝒂𝒖𝒄𝒉𝒚 − 𝑺𝒄𝒉𝒘𝒂𝒓𝒛 𝒊𝒏𝒆𝒒𝒖𝒂𝒍𝒊𝒕𝒚) … (𝟐)

Static optimization problems and their applications

Static Optimization
Optimisation is the process of minimising or maximising costs/benefits of some action. Static
optimisation refers to the process of minimising or maximising the costs/benefits of some action
for one instant in time only.

THEOREM 1: -Suppose that a function f is differentiable in an interval I and that c is an interior

point of I. For x = c to be a maximum or minimum point for f in I, a necessary condition is that it is
a stationary point for f —i.e. that x = c satisfies the equation,

𝑭′ (𝒙) = 𝟎 (𝒇𝒊𝒓𝒔𝒕 − 𝒐𝒓𝒅𝒆𝒓 𝒄𝒐𝒏𝒅𝒊𝒕𝒊𝒐𝒏)

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THEOREM 2:-𝒊𝒇 𝒇′ (𝒙) ≥ 𝟎 𝒇𝒐𝒓 𝒙 ≤ 𝒄 𝒂𝒏𝒅 𝒇′ (𝒙) ≤ 𝟎 𝒇𝒐𝒓 𝒙 ≥ 𝒄, 𝒕𝒉𝒆𝒏 𝒙 = 𝒄 𝒊𝒔 𝒂 𝒎𝒂𝒙𝒊𝒎𝒖𝒎 𝒑𝒐𝒊𝒏𝒕 𝒇𝒐𝒓 𝒇

𝒊𝒇 𝒇′ (𝒙) ≤ 𝟎 𝒇𝒐𝒓 𝒙 ≤ 𝒄 𝒂𝒏𝒅 𝒇′ (𝒙) ≥ 𝟎 𝒇𝒐𝒓 𝒙 ≥ 𝒄

𝒕𝒉𝒆𝒏 𝒙 = 𝒄
is a minimum point for f. Example, measured in milligrams per litre the concentration of a
drug in the bloodstream t hours after injection is given by the formula
𝒕
𝑪(𝒕) = 𝟐
𝒕 +𝟒

Find the time of maximum concentration.

Sol: -Differentiating with respect to t yield
𝟏 × (𝒕𝟐 + 𝟒) − 𝒕 × 𝟐𝒕 (𝟐 + 𝒕)(𝟐 − 𝒕)
𝒄′ (𝒕) = =
(𝒕𝟐 + 𝟒)𝟐 (𝒕𝟐 + 𝟒)𝟐
Extreme value Theorem
Suppose that f is a continuous function over a closed and bounded interval [a, b]. Then there
exists a point d in [a, b] where f has a minimum, and a point c in [a, b] where f has a maximum, so
that
𝒇(𝒅) ≤ 𝒇(𝒙) ≤ 𝒇(𝒄) 𝒇𝒐𝒓 𝒂𝒍𝒍 𝒙 𝒊𝒏 [𝒂, 𝒃]
Mean Value Theorem
If f is continuous in the closed bounded interval [a, b], and differentiable in the open interval (a,
𝒇(𝒃)−𝒇(𝒂)
b), then there exists at least one interior point x 𝑥 × 𝑖𝑛 (𝑎, 𝑏) such that,𝒇′ (𝒙 ∗) = 𝒃−𝒂

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Local Extreme Points

The function f has a local (or relative) maximum (minimum) at c, if there exists an interval (𝛼, 𝛽)
about c such that 𝑓(𝑥) ≤ (≥)𝑓(𝑐) for all x in (𝛼, 𝛽) which are in the domain of f.

Function value corresponding to local maximum (minimum) points are called local maximum
(minimum) values.

First Derivative Test

Suppose c is a stationary point for 𝒚 = 𝒇(𝒙).

• If 𝒇′ (𝒙) ≥ 𝟎 throughout some interval (𝒂, 𝒄) to the left of c and 𝒇′(𝒙) ≤ 𝟎 throughout some
interval (c, b) to the right of 𝑐, then𝒙 = 𝒄 is a local maximum point for 𝑓.

• If 𝒇′ (𝒙) ≤ 𝟎 throughout some interval (𝒂, 𝒄) to the left of c and 𝒇′ (𝒙) ≥ 𝟎 throughout some
interval (𝒄, 𝒃) to the right of c, then 𝒙 = 𝒄 is a local minimum point for f.

• If 𝒇′ (𝒙) > 𝟎 both throughout some interval (𝒂, 𝒄) to the left of c and throughout some
interval (𝑐, 𝑏) to the right of c, then 𝒙 = 𝒄 is not a local extreme point for 𝑓. The same
conclusion holds if 𝒇′ (𝒙) < 𝟎 on both sides of c.
Second Derivative Test

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The first derivative test on its own will determine whether a stationary point is a local maximum,
a local minimum, or neither. The next test requires knowing the first two derivatives of the
function, but only at the stationary point itself.

Let f be a twice differentiable function in an interval I, and let c be an interior point of I . Then
• 𝑓 ′ (𝑐) = 0 𝑎𝑛𝑑 𝑓"(𝑐) < 0 1 => 𝑥 = 𝑐 𝑖𝑠 𝑎 𝑠𝑡𝑟𝑖𝑐𝑡 𝑙𝑜𝑐𝑎𝑙 𝑚𝑎𝑥𝑖𝑚𝑢𝑚 𝑝𝑜𝑖𝑛𝑡.
• 𝑓 ′ (𝑐) = 0 𝑎𝑛𝑑 𝑓"𝑐) > 0 1 => 𝑥 = 𝑐 𝑖𝑠 𝑎 𝑠𝑡𝑖𝑟𝑐𝑡 𝑙𝑜𝑐𝑎𝑙 𝑚𝑖𝑛𝑖𝑚𝑢𝑚 𝑝𝑜𝑖𝑛𝑡.
• 𝑓 ′ (𝑐) = 0 𝑎𝑛𝑑 𝑓"(𝑐) = 0 1 = ?

Inflexion Point
The point c is called an inflection point for the function f if there exists an interval (a, b) about c
such that:
• 𝑓"(x) ≥ 0 in (a, c) and 𝑓"(𝑥) ≤ 0 𝑖𝑛 (𝑐, 𝑏)
• 𝑓"(x) ≤ 0 in (a, c) and f(𝑥) ≥ 0 𝑖𝑛 (𝑐, 𝑏)

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Concave v/s Convex

The function graphed in the following figure is strictly convex. Fairly obvious sufficient
conditions for strict concavity/convexity are the following,

• 𝑓"(𝑥) < 0 𝑓𝑜𝑟 𝑎𝑙𝑙 𝑥 𝜖 (𝑎, 𝑏) 1 => 𝑓(𝑥) 𝑖𝑠 𝑠𝑡𝑟𝑖𝑐𝑡𝑙𝑦 𝑐𝑜𝑛𝑐𝑎𝑣𝑒 𝑖𝑛 (𝑎, 𝑏)
• 𝑓"(𝑥) > 0 𝑓𝑜𝑟 𝑎𝑙𝑙 𝑥 𝜖 (𝑎, 𝑏) 1 => 𝑓(𝑥) 𝑖𝑠 𝑠𝑡𝑟𝑖𝑐𝑡𝑙𝑦 𝑐𝑜𝑛𝑣𝑒𝑥 𝑖𝑛 (𝑎, 𝑏)

INPUT -OUTPUT MODEL, LINEAR PROGRAMMING

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Input-Output Analysis
Input-output analysis is a basic method of quantitative economics that portrays macroeconomic
activity as a system of interrelated goods and services.

Assumptions
• Each industry produces only one homogeneous commodity
• Each industry uses a fixed input ratio (or factor combination) for the production of its output;
and
• Production in every industry is subject to constant returns to scale, so that a k-fold change in
every input will result in an exactly k-fold change in the output.

Objectives of Input-Output Model

• Rapid increase the National Development rate is main objective of this model.
• Maximising profit.
• Full employment achieved.
• Maximizing saving and increasing rate of capital formation.
• Received maximum Foreign exchanges.

Input-Output Transaction Table

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• The traditional I-O model is estimated with a square accounting framework where the number
of industries is equal to the number of commodities.

𝒅𝟏 = 𝒄𝟏 + 𝑰𝟏 + 𝑮𝟏 + ∆𝑰𝟏 + 𝑬𝒙𝟏
𝒅𝟐 = 𝒄𝟐 + 𝑰𝟐 + 𝑮𝟐 + ∆𝑰𝟐 + 𝑬𝒙𝟐
𝑿𝟏 = 𝒙𝟏𝟏 + 𝒙𝟏𝟐 + 𝒅𝟏
𝒙𝟐 = 𝒙𝟐𝟏 + 𝒙𝟐𝟐 + 𝒅𝟐
Where,
𝒅𝟏 = Final demand of agriculture
𝒅𝟐 = Final demand of industry
𝒄𝟏 = 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝑰 = 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
𝑮 = 𝐺𝑜𝑣𝑒𝑟𝑛𝑚𝑒𝑛𝑡 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠
∆𝑰 = 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
𝑬𝒙𝒑 = 𝑒𝑥𝑝𝑜𝑟𝑡𝑠
𝑰𝒎𝒑 = 𝐼𝑚𝑝𝑜𝑟𝑡𝑠
𝑭𝒅 = 𝑓𝑖𝑛𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑
𝒙𝟏 = 𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑 𝑜𝑓 𝑎𝑔𝑟𝑖𝑐𝑢𝑙𝑡𝑢𝑟𝑒
𝒙𝟐 = 𝑇𝑜𝑡𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑 𝑜𝑓 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦
𝑥11 𝑥21 𝑥12
𝒂𝟏𝟏 = , 𝑎21 = , 𝑎12 =

Mathematical Economics
𝑥1 𝑥1 𝑥2

On substitution, we get
𝒙𝟏 − 𝒂𝟏𝟏 𝒙𝟏 − 𝒂𝟏𝟐 𝒙𝟐 = 𝒅𝟏
𝒙𝟐 − 𝒂𝟐𝟏 𝒙𝟏 − 𝒂𝟐𝟐 𝒙𝟐 = 𝒅𝟐
Rearranging,
[(𝟏 − 𝒂𝟏𝟏 )𝒙𝟏 ] − 𝒂𝟏𝟐 𝒙𝟐 = 𝒅𝟏
−𝒂𝟐𝟏 𝒙𝟏 + [(𝟏 − 𝒂𝟐𝟐 )𝒙𝟐 ] = 𝒅𝟐

Input-Output Coefficient Matrix

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Hawkins –Simon Condition

• The direct and indirect requirements of input i to produce one unit of input i should be less
than 1 unit.
• If this sum is greater than or equal to $1, therefore, production will not be economically
justifiable.
Symbolically, this fact may be stated thus:
𝑛

∑ 𝑎𝑖𝑗 < 1 (𝑗 = 1, 2, … , 𝑛)
𝑖=1

Generalization in Matrix Form for n Industries:

(𝐼 − 𝐴) × 𝑋 = 𝑑
[(1 − 𝐴)−1 − 1 × (1 − 𝐴)] × 𝑋 = (𝐼 − 𝐴)−1 × 𝑑
𝐼 × 𝑋 = (𝐼 − 𝐴)−1 × 𝑑
𝑋 = (𝐼 − 𝐴)−1 𝑑

Where,
X = vector of output(𝑛 × 1)
d = vector of final demand(𝑛 × 1)
A = input-output coefficient matrix (𝑛 × 𝑛)

Mathematical Economics
I = identity matrix (𝑛 × 𝑛)
(𝐼 − 𝐴)−1 =Leontief inverse (𝑛 × 𝑛)
Leontief Inverse is the direct and indirect requirement of goods to produce 1 unit of final demand.

Dynamic Input-Output Model

A simple dynamic model has the following form:
𝑋𝑡 (𝐼 − 𝐴) − (𝑋𝑡+1 − 𝑋𝑡 )𝐵 = 𝐹𝑡
where, I is the 𝑛 × 𝑛 identity matrix,
A is the usual Leontief input matrix,
B is the matrix of fixed capital coefficients,
X is the vector of total outputs and
f is the vector of final deliveries, excluding fixed capital investment;
t refers to the time period.

Important Points:
• The field is most identified with the work of Wassily Leontief.
• Input-output model is a system of interrelated goods and services where economic activity
takes place.
• One industry’s output is another’s input.
• The basis of the model is the inter industry transaction table in which the rows provide the
distribution of a producers output and columns provide the inputs required by particular
industry.
• Intermediate demand plus final demand constitutes the total demand.
• 𝑋 = (𝐼 − 𝐴)−1 𝑑
• The sum of the elements in each column of the input-coefficient matrix

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• A must be less than 1. This is Hawkins – Simon condition.

• Dynamic I-O model has the form: 𝑋𝑡 (𝐼 − 𝐴) − (𝑋𝑡+1 − 𝑋𝑡 )𝐵 = 𝑓𝑡

LINEAR PROGRAMMING
Linear programming is a simple technique where we depict complex relationships through linear
functions and then find the optimum points. The real relationships might be much more complex
- but we can simplify them to linear relationships.

Properties:
The Properties of Linear Programming are:
• The relationship among decision variables must be linear in nature.
• A model must have an objective function.
• The resource constraints are essential.
• A model must have a non-negativity constraint.

LP Model Formulation
The steps for the model formation are:

Decision Variable

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• Mathematical symbols representing levels of activity of an operation.

Objective Function
• A linear relationship reflecting the objective of an operation.
Most frequent objective of business firms is to maximize profit.
• Most frequent objective of individual operational units (such as a production or packaging
department) is to minimize cost.

Constraint
• A linear relationship representing a restriction on decision making.
Model Formulation
𝑀𝑎𝑥
𝑚𝑖𝑛
= 𝑧 = 𝑐1 𝑥1 + 𝑐2 𝑥2 + ⋯ + 𝑐𝑛 𝑥𝑛
Subject to
𝑎11 𝑋1 + 𝑎12 𝑋2 + 𝑎𝑛 𝑋𝑛 (≤, = , ≥) 𝑏1
𝑎21 𝑋1 + 𝑎22 𝑋2 + ⋯ + 𝑎2𝑛 𝑋𝑛 (≤, = , ≥)𝑏2
:
𝑎𝑚 𝑋1 + 𝑎𝑚2 𝑋2 + ⋯ + 𝑎𝑚𝑛 𝑋𝑛 (≤, = , ≥)𝑏𝑚
Where,
𝑋𝑗 = decision variables
𝑏𝑖 = Constraint levels
𝑐𝑗 = objective function coefficients
𝑎𝑖𝑗 = constraint coefficients

Types of Solutions to LP Problem

• Simple Method
• Graphical Method

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Simplex Method
In this method, the value of the basic variable keeps transforming to obtain the maximum value
for the objective function.

STEPS
Step 1:
Establish a given problem. (i.e.,) write the inequality constraints and objective function.

Step 2:
Convert the given inequalities to equations by adding the slack variable to each inequality
expression.

Step 3:
Create the initial simplex tableau. Write the objective function at the bottom row. Here, each
inequality constraint appears in its own row. Now, we can represent the problem in the form of
an augmented matrix, which is called the initial simplex tableau.

Step 4:
Identify the greatest negative entry in the bottom row, which helps to identify the pivot column.

Mathematical Economics
The greatest negative entry in the bottom row defines the largest coefficient in the objective
function, which will help us to increase the value of the objective function as fastest as possible.

Step 5:
Compute the quotients. To calculate the quotient, we need to divide the entries in the far right
column by the entries in the first column, excluding the bottom row. The smallest quotient
identifies the row. The row identified in this step and the element identified in the step will be
taken as the pivot element. Step 6:

Carry out pivoting to make all other entries in column is zero.

Step 7:
If there are no negative entries in the bottom row, end the process.

Otherwise, start from step 4.

Step 8:
Finally, determine the solution associated with the final simplex tableau.

Graphical Method
The graphical method is used to optimize the two-variable linear programming. If the problem
has two decision variables, a graphical method is the best method to find the optimal solution.

Example
Calculate the maximal and minimal value of 𝒛 = 𝟓𝒙 + 𝟑𝒗 for the following constraints.

𝒙 + 𝟐𝒚 ≤ 𝟏𝟒
𝟑𝒙 − 𝒚 ≥ 𝟎
𝑿−𝒚 ≤ 𝟐
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Solution:
The three inequalities indicate the constraints. The area of the plane that will be marked is the
feasible region.
The optimisation equation (𝑧) = 5𝑥 + 3𝑦
You have to find the (𝑥, 𝑦) corner points that give the largest and smallest values of z.
To begin with, first solve each inequality.
𝟏
𝒙 + 𝟐𝒚 ≤ 𝟏𝟒 → 𝒚 ≤ − ( ) 𝒙 + 𝟕
𝟐
𝟑𝒙 − 𝒚 ≥ 𝟎 → 𝒚 ≤ 𝟑𝒙
𝒙−𝒚 ≤𝟐 → 𝒚≥ 𝒙−𝟐
Here is the graph for the above equations.

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Now pair the lines to form a system of linear equations to find the corner points.
1
𝑦 = −( )𝑥 + 7
2
𝑦 − 3𝑥
Solving the above equations, we get the corner points as (2, 6)
1
𝑦= − +7
2𝑥
𝑦 = 𝑥−2
Solving the above equations, we get the corner points as (6, 4)

𝑦 − 3𝑥
𝑦=𝑥−2
Solving the above equations, we get the corner points as (- 1, - 3)

For linear systems, the maximum and minimum values of the optimisation equation lie on the
corners of the feasibility region. Therefore, to find the optimum solution, you only need to plug
these three points in
• 𝒛 = 𝟑𝒙 + 𝟒𝒚 (𝟐, 𝟔): z = 5(2) + 3(6) = 10 + 18 = 28
• (6, 4): z = 5(6) + 3(4) = 30 + 12 = 42
• (- 1, - 3): z = 5(- 1) + 3(- 3) = - 5 - 9 = - 14
Hence, the maximum of z = 42 lies at (6, 4) and the minimum of z = - 14 lies at (-1, -3).

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DIFFERENTIAL EQUATIONS
Differential Equation
In general, an equation involving derivative (derivatives) of the dependent variable with respect
to independent variable (variables) is called a differential equation.

Formation of a Differential Equation whose General Solution is given

Let us consider the equation 𝑥 2 + 𝑦 2 = 𝑟 2 … (1)

By giving different values to r, we get different members of the family.

E.g. = 𝑥 2 + 𝑦 2 = 1, 𝑋𝑥 2 + 𝑦 2 = 4, 𝑥 2 + 𝑦 2 = 9 𝑒𝑡𝑐.

Thus, equation (1) represents a family of concentric circles cantered at the origin and having
different radii.
First Order, First Degree Differential Equation
𝑑𝑦
A first order-first degree differential equation is of the form = 𝑓(𝑥, 𝑦) … (1)
𝑑𝑥

If 𝑓(𝑥, 𝑦) can be expressed as a product 𝑔(𝑥), ℎ(𝑦), where, 𝑔(𝑥), is a function of x and (ℎ𝑦) is a
function of y, then the differential equation (1) is said to be of variable separable type.

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𝑑𝑦
• The differential equation (1) then has the form = ℎ(𝑦). 𝑔(𝑥)
𝑑𝑥

• If ℎ(𝑦) ≠ 0, 𝑠separating the variables, (2) can be rewritten as 1 / ℎ𝑦𝑑𝑦 = 𝑔 (x) dx ... (3)
• Integrating both sides of (3), we get ∫1/h dy = ∫g(x)dx ... (4)

• Thus, (4) provides the solutions of given differential equation in the form H(y) = G(x) + C
Here, H (y) and G (x) are the anti-derivatives of 1/h(y) and g(x) respectively and C is the arbitrary
constant.

IMPORTANT POINTS
• An equation involving derivatives of the dependent variable with respect to independent
variable (variables) is known as a differential equation.

• Order of a differential equation is the order of the highest order derivative occurring in the
differential equation.

• Degree of a differential equation is defined if it is a polynomial equation in its derivatives.

• Degree (when defined) of a differential equation is the highest power (positive integer only)
of the highest order derivative in it.

• A function which satisfies the given differential equation is called its solution. The solution
which contains as many arbitrary constants as the order of the differential equation is called
a general solution and the solution free from arbitrary constants is called particular solution.

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• To form a differential equation from a given function we differentiate the function

successively as many times as the number of arbitrary constants in the given function and
then eliminate the arbitrary constants.

• Variable separable method is used to solve such an equation in which variables can be
separated completely i.e. terms containing y should remain with 𝑑𝑦 and terms containing x
should remain with 𝑑𝑥.

• A differential equation which can expressed in the form-:

𝑑𝑦 𝑑𝑥
𝑓(𝑥, 𝑦) 𝑜𝑟 𝑔(𝑥, 𝑦), 𝑤ℎ𝑒𝑟𝑒 𝑓(𝑥, 𝑦)𝑎𝑛𝑑 𝑔(𝑥, 𝑦) are homogenous functions of degree
𝑑𝑥 𝑑𝑦
zero is called a homogeneous differential equation.

𝑑𝑦
• A differential equation of the form + 𝑃𝑦 = 𝑄
𝑑𝑥

Where P and Q are constants or functions of x only is called a first order linear differential
equation.

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