Mathematics for Economists (AgEc-2018) Lecture Notes: Introduction to Mathematical Economics

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What is the main focus of microeconomics?

Household consumption decisions (correct)

IS-LM Model

Macroeconomic consequences

Aggregate consumption

What percentage of GDP does consumption take?

Three-fourths

Two-thirds (correct)

Half

One-third

In the IS-LM Model, what is considered a source of shocks to the economy?

Changes in consumers' spending plans (correct)

Household savings

Government spending

Investment decisions

Who was central to the theory of economic fluctuations related to the consumption function?

John Maynard Keynes Signup and view all the answers

What determines aggregate consumption according to the text?

Theory of consumer behavior Signup and view all the answers

What determines how much of their income households decide to consume today and how much to save for the future?

Microeconomic question Signup and view all the answers

What did Keynes conjecture about the marginal propensity to consume (MPC)?

The MPC is between zero and one, meaning that people will consume part of their earned income and save the rest Signup and view all the answers

What did Keynes believe about saving and its relationship to income?

The rich save a higher proportion of their income than the poor Signup and view all the answers

What is the primary determinant of consumption according to Keynes?

Disposable income (Y) Signup and view all the answers

What is the average propensity to consume (APC) as defined in the context?

The ratio of consumption to income Signup and view all the answers

What does the Keynesian consumption function graphically represent?

The relationship between consumption and income Signup and view all the answers

What property is satisfied because the marginal propensity to consume (MPC) is between zero and one?

Higher income leads to higher consumption and saving Signup and view all the answers

Why did Keynes believe that saving was a luxury?

Because he expected the rich to save a higher proportion of their income than the poor Signup and view all the answers

What determines the slope of the consumption function?

Marginal propensity to consume only Signup and view all the answers

What does the average propensity to consume (APC) do as disposable income (Y) rises?

APC falls Signup and view all the answers

Mathematics is a language of symbols, grammar and logic, which greatly facilitates the process of deduction or it is a language whose elements consists of symbols ( letters, numbers, etc.). Mathematical economics is an approach to economic analysis, in which the economist makes use of mathematical symbols in the statement of the problem and draws upon known mathematical theorems to aid in reasoning. There are two types of logical reasoning. These are ______ & inductive method.

deductive Signup and view all the answers

Deductive method: is also known as ______ method. It is a logical reasoning to explain specific events on the basis of the already established theory.

analytical Signup and view all the answers

Inductive method: is a logical way of reasoning to arrive at a valid general statements on the basis of valid specific facts. However, mathematical economics uses ______ reasoning in order to analyze problems/events.

deductive Signup and view all the answers

Mathematical economics is reserved to describe cases employing mathematical techniques beyond simple geometry, such as matrix algebra, differential & integral calculus, differential equations, ______ equations etc.

difference Signup and view all the answers

In the IS-LM Model, what is considered a source of shocks to the economy? ______ method:

inductive Signup and view all the answers

Differential equation is an equation, in which the pattern of change of the dependent variable due to change in independent variable is described by ________ in the context of continuous time.

derivatives Signup and view all the answers

Difference equation is an equation, in which the pattern of change of the dependent variable due to change in independent variable is described by differences in ________ time context.

discrete Signup and view all the answers

The language used in mathematical economics is more ________ & precise.

concise Signup and view all the answers

Mathematical model will usually consist of a set of ________ designated to describe the structure of the model by relating a number of variables to one another in a certain ways.

equations Signup and view all the answers

Variables frequently used in economics include; price, revenue, cost, profit, national income, consumption, investment, imports, exports etc. Endogenous variables are variables that can be under the control of the decision maker. Exogenous variables are variables that cannot be under the control of the decision maker. A ________ is something whose magnitude can change.

variable Signup and view all the answers