Mathematics for Economics and Finance

Functions

  • Linear, consumption
  • Quadratic, consumption
  • Cubic, costs
  • Exponential, growth
  • Logarithmic, production

 Simultaneous equations

  • Demand is Pd = a + bq
  • Supply is Ps = j + kq
When demand is equal to supply it is
Product and quotient rule

To find profit maximisation you need to set total revenue equal to total cost and then differentiate the equation to find the roots q, and then substitute them back into the original equation.

Summation by integration

You can use this formula to find the present value of current and future income
Where T2 is the end date, T1 is the start date, R is the revenue and d is the discount rate

Keynesian multiplier

E = C (consumer expenditure) + I (investments) + G (government spending) + (X (exports) – M (imports))

Constraint valuation

A method of valuing resources for which there is no market and therefore no observational unit price. This could be used in cost-benefit analysis when trying to decipher intangible benefits and costs when producing the final balance sheet.

Economic input analysis

Use to analyse and examine the economy. However, it can also be used to measure the dependency a particular firm/industry has on the economy. Though there are certain assumptions made for economic impact analysis:

  • Firms are producing homogeneous analysis
  • Have to buy from other industries to survive
  • Part of the output goes to other industries and part goes to the final demand
  • I/O analysis determines what is needed to satisfy the final demand
  • Purchases and output are measured in money terms and assume prices are consistent