Essential Mathematics for

Economics and Business

Teresa Bradley
Limerick Institute of Technology
Third Edition

John Wiley & Sons, Ltd

CONTENTS

Introduction

xi

CHAPTER 1
Mathematical Preliminaries
1.1 Some Mathematical Preliminaries
1.2 Arithmetic Operations
1.3 Fractions
1.4 Solving Equations
1.5 Currency Conversions
1.6 Simple Inequalities
1.7 Calculating Percentages
1.8 The Calculator: Evaluation and Transposition of Formulae
1.9 Introducing Excel

1
2
2
5
8
10
15
18
21
27

CHAPTER 2
The Straight Line and Applications
2.1 The Straight Line
2.2 Mathematical Modelling
2.3 Applications: Demand, Supply, Cost, Revenue
2.4 More Mathematics on the Straight Line
2.5 Translations of Linear Functions (on the website)
2.6 Elasticity of Demand, Supply and Income
2.7 Budget and Cost Constraints (on the website)
2.8 Excel for Linear Functions
2.9 Summary
CHAPTER 3
Simultaneous Equations
3.1 Solving Simultaneous Linear Equations
3.2 Equilibrium and Break-even
3.3 Consumer and Producer Surplus
3.4 The National Income Model and the IS-LM Model
3.5 Excel for Simultaneous Linear Equations
3.6 Summary
Appendix

37
38
55
60
76
82
83
91
92
97

101
102
111
127
132
137
142
143

[viil]
CONTENTS

CHAPTER 4
Non-linear Functions and Applications
4.1 Quadratic, Cubic and Other Polynomial Functions
4.2 Exponential Functions
4.3 Logarithmic Functions
4.4 Hyperbolic Functions of the Form a/(bx + c)
4-5 Excel for Non-linear Functions
4.6 Summary

147
148
170
184
196
202
204

CHAPTER 5
Financial Mathematics
5.1 Arithmetic and Geometric Sequences and Series
5.2 Simple Interest, Compound Interest and Annual Percentage Rates
5.3 Depreciation
5.4 Net Present Value and Internal Rate of Return
5.5 Annuities, Debt Repayments, Sinking Funds
5.6 The Relationship between Interest Rates and the Price of Bonds
5.7 Excel for Financial Mathematics
5.8 Summary
Appendix

207
208
216
226
228
234
246
249
252
254

CHAPTER 6
Differentiation and Applications
6.1 Slope of a Curve and Differentiation
6.2 Applications of Differentiation, Marginal Functions, Average Functions
6.3 Optimisation for Functions of One Variable
6.4 Economic Applications of Maximum and Minimum Points
6.5 Curvature and Other Applications
6.6 Further Differentiation and Applications
6.7 Elasticity and the Derivative
6.8 Summary

257
258
268
284
301
317
331
344
354

CHAPTER 7
Functions of Several Variables
7.1 Partial Differentiation
7.2 Applications of Partial Differentiation
7.3 Unconstrained Optimisation
7.4 Constrained Optimisation and Lagrange Multipliers
7.5 Summary

359
360
378
398
408
420

CHAPTER 8
Integration and Applications
8.1 Integration as the Reverse of Differentiation
8.2 The Power Rule for Integration
8.3 Integration of the Natural Exponential Function
8.4 Integration by Algebraic Substitution
8.5 The Definite Integral and the Area under a Curve

425
426
427
433
434
439

[ix]

CONTENTS

8.6
8.7
8.8
8.9

Consumer and Producer Surplus

First-order Differential Equations and Applications
Differential Equations for Limited and Unlimited Growth
Summary

446
454
466
471

CHAPTER 9
Linear Algebra and Applications
9.1 Linear Programming
9.2 Matrices
9.3 Solution of Equations: Elimination Methods
9.4 Determinants
9.5 The Inverse Matrix and Input/Output Analysis
9.6 Excel for Linear Algebra
9.7 Summary

475
476
486
496
502
516
529
532

CHAPTER 10
Difference Equations
10.1 Introduction to Difference Equations
10.2 Solution of Difference Equations (First-order)
10.3 Applications of Difference Equations (First-order)
10.4 Summary

537
538
540
552
562

Solutions to Progress Exercises

565

Bibliography

651

List of Worked Examples

653

Index

659