Questions on Mathematical Economics
1. Identify the order and degree for each of the following differential
equations:
2. Derive the general solutions for the following FOD equations:
a. dy/dt + ay =0
b. dy/dt + ay =b
c. dy/dt + u(t)y =0
d. dy/dt + u(t)y = w(t)
3. Derive the general solution for capital, k, as a function of time. What will be
the long-run general solution?
4. Suppose the rate of change in price is a function of the excess demand and
the demand and supply functions are as given below. Derive the time path
of price, P(t). What will be the long run or intertemporal solution? What is
the market clearing equilibrium price? Can we say that the equilibrium is
stable?
dP/dt = m(Qd – Qs) where m=a constant >0
Qd = α – βP and Qs = -γ + δP
NB:
The equilibrium is said to be stable if the general solution converges in the
long-run.
5. Find the general and definite solution for:
dy/dt + 3t2y = t2
with y(0) = 1
6. Find the general solution of:
2dy/dt - 2t2y = 9t2
7. Find the general solution for:
(Schuams, page 373)
8. Find the general solution for
dy/dt – y/t = 0 ; y(3) = 12
9. Let the demand and supply be:
Qd = α – βP + σ(dp/dt) and Qs = -γ + δP
a) Assuming that the rate of change of price over time is directly
proportional to the excess demand, find the time path P(t) (general
solution).
b) What is the intertemporal equilibrium price? What is the market clearing
equilibrium price?
c) What restrictions on the parameter σ would ensure dynamic stability?
Ans:
a) Since the rate of change of price over time is directly proportional to the
excess demand, we have:
dp/dt = j(Qd – Qs) = j(α – βP + σ(dp/dt) + γ – δP) = j(α + γ) –j(β+δ)P + jσ(dp/dt)
where j is a constant >0.
dp/dt (1– jσ) = j(α + γ) –j(β+δ)P
dp/dt + j (β+δ)P/(1– jσ)= j(α + γ) /(1– jσ)
This is an autonomous FOD equation with a = j (β+δ)/(1– jσ) and b = j(α +
γ) /(1– jσ). The general solution is of the form:
P(t) = Ae-at + b/a.
P(t) = Ae(-j (β+δ)/1- jσ)t + (α + γ)/(β+δ)
b) The intertemporal equilibrium price occurs in the long-run as t
approaches infinity, that is (α + γ)/(β+δ)
The market clearing equilibrium price occurs when Qd = Qs. That is:
α – βP + σ(dp/dt) = -γ + δP
when Qd = Qs, the price is a fixed constant value, this makes dp/dt = 0
because the derivative of a constant is zero.
Hence, P* = (α + γ)/(β+δ), the same as intertemporal equilibrium price.
c) Condition for dynamic stability, 1– jσ > 0, that is σ > 1/j
10. Let the demand and supply be:
Qd = α – βP + η(dp/dt) and Qs = δP
a. Assuming that the market is cleared at every point in time, find the
time path P(t).
b. Does this market have a dynamically stable intertemporal price?
Hint: When the market is cleared at every point in time, Qd = Qs
11. A differential equation: Mdy + Ndt = 0
Is said to be exact if and only if there exists a function F(y,t) such that
M = 𝝏F/𝝏y and N = 𝝏F/𝝏t.
Or, for Mdy + Ndt = 0 to be exact:
𝝏M/𝝏t = 𝝏N/𝝏y
To solve for an exact differential equation is to search for the
original function F(y,t) and then set it equal to a constant, that is :
F(y,t) = c
12. Solve the equation: (t + 2y)dy + (y+3t2)dt = 0
Ans:
13. Derive the integrating factor values u(y) and u(t).
14. Solve the differential equation:
Ans:
15. Solve the differential equation:
Ans:
16. Solve
