V OLUME 2

U NIVERSITY M ATHEMATICS

R E V I S E D A N D E X P A N D E D E D I T IO N

O LANIYI E VANS
Pan-Atlantic University

www.unimath.5profz.com
Copyright © 2019, 2024 by Olaniyi Evans.

All rights reserved. No part of this book may be reproduced or transmitted in

any form or by any means, electronic or mechanical, including photocopying,
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review.

Limits of Liability/Disclaimer of Warranty: Every effort has been made to make

this book as complete and as accurate as it possibly can. However, there may be
mistakes, both typographical and content. Therefore, this book should be
harnessed as helpful information and not as the ultimate bringer of
mathematical genius. The author and publisher shall have neither liability nor
responsibility to any person or entity regarding any loss or damage caused, or
alleged to have been caused, directly or indirectly, from the information
contained in this book.

First edition 2019

Second edition 2024

ISBN: 978-978-977-881-2

Published by
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 Dedicated to students, chasing knowledge with might,
Whether undergraduate, postgraduate, or professional,
This book, a beacon through your scholarly days and nights,
Guiding, inspiring, as you reach academic heights.

PREFACE

Dear Student,

Bravo! Welcome to this comprehensive guide to university-level mathematics.

This book has been re-designed to help students like you navigate the often-
challenging terrain of higher mathematics, providing a detailed overview of the
key topics and concepts that you will encounter throughout your studies.

The chapters in this book cover a wide range of mathematical topics, from the
fundamentals of calculus and applications to the complexities of optimal control
theory. Each chapter is structured to provide a clear and concise overview of the
key concepts, with numerous examples and exercises to help you develop your
understanding and master the material. In the early chapters, you will explore
the basics of differentiation and integration, building a solid foundation for the
more advanced topics that follow. You will then delve deeper into matrices, game
theory, and linear programming as well as nonlinear programming.

The latter half of the book covers a range of topics in applied mathematics,
including differential/difference equations and optimal control theory. These
chapters are designed to help you apply your mathematical knowledge to real-
world problems, and to develop the critical thinking skills required for success in
both academia and industry.

I hope that this book will serve as a valuable resource throughout your university
studies, and that it will inspire you to explore the many fascinating and rewarding
applications of mathematics in the world around us. Whether you are a beginner
or an advanced student, I believe that this book will provide you with the tools
and knowledge you need to succeed in your mathematical journey.

Thanks for choosing University Mathematics – and good luck!

Olaniyi Evans, Ph.D.

ACKNOWLEDGEMENTS

To the dedicated reviewers of this book, my immense gratitude for your

meticulous scrutiny, constructive critiques and insightful feedback. To my
colleagues and students, I am profoundly grateful for your unwavering support
and continuous encouragement. To Ayomi Ini-K, Olami Oba-X and Iremi Teni-
D, I love you to the moon & back.
C ONTENTS
1. Calculus: Differentiation 1
Calculus 1
Differentiation 1
Derivation From First Principles 1
Rules of Differentiation 4
Chain Rule 6
Product rule 7
Quotient Rule 9
Second and Higher Order Derivatives 10
Implicit Differentiation 11
Inverse Function Rule 12

2. Applications of Differential Calculus 15

Concavity, Convexity and Relative Extrema 15
Inflection Points 16
Revenue Functions 19
Cost Functions 21
Profit Maximization 23
Point Elasticity of Demand 27
Other Applications of Differentiation 29

3. Differentiation of Logarithmic &

Trigonometric Functions 32
Exponential Functions 32
Logarithmic Functions 33
Applications of Exponential and Logarithmic functions 35
Trigonometric Differentiation 38

4. Multivariate Functions & Partial Derivatives 42

Rules of Partial Differentiation 42
Second-order Partial Derivatives 47
Optimization of Multivariable Functions 47
Unconstrained Optimization 48
Constrained Optimization 49
Incremental Changes, Partial or total differentials
and Total Derivatives 51
Implicit Function Rule 54

5. Further Applications of Multivariate Calculus 59

Comparative Statics and Income Determination Multipliers 59
Cobb-Douglas Production Function 62
Utility Functions 64
Partial Elasticities 66

6. Limits, Continuity & Differentiability 69

Limits 69
Continuity 70
Limit Rules 71
Factoring Method 73
Conjugate Method 74
Limits to Infinity: Horizontal and Vertical asymptotes 76
 L’Hôpital’s Rule 78
Differentiability 81

7. Polynomials: Remainder & Factor Theorem 85

Addition and Subtraction of Polynomials 85
Multiplying Polynomials 86
Using Polynomial Models 87
Polynomial Division 89
Remainder Theorem 92
Factor Theorem 92

8. Partial Fractions & Binomial Series 96

Partial Fractions 96
Binomial Theorem 100
Applications of Partial Fractions to Series Expansions 103

9. Calculus: Integration 106

Integration 106
Indefinite Integrals 107
Integration by Substitution 109
Integration by Parts 114
Integration by Partial Fractions 119

10. Calculus: Definite Integrals 123

The Fundamental Theorem of Calculus 123
Improper Integrals 126
Area Bounded by a Curve 128
Consumer Surplus and Producer Surplus 129
Cost, Revenue and Profit Functions 132
Frequency Functions and Probability 134
Average Value of a Function 136
Inventory Model 137
Amount of an Annuity 138
Consumption of a Natural Resource 138
Other Economic Applications 139

11. Matrices & Determinants 142

Matrices 142
Matrix Operations 143
Addition and Subtraction 143
Scalar Multiplication 143
Vector Multiplication 144
Transpose of a Matrix 145
Identity Matrix 145
The Determinant of a Matrix 147
2×2 Matrix 147
3×3 Matrix 147
Inverse of a Matrix 149
2×2 Matrix 149
3×3 Matrices 149

12. Matrices & Simultaneous Equations 155

Inverse Matrix 155
Cramer’s Rule 159
 Gauss-Jordan Elimination 162
Applications to market and national income models 165
Functional Dependence: The Jacobian 167

13. Quadratic Forms, Definite Matrices,

Eigenvalues & Hessian 169
Quadratic Forms and Definite Matrix 169
Eigenvalues and Eigenvectors 172
Unconstrained Optimization Using the Bordered Hessian 174
Constrained Optimization Using the Bordered Hessian 179

14. Input-Output Analysis 182

Input-Output Table 182
Basic Derivation 182
Practiced Examples 184

15. Partial & General Equilibrium Analysis 193

The Meaning of Equilibrium 193
Partial Market Equilibrium 193
General Market Equilibrium 195
Equilibrium in National-Income Analysis 197
IS-LM Analysis 200

16. Linear Programming 204

A Linear Programming Problem 204
Steps in Solving a LP problem 205
Graphical Method 205
Steps in the Graphical Method 205
Matrix Method 213

17. Linear Programming: Simplex Method 217

The Simplex Method 217
Steps in the simplex method 217
Maximization 217
Minimization 224

18. Duality in Linear Programming 231

Duality: Primal & Dual 231
Matrix Method 232
Simplex Method 237

19. Game Theory 243

The Prisoner’s Dilemma 243
Zero-Sum Games 244
Nash Equilibrium 245
Payoff Matrix 245
Pure Strategy Vs Mixed Strategy Games 246
The Maximin-Minimax Principle 247
The Minimax Theorem 247
Reduction by Dominance 249
Algebraic Method 252
Graphical Method 254
Simplex Method 256
20. Non-linear Programming & Envelope Theorem 264
Concave programming 264
Karush-Kuhn-Tucker (KKT) conditions 264
The envelope theorem 271
Utility maximization: Roy’s identity 271
Cost minimization: Shephard’s lemma 272
The Lagrange multiplier as shadow value 273

21. Differential Equations 275

General Formula 275
(Micro) Dynamic Model of a Market 278
Exact Differential Equations and Partial Integration 281
Integrating Factors 284
Separation of Variables 286
Phase Diagrams 291

22. Difference Equations 296

Iterative Method 296
General Method 296
Dynamic Stability of Equilibrium 298
Cobweb Model 299
Lagged Income Determination Model 303
Harrod Model 304
Phase Diagrams 306

23. Differential & Difference Equations of Higher Order 231

Second-order differential equations 309
Second-order difference equations 312
Characteristic roots 315
Complex roots in second-order differential equations 316
Complex roots in second-order difference equations 317
Applications of second-order differential equations 319
A market model with price expectations 319
Applications of second-order difference equations 322
Samuelson multiplier-accelerator interaction model 322

24. Simultaneous Systems of Differential

& Difference Equations 326
Simultaneous Differential Equations: Case I 326
Simultaneous Differential Equations: Case II 329
Simultaneous Difference Equations: Case I 331
Simultaneous Difference Equations: Case II 334

25. Optimal Control Theory 337

The Hamiltonian & the Pontryagin’s Maximum Principle 338
Constraints in the Endpoints 343
The Current-Value Hamiltonian 344

Suggestions for Further Reading 349

Index 350
 T O PIC S IN V O LU M E 1
• Algebra, factorization & surds • Time series & forecasting
• Indices, logarithms & • Transportation problem &
exponential growth assignment models
• Linear equations & inequalities • Inventory models: inventory
• Simultaneous equations planning and production
• Quadratic equations • Network analysis
• Set theory & logic • Simulation
• Sequences & series • Queueing Theory
• Permutations & combinations • Replacement analysis
• Mathematical induction • Risk & uncertainty
• Functions • Probability
• Descriptive statistics • Joint probability
• Savings plan, loans, credit-card • Discrete/continuous probability
& mortgages distributions
• Simple & compound interest • Hypothesis testing
• Annuities & perpetuities • Regression
• Trade & cash discount • Index numbers
• Markup & markdown • Complex numbers
• Discounted cash flow techniques • Trigonometry
• Sensitivity analysis • Coordinate geometry
• Capital rationing • Vectors
• Number systems & unit analysis • Data analysis: Excel & SPSS
• Index numbers • Econometric analysis: Eviews &
STATA
 1
CALCULUS: DIFFERENTIATION

CONTENTS
Calculus 1
Differentiation 1
Derivation From First Principles 1
Rules of Differentiation 4
Chain Rule 6
Product rule 7
Quotient Rule 9
Second and Higher Order Derivatives 10
Implicit Differentiation 11
Inverse Function Rule 12

C A LC U LU S
Calculus is the branch of mathematics focused on the calculation of
instantaneous rates of change (differentiation or differential calculus) and the
summation of infinitely many small factors to determine some whole
(integration or integral calculus). The creation of calculus is widely
acknowledged to have occurred independently and simultaneously through the
work of two distinguished figures in the seventeenth century: Sir Isaac Newton,
renowned for his contributions to gravity, and the philosopher-mathematician
Gottfried Leibniz.

D I FF E R E N T IA T IO N
Differentiation is the process of finding the derivative, or rate of change, of a
function. For example, with differentiation, you can find the rate of change of
velocity with respect to time (i.e., acceleration). It particularly allows us to find
the rate of change of y with respect to x, which on a graph of y against x is the
gradient of the curve.

D E R I VA TI O N F R O M F IR ST P R I NC IP LE S
Suppose we want to find the gradient of a curve at a point A in Figure 1.1. We can
add another point B on the line close to point A. Let ∆𝑥 represents a small change
in x and ∆𝑦 represents a small change in y. As point B moves closer to point A,
the gradient of the line AB gets closer to the gradient of the tangent at A.
2 Olaniyi Evans | University Mathematics

We can write the gradient of the line AB as:

𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝒚 ∆𝒚 𝜹𝒚
= =
𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝒙 ∆𝒙 𝜹𝒙

Figure 1.1 Gradient of a curve at a point A

𝛿𝑦
As B gets closer to A, δx gets closer to 0 and gets closer to the value of the
𝛿𝑥
gradient of the tangent at A. However, δx cannot be equal to 0 because we would
then have division by 0 and the gradient would be undefined. Rather we consider
the limit as δx tends to 0. This means that δx becomes infinitesimal without
actually becoming 0.
In general,
𝛿𝑦 𝑑𝑦
𝑙𝑖𝑚 =
𝛿𝑥→0 𝛿𝑥 𝑑𝑥
𝑑𝑦
represents the derivative of y with respect to x.
𝑑𝑥

According to the general principles, the derivative of

a function 𝑦 = 𝑓(𝑥) at a point 𝑥 is
𝒅𝒚 𝒇(𝒙 + 𝜹𝒙) − 𝒇(𝒙)
= 𝒍𝒊𝒎
𝒅𝒙 𝜹𝒙→𝟎 𝜹𝒙
provided that the limit exists.

NOTE: At a given point on a curve, the gradient of the curve is equal to the
gradient of the tangent to the curve. The derivative describes the gradient of a
curve at any point on the curve. It also describes the gradient of a tangent to the
curve at any point.

 EXAMPLE 1.1
Find the derivative of the following functions using first principles.
a) 𝑦 = 𝑥 2 b) 𝑦 = 𝑥 3 − 7𝑥 + 1
S O L U T I O N tips
𝑑𝑦 𝑓(𝑥 + 𝛿𝑥) − 𝑓(𝑥)
a) = lim
𝑑𝑥 𝛿𝑥→0 𝛿𝑥
(𝑥 + 𝛿𝑥)2 −𝑥 2 𝑥 2 +2𝑥𝛿𝑥 + (𝛿𝑥)2 − 𝑥 2
= lim = lim
𝛿𝑥→0 𝛿𝑥 𝛿𝑥→0 𝛿𝑥
Chapter 1| Calculus: Differentiation 3

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 2
APPLICATIONS OF
DIFFERENTIAL CALCULUS

CONTENTS

Concavity, Convexity and Relative Extrema 15

Inflection Points 16
Revenue Functions 19
Cost Functions 21
Profit Maximization 23
Point Elasticity of Demand 27
Other Applications of Differentiation 29

C O NC A V ITY , C O NV E X I T Y A ND R E LA TI VE E X TR E M A
A convex function has an increasing first derivative, making it appear to bend
upwards, as shown in Figure 2.1. Conversely, a concave function has a
decreasing first derivative making it bend downwards. Mathematically,

𝑓 ′ (𝑎) > 0 increasing function at 𝑥 = 𝑎

𝑓 ′ (𝑎) < 0 decreasing function at 𝑥 = 𝑎

First-derivative test or first-order condition for concavity/convexity:

𝑓 ′ (𝑎) > 0 𝑓(𝑥) is convex at 𝑥 = 𝑎
𝑓 ′ (𝑎) < 0 𝑓(𝑥) is concave at 𝑥 = 𝑎

Second derivative test or second-order condition:

𝑓 ′′ (𝑎) > 0 local minimum at 𝑥 = 𝑎
𝑓′′ (𝑎) < 0 local maximum at 𝑥 = 𝑎
𝑓′′ (𝑎) = 0 test is inconclusive

The relative extrema are points at which any economic model or function is at
a local maximum or minimum. If the function is strictly concave (or convex),
there is only one maximum (or minimum), called a global maximum (or
minimum). A differentiable function 𝑓(𝑥) is (strictly) concave over an interval if
and only if its derivative function 𝑓′(𝑥) is (strictly) monotonically decreasing over
that interval, that is, the concave function has a decreasing slope. A monotonic
function is a function that is either always increasing or always decreasing.
16 Olaniyi Evans | University Mathematics

Figure 2.1 Minima & Maxima

a. For minima, 𝑓 ′′ (𝑎) > 0: convex

b. For maxima, 𝑓 ′′ (𝑎) < 0: concave

The global maximum (or minimum) is the single greatest (or smallest) value
over the entire function. Local maximum (or minimum) is the greatest (or
smallest) value within a given range of a function. As shown in Figure 2.2, there
is only one global maximum (and one global minimum) but there can be more
than one local maximum or minimum. If there is only one local maximum, then
it is the global maximum.

Figure 2.2 Global/Local Minima & Maxima

I NF LE C TI O N P O I NT S
As shown in Figure 2.3, an inflection point is a point where a function changes
concavity (e.g., from being ‘concave up’ to being "concave down’). Inflection
points can only occur when the second derivative is zero or undefined.
Chapter 2| Applications of Differential Calculus 17

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 3
DIFFERENTIATION OF EXPONENTIAL,
LOGARITHMIC AND TRIGONOMETRIC
FUNCTIONS

CONTENTS
Exponential Functions 32
Logarithmic Functions 33
Applications of Exponential and Logarithmic functions 35
Trigonometric Differentiation 38

E X PO NE NT IA L F U N C T IO N S
An exponential function is a mathematical function of the form 𝑦 = 𝑒 𝑝 where e =
2.71828 and p is a polynomial of degree n.
Example: 𝑦 = 𝑒 2𝑥−7 .

Rules for the differentiation of exponential functions:

𝑑 𝑢 𝑑𝑢 𝑢 𝑑 𝑢 𝑑𝑢 𝑢
(𝑒 ) = ∙𝑒 (𝑎 ) = ∙ 𝑎 ln 𝑎
𝑑𝑥 𝑑𝑥 𝑑𝑥 𝑑𝑥

Special cases: If 𝑦 = 𝑒 𝑥 , then 𝑑𝑦/𝑑𝑥 = 𝑒 𝑥

If 𝑦 = 𝑎 𝑥 , then 𝑑𝑦/𝑑𝑥 = (𝑙𝑛 𝑎) ∙ 𝑎 𝑥

 EXAMPLE 3.1
Differentiate
2
a) 𝑦 = 𝑒 𝑥 −7 b) 𝑦 = 5√𝑥
S O L U T I O N tips
a) Let 𝑢 = 𝑥 2 − 7, then 𝑑𝑢/𝑑𝑥 = 2𝑥
𝑑𝑦 𝑑 𝑢 𝑑𝑢 𝑢 2
= (𝑒 ) = ∙ 𝑒 = 2𝑥 ∙ 𝑒 𝑥 −7
𝑑𝑥 𝑑𝑥 𝑑𝑥
Chapter 3| Differentiation of Exponential, Logarithmic and Trigonometric Functions 33

1⁄ 1
b) Let 𝑢 = √𝑥 = 𝑥 2, then 𝑑𝑢/𝑑𝑥 = 𝑥 −1/2
2
𝑑𝑦 𝑑 𝑢 𝑑𝑢 𝑢 1 (ln 5) ∙ 5√𝑥
= (𝑎 ) = ∙ 𝑎 ln 𝑎 = 𝑥 −1/2 ∙ 5√𝑥 ∙ (ln 5) =
𝑑𝑥 𝑑𝑥 𝑑𝑥 2 2√𝑥

 EXAMPLE 3.2
Differentiate
𝑒𝑥
a) 𝑦 = 2𝑒 𝑥 √𝑥 b) 𝑦 =
3−𝑒 𝑥

S O L U T I O N tips
a) Apply the product rule,

Let 𝑢 = 2𝑒 𝑥 , then 𝑑𝑢/𝑑𝑥 = 2𝑒 𝑥

1
Let 𝑣 = √𝑥, then 𝑑𝑣/𝑑𝑥 = 𝑥 −1/2
2

𝑑𝑦 1 𝑒𝑥
= √𝑥 ∙ 2𝑒 𝑥 + 2𝑒 𝑥 ∙ 𝑥 −1/2 = 2𝑒 𝑥 √𝑥 +
𝑑𝑥 2 √𝑥
b) Apply the quotient rule,

Let 𝑢 = 𝑒 𝑥 and 𝑣 = 3 − 𝑒 𝑥
𝑑𝑢 𝑑𝑣
= 𝑒 𝑥 and = −𝑒 𝑥
𝑑𝑥 𝑑𝑥
𝑑𝑢 𝑑𝑣
𝑑𝑦 𝑣 ∙ 𝑑𝑥 − 𝑢 ∙ 𝑑𝑥 (3 − 𝑒 𝑥 )𝑒 𝑥 − 𝑒 𝑥 (−𝑒 𝑥 ) 3𝑒 𝑥
= 2
= 𝑥 2
=
𝑑𝑥 𝑣 (3 − 𝑒 ) (3 − 𝑒 𝑥 )2

L O G A R IT HM IC F U N C T IO N S
Logarithmic functions are the inverse of exponential functions. For example, in
the logarithmic function, 𝑦 = log 𝑎 𝑥, y is the logarithm of x to the base of a such
that 𝑥 = 𝑎 𝑦 .
Example: 𝐿𝑜𝑔2 8 = 3.

Rules for the differentiation of logarithmic functions:

𝑑 𝑑𝑢 1 𝑑 𝑑𝑢 1
(ln 𝑢) = ∙ (log a 𝑢) = ∙
𝑑𝑥 𝑑𝑥 𝑢 𝑑𝑥 𝑑𝑥 𝑢 ln 𝑎

Special Cases: If 𝑦 = ln 𝑥, then 𝑑𝑦/𝑑𝑥 = 1/𝑥

If 𝑦 = 𝑙𝑜𝑔𝑎 𝑥, then 𝑑𝑦/𝑑𝑥 = 1/(𝑥 ∙ ln 𝑎)

 EXAMPLE 3.3
Differentiate
a) 𝑦 = 4 ln √𝑥 b) 𝑦 = log10 (4𝑥 2 − 3𝑥 + 1)
34 Olaniyi Evans | University Mathematics

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 4
MULTIVARIATE FUNCTIONS AND
PARTIAL DERIVATIVES

CONTENTS
Rules of Partial Differentiation 42
Second-order Partial Derivatives 47
Optimization of Multivariable Functions 47
Unconstrained Optimization 48
Constrained Optimization 49
Incremental Changes, Partial or total
differentials and Total Derivatives 51
Implicit Function Rule 54

Multivariable calculus (also called multivariate calculus) deals with functions

of several variables. In the previous chapters, differentiation was limited to
functions of one independent variable only. More realistic economic models are,
however, usually functions of more than one variable.
Functions of two variables are written in general form as
𝑧 = 𝑓(𝑥, 𝑦)
For example,
𝑧 = 𝑥 − 3𝑦 + 1 𝑧 = 𝑥 2 + 𝑦 3 − 4𝑥𝑦 − 5
Where x and y are the independent variables and z is the dependent variable.

R U LE S OF P A R T I A L D IF F E R E NT IA T IO N
All rules of ordinary differentiation apply. To show that something has been
partially (instead of fully) differentiated we use the symbol 𝜕. At a time, we
differentiate only one independent variable and keep all other independent
variables constant. Thus, a partial derivative of a function of several variables
is its derivative with respect to one variable, with the others held constant.

Power rule: Given 𝑧 = 𝑥 𝑛 𝑦 𝑚

𝜕𝑧 𝜕
= [𝑦 𝑚 ] (𝑥 𝑛 ) = 𝑛𝑥 𝑛−1 𝑦 𝑚 (Consider y as a constant)
𝜕𝒙 𝜕𝑥
𝜕𝑧 𝜕
= [𝑥 𝑛 ] (𝑦 𝑚 ) = 𝑚𝑦 𝑚−1 𝑥 𝑛 (Consider x as a constant)
𝜕𝒚 𝜕𝑦
Generalized Power Function rule: Given 𝑧 = [𝑔(𝑥, 𝑦)]𝑛 where g is a
differentiable function:
𝜕𝑧 𝜕𝑔
= 𝑛[𝑔(𝑥, 𝑦)]𝑛−1 ∙ (Consider y as a constant)
𝜕𝒙 𝜕𝒙
𝜕𝑧 𝜕𝑔
= 𝑛[𝑔(𝑥, 𝑦)]𝑛−1 ∙ (Consider x as a constant)
𝜕𝒚 𝜕𝒚

Product rule: Given 𝑧 = 𝑔(𝑥, 𝑦) ∙ ℎ(𝑥, 𝑦) where g and h are differentiable

functions:
𝜕𝑧 𝜕ℎ 𝜕𝑔
= 𝑔(𝑥, 𝑦) ∙ + ℎ(𝑥, 𝑦) ∙ (Consider y as a constant)
𝜕𝒙 𝜕𝒙 𝜕𝒙
𝜕𝑧 𝜕ℎ 𝜕𝑔
= 𝑔(𝑥, 𝑦) ∙ + ℎ(𝑥, 𝑦) ∙ (Consider x as a constant)
𝜕𝒚 𝜕𝒚 𝜕𝒚

𝑔(𝑥,𝑦)
Quotient rule: Given 𝑧 = where g and h are differentiable functions and
ℎ(𝑥,𝑦)
ℎ ≠ 0:
𝜕𝑔
𝜕𝑧 ℎ(𝑥,𝑦)∙𝜕𝒙−𝑔(𝑥,𝑦)∙𝜕ℎ
𝜕𝒙
= 2 (Consider y as a constant)
𝜕𝒙 [ℎ(𝑥,𝑦)]

𝜕𝑔 𝜕ℎ
𝜕𝑧 ℎ(𝑥,𝑦)∙𝜕𝒚−𝑔(𝑥,𝑦)∙𝜕𝒚
= 2 (Consider x as a constant)
𝜕𝒚 [ℎ(𝑥,𝑦)]

 EXAMPLE 4.1
Find the partial derivatives of the following functions:
a) 𝑧 = 5𝑥 2 − 𝑥𝑦 + 𝑦 4 b) 𝑧 = −𝑤 2 + 𝑤𝑥𝑦 − 𝑥 3 𝑦 2
S O L U T I O N tips
a) Apply the power rule:
𝜕𝑧
= 10𝑥 − 𝑦 + 0 𝑦 is a constant
𝜕𝑥
= 10𝑥 − 𝑦
𝜕𝑧
= 0 − 𝑥 + 4𝑦 3 𝑥 is a constant
𝜕𝑦
= −𝑥 + 4𝑦 3
𝜕𝑧
b) = 0 + 𝑤𝑦 − 3𝑥 2 𝑦 2 w and 𝑦 are constants
𝜕𝑥
= 𝑤𝑦 − 3𝑥 2 𝑦 2
𝜕𝑧
= 0 + 𝑤𝑥 − 2𝑥 3 𝑦 𝑤 and 𝑦 are constants
𝜕𝑦
= 𝑤𝑥 − 2𝑥 3 𝑦
𝜕𝑧
= −2𝑤 + 𝑥𝑦 − 0 𝑥 and 𝑦 are constants
𝜕𝑤
= −2𝑤 + 𝑥𝑦

 EXAMPLE 4.2
Consider the functions:
3 2
a) 𝑧 = (5𝑥 − 𝑦)3 b) 𝑧 = (𝑥 3 − 𝑥𝑦 2 )
2
Differentiate z partially with respect to x and y.
44 Olaniyi Evans | University Mathematics

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 5
FURTHER APPLICATIONS OF
MULTIVARIABLE CALCULUS

CONTENTS
Comparative Statics and Income Determination Multipliers 59
Cobb-Douglas Production Function 62
Utility Functions 64
Partial Elasticities 66

C O M P A R A T IV E S T A T IC S A N D I NC O M E
D E TE R M IN A T IO N M U LT I PL IE R S
In economics, comparative statics aims to understand how changes in
exogenous variables influence the endogenous variables in an economic model.
To perform this analysis, partial derivatives are often utilized to calculate the
various "multipliers" associated with an income determination model.

The term "multiplier" in this context signifies an economic factor that can
trigger changes or shifts in several interconnected economic variables when it is
increased or altered. These multipliers play a critical role in understanding the
ripple effects of changes in the economy and are central to economic policy
analysis.

 EXAMPLE 5.1
In a hypothetical economy

𝑌 = 𝐶 + 𝐼 + 𝐺0 + (𝑋0 − 𝑀0 ) (1)

𝐶 = 𝑐0 + 𝑐𝑌 (2)

𝐼 = 𝑖0 + 𝑎𝑌 (3)

a) Determine the equilibrium level of income.

b) Derive the government, export and import multipliers.
58 Olaniyi Evans | University Mathematics

S O L U T I O N tips
a) Substitute (2) and (3) in (1)

𝑌 = 𝑐0 + 𝑐𝑌 + 𝑖0 + 𝑎𝑌 + 𝐺0 + (𝑋0 − 𝑀0 )

Isolate Y

𝑌 − 𝑐𝑌 − 𝑎𝑌 = 𝑐0 + 𝑖0 + 𝐺0 + (𝑋0 − 𝑀0 )

Simplify to obtain the equilibrium level of income

1
𝑌̅ = (𝑐 + 𝑖0 + 𝐺0 + 𝑋0 − 𝑀0 ) (4)
1−𝑐−𝑎 0
b) Take the partial derivative of (4) to obtain the multipliers:
The government multiplier is

𝜕𝑌̅ 1
=
𝜕𝐺0 1 − 𝑐 − 𝑎

The export multiplier is

𝜕𝑌̅ 1
=
𝜕𝑋0 1 − 𝑐 − 𝑎

The import multiplier is

𝜕𝑌̅ 1
=−
𝜕𝑀0 1−𝑐−𝑎

 EXAMPLE 5.2
Given the model

𝑌 = 𝐶 + 𝐼0 + 𝐺0 (1) 𝑌𝑑 = 𝑌 − 𝑇 (3)
𝐶 = 𝑐0 + 𝑐𝑌𝑑 (2) 𝑇 = 𝑡0 + 𝑡𝑌 (4)
a) Derive the equilibrium level of income, the export multiplier and the
import multiplier.
b) Given 𝑐 = 0.8, 𝑐0 = 10, 𝑡0 = 5, 𝑡 = 0.3, 𝐼0 = 9 and 𝐺0 = 7.
i. Compute the equilibrium level of income.
ii. Calculate the effect on 𝑌̅ of an increase of 5.5 in 𝑡0 .
iii. By how much should the government change expenditure to
achieve a full-employment income of 75?
iv. Assuming the marginal tax rate is halved, what is the effect on 𝑌̅?
v. By how much should the government change the marginal tax
rate to achieve a full-employment income of 60?

S O L U T I O N tips
a) Substitute (2), (3) and (4) in (1)

𝑌 = 𝑐0 + 𝑐(𝑌 − 𝑇) + 𝐼0 + 𝐺0

𝑌 = 𝑐0 + 𝑐(𝑌 − (𝑡0 + 𝑡𝑌)) + 𝐼0 + 𝐺0

Chapter 5| Further Applications of Multivariable Calculus 59

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 6
LIMITS, CONTINUITY AND
DIFFERENTIABILITY

CONTENTS
Limits 69
Continuity 70
Limit Rules 71
Factoring Method 73
Conjugate Method 74
Limits to Infinity: Horizontal and Vertical asymptotes 76
L’Hôpital’s Rule 78
Differentiability 81

L IM IT S
A limit is the value that a function approaches as the input approaches some
value. Limits are useful to describe continuity, derivatives, and integrals.
A limit of a function is written as
lim 𝑓(𝑥) = 𝐿
𝑥→𝑎
and is read as "the limit of f of x as x approaches a equals L".

Graphical Limits
Let 𝑓(𝑥) be a function whose graph is given below.
70 Olaniyi Evans | University Mathematics

The limits are the values that the function approaches as the input approaches
the value of 𝑥. That is:

lim 𝑓(𝑥) = 0 lim 𝑓(𝑥) = 3 lim 𝑓(𝑥) = −2.5

𝑥→−1 𝑥→0 𝑥→1.5

Generally, the limits are the values of the function (if the function is continuous).

C O NT I NU IT Y
A function 𝑓(𝑥) is continuous at 𝑥 = 𝑎 if

a) 𝑓(𝑥) has a limit as 𝑥 → 𝑎,

b) 𝑓(𝑥) is defined at 𝑥 = 𝑎, and
c) lim 𝑓(𝑥) = 𝑓(𝑎)
𝑥→𝑎

A discontinuous function has gaps along its graph. If f(x) is not continuous at
𝑥 = 𝑎, then f(x) is said to be discontinuous at this point. The function probably
has a hole or breaks.

If a function 𝑓(𝑥) is discontinuous at 𝑥 = 𝑎, then

a) 𝑓(𝑥) has a jump discontinuity at 𝑥 = 𝑎 if lim− 𝑓(𝑥) ≠ lim+ 𝑓(𝑥). The

𝑥→𝑎 𝑥→𝑎
right-hand and left-hand limits of the function are not equal.

b) 𝑓(𝑥) has a removable discontinuity at 𝑥 = 𝑎 if lim 𝑓(𝑥) exists and this

𝑥→𝑎
limit is finite. The function is undefined at 𝑥 = 𝑎. The graph is unconnected
at a point but can be made connected by filling in a single point.
Chapter 6| Limits, Continuity and Differentiability 71

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 7
POLYNOMIALS: REMAINDER &
FACTOR THEOREM

CONTENTS
Addition and Subtraction of Polynomials 85
Multiplying Polynomials 86
Using Polynomial Models 87
Polynomial Division 89
Remainder Theorem 92
Factor Theorem 92

A polynomial is an algebraic expression of one or more algebraic terms,

especially the sum of several terms that contain different powers of the same
variable(s) (such as 𝑎𝑥 2 + 𝑏𝑥 + 𝑐). In other words, a polynomial is a string of
mathematical terms. Monomial is the polynomial with one term (such as 𝑎𝑥 2 );
binomial is the polynomial with two unlike terms (such as 𝑎𝑥 2 + 𝑏), and
trinomial is the polynomial with three unlike terms (such as 𝑎𝑥 2 + 𝑏𝑥 + 𝑐).

A D D IT IO N AND SUBTRACTION OF P O L Y NO M IA L S
Adding and subtracting polynomials is simply adding and subtracting their like
terms.

 EXAMPLE 7.1
Evaluate (11𝑥 2 − 𝑥) + (𝑥 2 + 6𝑥 + 1).

S O L U T I O N tips
When adding polynomials, drop the parenthesis and combine like terms.

(11𝑥 2 − 𝑥) + (𝑥 2 + 6𝑥 + 1) = 11𝑥 2 + 𝑥 2 − 𝑥 + 6𝑥 + 1
= 12𝑥 2 + 5𝑥 + 1
86 Olaniyi Evans | University Mathematics

 EXAMPLE 7.2
Evaluate (𝑥 2 + 3𝑥 − 8) − (−𝑥 2 − 𝑥 + 2).

S O L U T I O N tips
When subtracting polynomials, distribute the negative first, then combine like
terms.

(𝑥 2 + 3𝑥 − 8) − (−𝑥 2 − 𝑥 + 2) = 𝑥 2 + 3𝑥 − 8 + 𝑥 2 + 𝑥 − 2

= 2𝑥 2 + 4𝑥 − 10

M U LT I PLY I NG P O L Y NO M I A L S
Multiplying polynomials involves applying the rules of exponents and the
distributive property to simplify polynomials. The general rule is that every term
in the first factor has to multiply every term in the other factor. Multiplying
polynomials follow four methods: distribute, FOIL, rows and box, as shown
in Example 7.3.

 EXAMPLE 7.3
Simplify (𝑥 + 2𝑦)(3𝑥 − 4𝑦).
S O L U T I O N tips
Multiplying polynomials follow four methods: distribute, FOIL, rows and box.

Distribute 𝑥(3𝑥 − 4𝑦) + 2𝑦(3𝑥 − 4𝑦) = 3𝑥 2 − 4𝑥𝑦 + 6𝑥𝑦 − 8𝑦 2

= 3𝑥 2 + 2𝑥𝑦 − 8𝑦 2

FOIL 𝑥(3𝑥) + 𝑥(−4𝑦) + 2𝑦(3𝑥) + 2𝑦(−4𝑦)

= 3𝑥 2 − 4𝑥𝑦 + 6𝑥𝑦 − 8𝑦 2
= 3𝑥 2 + 2𝑥𝑦 − 8𝑦 2

Rows

Using the FOIL method:

• First, multiply the first term of each binomial.
• Multiply the outside two terms.
• Multiply the inside two terms.
• Multiply the last term of each binomial.
The letters of FOIL can help you remember each combination.
Chapter 7| Polynomials: Remainder and Factor Theorem 87

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 8
PARTIAL FRACTIONS &
BINOMIAL SERIES

CONTENTS
Partial Fractions 96
Binomial Theorem 100
Applications of Partial Fractions to Series Expansions 103

P A R TI A L F R A C T IO N S
Partial fraction decomposition or partial fraction expansion is the process
of expressing a rational function (where the numerator and the denominator are
both polynomials) as a sum of its initial polynomial fractions. The concept was
discovered by both Johann Bernoulli and Gottfried Leibniz independently in
1702.
Form of Algebraic Fraction Form of Partial Fractions
𝑝𝑥 + 𝑞 𝐴 𝐵
+
(𝑥 + 𝑎)(𝑥 + 𝑏) (𝑥 + 𝑎) (𝑥 + 𝑏)
𝑝𝑥 + 𝑞 𝐴 𝐵
+
(𝑥 + 𝑎)2 (𝑥 + 𝑎) (𝑥 + 𝑏)2
𝑝𝑥 2 + 𝑞𝑥 + 𝑟 𝐴 𝐵 𝐶
+ +
(𝑥 + 𝑎)(𝑥 + 𝑏)(𝑥 + 𝑐) (𝑥 + 𝑎) (𝑥 + 𝑏) (𝑥 + 𝑐)
𝑝𝑥 2 + 𝑞𝑥 + 𝑟 𝐴 𝐵 𝐶
+ 2
+
(𝑥 + 𝑎)2 (𝑥 + 𝑏) (𝑥 + 𝑎) (𝑥 + 𝑎) (𝑥 + 𝑏)
𝑝𝑥 2 + 𝑞𝑥 + 𝑟 𝐴 𝐵𝑥 + 𝐶
+
(𝑥 + 𝑎)(𝑥 2 + 𝑏𝑥 + 𝑐) (𝑥 + 𝑎) (𝑥 2 + 𝑏𝑥 + 𝑐)
where 𝑥 2 + 𝑏𝑥 + 𝑐 cannot be factorised.

For an algebraic fraction to be expressed in partial fractions, the numerator must

be at least one degree less than the denominator.
Chapter 8| Partial Fractions and Binomial Theorems 97

 EXAMPLE 8.1 TWO LINEAR FACTORS

Express in partial fractions
7𝑥 + 16
𝑥² + 2𝑥 − 8
S O L U T I O N tips
Factorise 𝑥 2 + 2𝑥 − 8
7𝑥 + 16 A B
= +
𝑥² + 2𝑥 − 8 𝑥 + 4 𝑥 − 2
Multiply both sides by (𝑥 + 4)(𝑥 − 2)
7𝑥 + 16 = 𝐴(𝑥 − 2) + 𝐵(𝑥 + 4)
Equate the first factor to zero: (𝑥 − 2) = 0 → 𝑥=2
When 𝑥 = 2;
7(2) + 16 = 𝐴(2 − 2) + 𝐵(2 + 4)
14 + 16 = 𝐴(0) + 6𝐵
30 = 6𝐵 → 𝐵=5
Equate the second factor to zero: (𝑥 + 4) = 0 ⇒ 𝑥 = −4
When 𝑥 = −4;
7(−4) + 16 = 𝐴(−4 − 2) + 𝐵(−4 + 4)
−28 + 16 = 𝐴(−6) + 𝐵(0)
−12 = −6𝐴 → 𝐴=2
Therefore
7𝑥 + 16 2 5
= +
𝑥² + 2𝑥 − 8 𝑥 + 4 𝑥 − 2

 EXAMPLE 8.2 REPEATED FACTORS

Express in partial fractions
2𝑥 − 5
(𝑥 − 3)²
S O L U T I O N tips
2𝑥 − 5 𝐴 𝐵
= +
(𝑥 − 3)² 𝑥 − 3 (𝑥 − 3)²
Multiply both sides by the common denominator (𝑥 – 3)2
2𝑥 – 5 = 𝐴 (𝑥 – 3) + 𝐵
(𝑥 − 3) = 0 → 𝑥=3
2(3) – 5 = 𝐴 (3 – 3) + 𝐵
1 = 𝐴 (0) + 𝐵 → 𝐵 = 1
Substituting 𝐵 = 1 in (i)
2𝑥 – 5 = 𝐴 (𝑥 – 3) + 1
98 Olaniyi Evans | University Mathematics

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 9
CALCULUS: INTEGRATION

CONTENTS
Integration 106
Indefinite Integrals 107
Integration by Substitution 109
Integration by Parts 114
Integration by Partial Fractions 119

I NT E G R A T IO N
We know from the previous chapters that a function, 𝑦 = 𝑓(𝑥), can be
𝑑𝑦
differentiated to obtain the derivative, . The reverse process of obtaining
𝑑𝑥
𝑓(𝑥) from knowledge of its derivative is called integration.
The process of integration (or antidifferentiation) undoes the process of
differentiation. For example, if we differentiate the function 𝑦 = 𝑥 2 , we obtain
𝑑𝑦
= 2𝑥. Integration reverses this process, and we say that the integral of 2𝑥 is 𝑥 2 .
𝑑𝑥
There are many functions we can differentiate to give 2𝑥: 𝑥 2 − 1, 𝑥 2 + 8, 𝑥 2 +
0.2. Because of this, we include an arbitrary constant, c. We say that 2x is
integrated with respect to x to give 𝑥 2 + 𝑐.
The symbol for integration is ∫, known as an integral sign. We can therefore
write:

∫ 2𝑥 𝑑𝑥 = 𝑥 2 + 𝑐

𝑑𝑥 is a notation which indicates the name of the variable involved. An arbitrary

constant of integration, 𝑐, is also included. Arbitrary means ‘can take any value’.
Based on the results they produce, integrals are divided into two classes: definite
and indefinite integrals. A definite integral has upper and lower limits on the
integrals; it’s called definite because, at the end of the solution, we have a definite
number which represents the area under the curve 𝑓(𝑥) from 𝑥 = 𝑎 to 𝑥 = 𝑏.
On the other hand, an indefinite integral is a function; it has no limits and
thus have a constant of integration.
Chapter 9| Calculus: Integration 107

Table 9.1 Rules of Integration

Integrals Derivatives
𝑥 𝑛+1
∫ 𝑥 𝑛 𝑑𝑥 + 𝑐, 𝑛 ≠ −1
𝑛+1
(𝑎𝑥 + 𝑏)𝑛+1
∫(𝑎𝑥 + 𝑏)𝑛 𝑑𝑥 + 𝑐, 𝑛 ≠ −1
𝑎(𝑛 + 1)
Basic functions
1
∫ 𝑑𝑥 ln |𝑥| + 𝑐
𝑥
𝑑 𝑑
∫ 𝑑𝑥 ln |a𝑥 + 𝑏| + 𝑐
𝑎𝑥 + 𝑏 𝑎
1 𝑎𝑥
∫ 𝑒 𝑎𝑥 𝑑𝑥 𝑒 +𝑐
Exponential 𝑎
functions 𝑎𝑥
∫ 𝑎 𝑥 𝑑𝑥 +𝑐
ln 𝑎

∫ 𝑠𝑖𝑛 𝑥 𝑑𝑥 − 𝑐𝑜𝑠 𝑥 + 𝑐

Trigonometric
∫ 𝑐𝑜𝑠 𝑥 𝑑𝑥 𝑠𝑖𝑛 𝑥 + 𝑐
functions

∫ tan 𝑥 𝑑𝑥 −𝑙𝑛|𝑐𝑜𝑠𝑥| + 𝑐

∫ ln 𝑥 𝑑𝑥 𝑥 𝑙𝑛 𝑥 − 𝑥 + 𝑐
Logarithmic
functions x
∫ 𝑙𝑜𝑔𝑎 𝑥 𝑑𝑥 𝑥 𝑙𝑜𝑔𝑎 𝑥 − +𝑐
ln 𝑎
1
∫ 𝑑𝑥 arctan 𝑥 + 𝑐 = tan−1 𝑥 + 𝑐
1 + 𝑥2
Rational 1
∫ 𝑑𝑥 arcsin 𝑥 + 𝑐 = sin−1 𝑥 + 𝑐
functions √1 + 𝑥 2
1
∫ 𝑑𝑥 arcsec 𝑥 + 𝑐 = sec −1 𝑥 + 𝑐
|𝑥|√𝑥 2 − 1

I ND E F IN I TE I N T E G R A L S
The result of finding an indefinite integral is usually a function plus a constant of
integration. For example:
𝑥 2+1 𝑥3
∫ 𝑥 2 𝑑𝑥 = +𝑐 = +𝑐
2+1 3
108 Olaniyi Evans | University Mathematics

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 10
CALCULUS:
DEFINITE INTEGRALS

CONTENTS
The Fundamental Theorem of Calculus 123
Improper Integrals 126
Area Bounded by a Curve 128
Consumer Surplus and Producer Surplus 129
Cost, Revenue and Profit Functions 132
Frequency Functions and Probability 134
Average Value of a Function 136
Inventory Model 137
Amount of an Annuity 138
Consumption of a Natural Resource 138
Other Economic Applications 139

𝑏
The definite integral is defined as ∫𝑎 𝑓(𝑥)𝑑𝑥. The numbers a and b are
known as the lower and upper limits of the integral. Definite integrals have
many applications, for example in finding areas bounded by curves and
consumer surplus.

T H E F U ND A M E N T A L T H E O R E M OF C A L C U LU S
The fundamental theorem of calculus, expressed mathematically, states that

𝒃
∫ 𝒇(𝒙)𝒅𝒙 = [𝑭(𝒙)]𝒃𝒂 = 𝑭(𝒃) − 𝑭(𝒂)
𝒂

where[𝐹(𝑥)]𝑏𝑎 indicates that b and a are to be substituted successively for x.

Properties of Definite Integrals

𝑏 𝑎
1) ∫𝑎 𝑓(𝑥)𝑑𝑥 = − ∫𝑏 𝑓(𝑥)𝑑𝑥
𝑎
2) ∫𝑎 𝑓(𝑥)𝑑𝑥 = 𝐹(𝑎) − 𝐹(𝑎) = 0
𝑐 𝑏 𝑐
3) ∫𝑎 𝑓(𝑥)𝑑𝑥 = ∫𝑎 𝑓(𝑥)𝑑𝑥 + ∫𝑏 𝑓(𝑥)𝑑𝑥
𝑏 𝑏
4) ∫𝑎 𝑘𝑓(𝑥)𝑑𝑥 = 𝑘 ∫𝑎 𝑓(𝑥)𝑑𝑥
124 Olaniyi Evans | University Mathematics

 EXAMPLE 10.1
2
Evaluate ∫ 5𝑥 𝑑𝑥.
−1

S O L U T I O N tips
First perform the integration and use this convention.
2 2
5𝑥 2
∫ 5𝑥 𝑑𝑥 = [ + 𝑐]
−1 2 −1
Let x equal the value at the upper limit, then the value at the lower limit.
2
5(2)2 5(−1)2 5 1
∫ 5𝑥 𝑑𝑥 = [ + 𝑐] − [ + 𝑐] = 10 − = 7
−1 2 2 2 2

 EXAMPLE 10.2
Find
4 8 1
4 −
1 2
a) ∫ (3√𝑥 + ) 𝑑𝑥 b) ∫ (4𝑡 − 1) 3 𝑑𝑡 c) ∫ 𝑥𝑒 4𝑥 −3 𝑑𝑥
1 √𝑥 4 −1

S O L U T I O N tips
4 4
4 1 1
a) ∫ (3√𝑥 + ) 𝑑𝑥 = ∫ (3𝑥 2 + 4𝑥 −2 ) 𝑑𝑥
1 √𝑥 1
3 1 4
3𝑥 2 4𝑥 2 3 1 4
=[ + ] = [2𝑥 2 + 8𝑥 2 ]
3 1 1
2 2 1
(2
= (2 ∙ 8 + 8 ∙ 2) − ∙ 1 + 8 ∙ 1) = 22
8 1 1 3 2 8 3 2 3 2
−3
b) ∫ (4𝑡 − 1) 𝑑𝑡 = . [(4𝑡 − 1)3 ] = [(4(8) − 1)3 ] − [(4(4) − 1)3 ] = 1.42
4 4 2 4 8 8

c) Use integration by substitution

𝑑𝑢 1
Let 𝑢 = 4𝑥 2 − 3 then, = 8𝑥 𝑑𝑥 = 𝑑𝑢
𝑑𝑥 8𝑥
It follows that
1 1 1
2 −3 1 1 1 1
∫ 𝑥𝑒 4𝑥 𝑑𝑥 = ∫ 𝑥𝑒 𝑢 ( 𝑑𝑢) = ∫ 𝑒 𝑢 𝑑𝑢 = [ 𝑒 𝑢 ]
−1 −1 8𝑥 8 −1 8 0
1 4𝑥2 −3 1 1 4(1)2−3 1 4(0)2−3
=[ 𝑒 ] =[ 𝑒 ]−[ 𝑒 ]
8 0 8 8
−3
𝑒−𝑒
= = 0.33
8

 EXAMPLE 10.3
Find the integrals
1 3
𝑥² + 7𝑥 − 14 4𝑥
a) ∫ 𝑑𝑥 b) ∫ 𝑑𝑥
0 𝑥² + 2𝑥 − 15 1 (2𝑥 − 1)2 (𝑥 + 1)
Chapter 10| Calculus: Definite Integrals 125

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 11
MATRICES &
DETERMINANTS

CONTENTS
Matrices 142
Matrix Operations 143
Addition and Subtraction 143
Scalar Multiplication 143
Vector Multiplication 144
Transpose of a Matrix 145
Identity Matrix 145
The Determinant of a Matrix 147
2×2 Matrix 147
3×3 Matrix 147
Inverse of a Matrix 149
2×2 Matrix 149
3×3 Matrices 149

M A TR IC E S
Consider a firm which produces two types of goods, Ice Cream and Yoghurt,
which it sells to three customers, James Bond, Harry Porter and Lionel Messi.
The weekly sales for these goods are given in Table 11.1. In a particular week, the
firm sells 5 barrels of Ice Cream to James Bond and 9 barrels to Harry Porter,
and so on.

Table 11.1 Weekly Sales

Ice Cream Yoghurt
James Bond 5 2
Sold to customer Harry Porter 9 1
Lionel Messi 8 6

If we ignore the table headings, this information can be written more concisely
in matrix form as
5 2
𝑊 = [9 1 ]
8 6
Chapter 11| Matrices and Determinants 143

In general, a matrix is a rectangular array of numbers, or expressions, arranged

in rows and columns. The number of rows and columns of a matrix is called its
order or its dimension. For example, the dimension (or order) of the matrix
below is 3 × 2 (read "three by two"), because there are three rows and two
columns:
1 4
[−9 2]
3 7
The rows are horizontal and the columns are vertical. Each element of a matrix
is often denoted by a variable with two subscripts. For example, a 31 represents
the element at the third row and first column of matrix A:
𝑎11 𝑎12 𝑎13
𝐴 = [𝑎21 𝑎22 𝑎23 ]
𝑎31 𝑎32 𝑎33

M A TR IX O PE R A T IO NS
Addition, subtraction, and multiplication can be performed using matrices.

Addition and Subtraction

If they have the same dimensions, two matrices can be added or subtracted
element by element.

 EXAMPLE 11.1
1 2 0 −1
Given 𝐴 = [ ] 𝐵=[ ]. Find a) 𝐴 + 𝐵 b) 𝐴 − 𝐵
3 4 5 −2
S O L U T I O N tips
a) Add the corresponding elements
1 + 0 2 + −1 1 1
𝐴+𝐵 =[ ]=[ ]
3 + 5 4 + −2 8 2
b) Subtract the corresponding elements
1 − 0 2 − −1 1 3
𝐴−𝐵 =[ ]=[ ]
3 − 5 4 − −2 −2 6

Scalar Multiplication
Scalar multiplication can also be done on any matrix by multiplying each
element of the matrix by a number.

 EXAMPLE 11.2
−1 2
Given 𝐴 = [ 4 0 ], find a) 2𝐴 b) −3𝐴/2
10 −6
S O L U T I O N tips
a) Multiply each element of the matrix by 2.
−1 2 −2 4
2A = 2[ 4 0 ] =[ 8 0 ]
10 −6 20 −12
144 Olaniyi Evans | University Mathematics

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 12
MATRICES & SIMULTANEOUS
EQUATIONS

CONTENTS
Inverse Matrix 155
Cramer’s Rule 159
Gauss-Jordan Elimination 162
Applications to market and national income models 165
Functional Dependence: The Jacobian 167

I NV E R SE M A T R IX
The simultaneous equations 𝑎11 𝑥 + 𝑎12 𝑦 = 𝑏1 , 𝑎21 𝑥 + 𝑎22 𝑦 = 𝑏2 can be written
in matrix form as:
𝑎11 𝑎12 𝑥 𝑏
[𝑎 ] [ ] = [ 1]
21 𝑎22 𝑦 𝑏2
In reduced form as: 𝐴𝑘 = 𝐵

If 𝐴𝑘 = 𝐵, then
𝒌 = 𝑨−𝟏 𝑩
𝐴 is the matrix; 𝑘 is the 𝑥, 𝑦, 𝑧 (etc) values; and 𝐵 is
the constants.

 EXAMPLE 12.1
Solve the simultaneous equations: −𝑥 + 2𝑦 = −5, 2𝑥 − 3𝑦 = 9
S O L U T I O N tips
Rewrite the equations in matrices form
−1 2 𝑥 −5
[ ][ ] = [ ]
2 −3 𝑦 9
If 𝐴𝑘 = 𝐵, then 𝑘 = 𝐴−1 𝐵
𝑥 −5 1 −3 −2 −5
[𝑦] = 𝐴−1 [ ] = [ ][ ]
9 −1(−3) − 2(2) −2 −1 9
1 −3(−5) + −2(9) −3 3
= [ ] = −[ ]=[ ]
−1 −2(−5) + −1(9) 1 −1
𝑥 = 3, 𝑦 = −1
156 Olaniyi Evans | University Mathematics

 EXAMPLE 12.2
Solve the simultaneous equations: 0.4𝑥 + 0.3𝑦 = 1, −0.2𝑥 + 0.1𝑦 = 2
S O L U T I O N tips
Rewrite the equations in matrices form
0.4 0.3 𝑥 1
[ ][ ] = [ ]
−0.2 0.1 𝑦 2
If 𝐴𝑘 = 𝐵, then 𝑘 = 𝐴−1 𝐵
𝑥 1 1 0.1 −0.3 1 −5
[𝑦] = 𝐴−1 [ ]= [ ] [ ]= [ ]
2 0.1 0.2 0.4 2 10
𝑥 = −5, 𝑦 = 10

 EXAMPLE 12.3
Solve the simultaneous equations using inverse matrix:
2𝑥 + 3𝑦 − 𝑧 = 4, 3𝑥 + 4𝑦 + 2𝑧 = 2, and −𝑦 + 5𝑧 = −6.
S O L U T I O N tips
2 3 −1
Rewrite the equations in matrix form: A = [3 4 2]
0 −1 5
|𝐴| = +2 | 4 2| − 3 |3 2| + (−1) |3 4 |
−1 5 0 5 0 −1
= 2(20 − (−2)) − 3(15 − 0) − 1(−3 − 0)
= 44 − 45 + 3 = 2
4 2 3 2 3 4
+| | −| | +| |
−1 5 0 5 0 −1
3 −1 2 3 2 3
𝐶 = −| | +| | −| |
−1 5 0 5 0 −1
3 −1 2 −1 2 3
[ + |4 2 | −|
3 2
| +| |
3 4 ]
(20 − (−2)) −(15 − 0) (−3 − 0) 22 −15 −3
= [ −(15 − 1) (10 − 0) −(−2 − 0)] = [−14 10 2]
(6 − (−4)) −(4 − (−3)) (8 − 9) 10 −7 −1
22 −14 10
Adj A = 𝐶 𝑇 = [−15 10 −7]
−3 2 −1
1 1 22 −14 10
𝐴−1 = Adj 𝐴 = [−15 10 −7]
|𝐴| 2
−3 2 −1
If 𝐴𝑘 = 𝐵, then 𝑘 = 𝐴−1 𝐵
𝑥 1 22 −14 10 4
[𝑦] = [−15 10 −7] [ 2 ]
𝑧 2
−3 2 −1 −6
22(4) − 14(2) + 10(−6)
1 1 0 0
= [−15(4) + 10(2) − 7(−6)] = [ 2 ] = [ 1 ]
2 2
−3(4) + 2(2) − 1(−6) −2 −1
𝑥 = 0, 𝑦 = 1, 𝑧 = −1
Chapter 9| Matrices and Simultaneous Equations 157

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 13
QUADRATIC FORMS, DEFINITE
MATRICES, EIGENVALUES & HESSIAN

CONTENTS
Quadratic Forms and Definite Matrix 169
Eigenvalues and Eigenvectors 172
Unconstrained Optimization Using the Bordered Hessian 174
Constrained Optimization Using the Bordered Hessian 179

Q U A D R A TIC F O R M S A ND D E F IN I TE M A TR IX
The quadratic form of an 𝑛 × 𝑛 symmetric matrix A is given by

𝑄(𝑥) = 𝑥 𝑇 𝐴𝑥

where 𝑥 is a vector of variables, and A is a symmetric matrix.

For example, consider the matrix

1 2
𝐴=[ ]
2 1
The quadratic form is given by

𝑥2 ] [1 2 𝑥1
𝑄(𝑥) = 𝑥 𝑇 𝐴𝑥 = [𝑥1 ][ ]
2 1 𝑥2
= 𝑥12 + 4𝑥1 𝑥2 + 𝑥22

Also consider the following matrix

1 0 0
𝐴 = [0 2 0]
0 0 3
The quadratic form is given by
1 0 0 𝑥1
𝑄(𝑥) = 𝑥 𝑇 𝐴𝑥 = [𝑥1 𝑥2 𝑥3 ] [0 2 0] [𝑥2 ]
0 0 3 𝑥3
= 𝑥12 + 2𝑥22 + 3𝑥32
170 Olaniyi Evans | University Mathematics

The quadratic form 𝑄(𝑥) is:

• Positive definite if 𝑄(𝑥) > 0 for all 𝑥 ≠ 0.

• Negative definite if 𝑄(𝑥) < 0 for all 𝑥 ≠ 0.
• Indefinite if 𝑄(𝑥) assumes both positive and negative values.

Also, 𝑄(𝑥) is said to be positive definite if 𝑄(𝑥) ≥ 0 for all 𝑥, and negative
definite if 𝑄(𝑥) ≤ 0 for all 𝑥.

The matrix 𝐴 will determine to which one of the above definitions the quadratic
form will belong. We can use either of the two tests:

1. Discriminant test
2. Eigenvalues test

For example, matrix A is positive definite if and only if all the eigenvalues are
positive (see Table 13.1). The determinant of a matrix is the product of its
eigenvalues. So, if all the eigenvalues are positive, then the
discriminant/determinant is also positive.

Table 13.1 Conditions for Definiteness

Discriminant/Determinant
Definiteness Eigenvalues
of Principal Minors

positive definite Di > 0 , i = 1…n all ri > 0

positive semidefinite Di ≥ 0 , i = 1…n all ri ≥ 0

negative definite D1 < 0 , D2 > 0 , D3 < 0… all ri < 0

negative semidefinite D1 ≤ 0 , D2 ≥ 0 , D3 ≤ 0… all ri ≤ 0

some ri ≥ 0, some ri ≤
indefinite none of the above
0

 EXAMPLE 13.2
Write 𝑄 = 5𝑥12 + 4𝑥22 − 4𝑥1 𝑥2 in the form 𝑄(𝑥) = 𝑥 𝑇 𝐴𝑥, where 𝐴 is a 2 × 2
matrix.

S O L U T I O N tips
The cross term is −4𝑥1 𝑥2 = −2𝑥1 𝑥2 − 2𝑥2 𝑥1 . Hence
𝑥
𝑄(𝑥) = 𝑥 𝑇 𝐴𝑥 = [𝑥1 𝑥2 ] [ 5 −2] [ 1 ]
−2 4 𝑥2
NOTE: The coefficients of the squares appear on the main diagonal while the
coefficients of the cross terms are neatly divided among two positions to give
a symmetric matrix. Hence this matrix is referred to as the matrix of the
quadratic form Q.
Chapter 13 | Quadratic Forms, Definiteness, Eigenvalues & Hessian 171

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 14
INPUT-OUTPUT
ANALYSIS

CONTENTS
Input-Output Table 182
Basic Derivation 182
Practiced Examples 184

Input-output analysis is a macroeconomic analysis based on the

interdependencies between economic sectors or industries. It was developed by
Wassily Leontief, who won the Nobel Prize in Economics for his work in this area.
It is used in economic projections of demand, employment, investment and
output for the individual sectors of the economy; study of technological change
and its effects; analysis of the effects of changes in wage, profit, and tax on prices;
and study of economic relationships, use of natural resources, and development
planning.

I N PU T -O U T PU T T A B LE
An input-output table describes the flow of goods and services between the
sectors of an economy over a period of time. Table 14.1 shows an input-output
table describing an economy. Sectoral inputs are recorded column-wise and
outputs, row-wise. The nine entries (𝐴𝑖𝑗 ) in the main body of the table are the
intersectoral flows. Of the total output of sector 1, A11 is used up in the sector 1
itself, A12 is absorbed, as one of its inputs, by sector 2, A13 is taken by sector 3 and
F1 is absorbed by final consumers (households). The second and the third rows
similarly describe the allocation of the outputs of the two other sectors. Primary
inputs comprise capital and labour.

B A S IC D E R I V A T IO N
Table 14.1 depicts inter-industry relationships within the economy, showing how
output from one sector may become an input to another sector. In the inter-
sectoral matrix, each sector uses a particular proportion of output to meet its
input needs as also those of other sectors. It uses the rest to satisfy the final
demand. The input coefficient of sector i into sector j is the quantity of the output
of sector i absorbed by sector j per unit of j’s total output. The input coefficient
may be expressed as
Chapter 14| Input-Output Analysis 183

𝑨𝒊𝒋
𝒂𝒊𝒋 =
𝑿𝒋

Where, 𝑎𝑖𝑗 is the input coefficient, 𝐴𝑖𝑗 refers to the inputs of the jth sector from
the ith sector and, 𝑋𝑗 , the total output of the jth sector.

Table 14.1 Input-Output Table

Final Total
1 2 3
Demand Output

1 A11 A12 A13 F1 X1

2 A21 A22 A23 F2 X2

3 A31 A32 A33 F3 X3

Primary Inputs x1 x2 x3
Total Inputs X1 X2 X3

We can have a matrix of coefficients (or technology matrix or input-output

matrix),
𝑎11 𝑎12 𝑎13
𝐴 = [𝑎21 𝑎22 𝑎23 ]
𝑎31 𝑎32 𝑎33

Generally, in any economy, the output of the sectors is given by

𝑿 = (𝑰 − 𝑨)−𝟏 𝑭

𝑋1
Where the outputs, 𝑋 = [𝑋2 ];
𝑋3

The Leontief matrix is

1 0 0 𝑎11 𝑎12 𝑎13
(𝐼 − 𝐴) = [0 1 0] − [𝑎21 𝑎22 𝑎23 ]
0 0 1 𝑎31 𝑎32 𝑎33
𝐹1
The final demand, 𝐹 = [𝐹2 ].
𝐹3
184 Olaniyi Evans | University Mathematics

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 15
PARTIAL & GENERAL
EQUILIBRIUM ANALYSIS

CONTENTS
The Meaning of Equilibrium 193
Partial Market Equilibrium 193
General Market Equilibrium 195
Equilibrium in National-Income Analysis 197
IS-LM Analysis 200

T H E M E A NI NG OF E Q U IL IB R I U M
Equilibrium is a situation characterized by a lack of tendency to change. Thus,
equilibrium means a state of balance. There are two approaches to equilibrium:
Partial and general.

P A R TI A L M A R K E T E Q U IL IB R I U M
Partial equilibrium (or Marshallian partial equilibrium) analyzes the market for
a single commodity. The supply and demand model originated by Alfred
Marshall is the typical example of a partial equilibrium model. For example, in
the money market, the interest rate is determined when the demand for savings
equals its supply. In the labor market, the wage rate is determined when the
demand for labor equals its supply.
Equilibrium analysis in a market involves finding the point where the demand
for a particular good matches its supply, resulting in an equilibrium price and
quantity. This can be done using two methods: algebraic or graphical.

 EXAMPLE 15.1 A LINEAR MODEL

If the demand and supply curve for computers are
3
𝑞𝑑 = 50 − 3𝑝 𝑞𝑠 = 14 + 𝑝
2
a. Determine the equilibrium price and quantity.
1
b. Suppose the demand function changed to 𝑞𝑑 = 29 − 𝑝 . Has demand
6
increased or decreased? How can you tell?
194 Olaniyi Evans | University Mathematics

S O L U T I O N tips
Algebraic Depiction:
a) At equilibrium E, 𝑞𝑑 = 𝑞𝑠

3 9
50 − 3𝑝 = 14 + 𝑝 → − 𝑝 = −36 → 𝑝=8
2 2
Then the equilibrium price is
𝑝̅ = 8
The equilibrium quantity is obtained by substituting 𝑝̅ into either 𝑞𝑑 or 𝑞𝑠 :
3 3
𝑞̅ = 50 − 3𝑝 = 50 − 3(8) = 26 or 𝑞̅ = 14 + 𝑝 = 14 + (8) = 26
2 2

1
b) If the demand function changed to 𝑞𝑑 = 29 − 𝑝, then at a new equilibrium
6
E2 ,
1 3 1 3
29 − 𝑝 = 14 + 𝑝 → − 𝑝 − 𝑝 = −15 → 𝑝=9
6 2 6 2
Then the new equilibrium price is
𝑝̅ = 9
The new equilibrium quantity is obtained by substituting 𝑝̅ into either 𝑞𝑑
or 𝑞𝑠 :
1 1 3 3
𝑞̅ = 29 − 𝑝 = 29 − (9) = 27.5 or 𝑞̅ = 14 + 𝑝 = 14 + (9) = 27.5
6 6 2 2

It represents an increase in demand. At the same prices, more quantities are

demanded.
Graphical Depiction:

 EXAMPLE 15.2 NONLINEAR MODEL

Given the following data for widgets:
𝑞𝑑 = 4 − 3𝑝
𝑞𝑠 = 2𝑝2 − 1
Determine the equilibrium price and quantity.
Chapter 15| Partial and General Equilibrium Analysis 195

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 16
LINEAR PROGRAMMING

CONTENTS
A Linear Programming Problem 204
Steps in Solving a LP problem 205
Graphical Method 205
Steps in the Graphical Method 205
Matrix Method 213

A L I NE A R P R O G R A M M I NG P R O B LE M
Linear Programming (LP) is an optimization technique used to maximize or
minimize a linear function (usually profit or cost of production), subject to a set
of constraints. It was developed by Leonid Kantorovich around the time of
WWII. LP is a special case of mathematical programming (also called
mathematical optimization). Mathematical Programming is the use of
mathematical models in the optimum allocation of limited resources among
competing activities, under a set of constraints. There are well-known successful
applications in engineering (for shape optimisation), efficient manufacturing
(for maximisation of profit), energy industry (for optimisation of the electric
power system), and transportation optimisation (for cost and time efficiency).
The standard form of a LP problem consists of the following three parts:

A linear function to be maximized/minimized

e.g. 𝑍 = 𝑐1 𝑥1 + 𝑐2 𝑥2

Problem constraints of the following form

𝑎11 𝑥1 + 𝑎12 𝑥2 ≤ 𝑏1
e.g.
𝑎21 𝑥1 + 𝑎22 𝑥2 ≤ 𝑏2

Non-negativity restrictions
e.g. 𝑥1 ≥ 0, 𝑥2 ≥ 0

where the objective function, Z, is the expression to be maximized or

minimized; x represents the variables to be determined; a, c and b are constants.
The inequalities are the constraints over which the objective function is to be
Chapter 16| Linear Programming 205

optimized. The non-negativity restriction of all the variables is a condition

always implicit in the methods of solution in LP.

Steps in Solving a LP problem

If the problem is not a word/story problem, skip to step 5.

1. Identify the decision variables (e.g., 𝑥1 , 𝑥2 ). Decision variables describe

the quantities that the decision makers would like to determine. They are
the unknowns of a LP problem.
2. Write the objective function represented by Z. The objective function is
the function whose value is to be either minimized or maximized (e.g., 𝑍 =
𝑥1 + 𝑥2 ).
3. State the constraints (e.g., 𝑥1 + 𝑥2 ≥ 1). The constraints are the
restrictions or limitations on the decision variables.
4. Note the non-negativity restriction (e.g., 𝑥1 ≥ 0, 𝑥2 ≥ 0). Non-negativity
restriction indicates that all decision variables must take on values equal
to or greater than zero.
5. Solve the LP problem. The most popular methods are graphical, matrices
and simplex method.

G R A PH IC A L M E T H O D
If a LP problem has two decision variables, the graphical method can find the
optimal solution. In this method, the inequalities are plotted in the XY graph
where the intersecting region forms the feasible region. The feasible region
provides the optimal solution.
In the graphical method, the fundamental theorem of LP or the corner
point theorem is important.

The fundamental theorem of LP or the corner

point theorem states that, if a LP problem is feasible,
the maximum or minimum value will occur at a corner
point, or on a line segment between two corner points.

To find the optimal values in the feasible region, we test the corner points. Any
corner point that provides the largest value for the objective function is the
maximum; any corner point that provides the smallest value for the objective
function is the minimum.

Steps in the Graphical Method:

1. Formulate the LP problem.
2. Graph the inequalities: locate the feasible region and the corner points.
3. Determine the value of the objective function at each corner point.
4. Identify the optimum point.

 EXAMPLE 16.1
Solve the following LP problem using the graphical method:
𝑥1 + 2𝑥2 ≥ 12
Min 𝐶 = 2𝑥1 + 𝑥2 subject to {1.5𝑥1 + 𝑥2 ≥ 8 𝑥1 ≥ 0, 𝑥2 ≥ 0
3𝑥1 + 𝑥2 ≥ 11
206 Olaniyi Evans | University Mathematics

S O L U T I O N tips
First graph the inequalities. Find two solutions, preferably the 𝑥1 -intercepts and
𝑥2 -intercepts of the graph, by setting first 𝑥1 = 0 and then 𝑥2 = 0.
𝒙𝟏 + 𝟐𝒙𝟐 = 𝟏𝟐 𝟏. 𝟓𝒙𝟏 + 𝒙𝟐 = 𝟖 𝟑𝒙𝟏 + 𝒙𝟐 = 𝟏𝟏

𝑥1 = 0, 𝑥2 = 6 𝑥1 = 0, 𝑥2 = 8 𝑥1 = 0, 𝑥2 = 11

𝑥2 = 0, 𝑥1 = 12 𝑥2 = 0, 𝑥1 = 5.33 𝑥2 = 0, 𝑥1 = 3.67

For each inequality, plot the two points and draw a line connecting them. The
shaded area is the feasible region. The feasible region is the one which satisfies
all the inequalities.

Then find the corner points of the shaded polygon formed. A corner point is a
point in the feasible region that is the intersection of two boundary lines.
Substitute the corner points into the objective function (C) and find the smallest
value.
Corner Point 𝐶 = 2𝑥1 + 𝑥2

(0, 11) 2(0) + (11) = 11

(2, 5) 𝟐(𝟐) + (𝟓) = 𝟗

(12, 0) 2(12) + (0) = 24

The minimum value is 9 at (2, 5).
Hence, the optimal solution to the given LP problem is: 𝑥1 = 2, 𝑥2 = 5 and 𝐶 =
9.

 EXAMPLE 16.2
Fitness Engineering produces only two fitness trackers: Grandeur and Posh.
Production is limited to 20 hours per week, and the production of Grandeur
requires 2 hours while the production of Posh requires 1 hour. The firm has only
16 cubic feet of storage space and a package of Grandeur requires 1 cubic feet,
while a package of Posh requires 1 cubic feet. The demand is such that no more
than 8 packages of Grandeur can be sold each week. The management has
determined that the profit are $2.05 for each Grandeur and $1.05 for each Posh.
Chapter 16| Linear Programming 207

How many fitness trackers of each type should be produced each week in order
to maximize the total profit?
S O L U T I O N tips
First define the decision variables and the units in which they are measured. For
this problem we are interested in knowing the optimal number of packages of
each type of fitness tracker to produce per week.

Let 𝑥1 = Number of packages of Grandeur produced per week.

𝑥2 = Number of packages of Posh produced per week.

The objective function is easy to identify since the idea is to maximize the profit:
The management has determined that the profit are $2.05 for each Grandeur and
$1.05 for each Posh. Which is given by:

𝑍 = 2.05𝑥1 + 1.05𝑥2

Production is limited to 20 hours per week, and production of Grandeur requires

2 hours while production of Posh requires 1 hour. Now, the constraint imposed
on production capacity per week is:

2𝑥1 + 𝑥2 ≤ 20

The firm has only 16 cubic feet of storage space and a package of Grandeur
requires 1 cubic feet, while a package of Posh requires 1 cubic feet. Now, the
constraint on storage capacity per week is:

𝑥1 + 𝑥2 ≤ 16

The demand is such that no more than 8 packages of Grandeur can be sold each
week. Now, the constraint on demand is:
𝑥1 ≤ 8
Since the decision variables must be nonnegative,

𝑥1 ≥ 0, 𝑥2 ≥ 0

Thus, the LP is:

2𝑥1 + 𝑥2 ≤ 20
Max 𝑍 = 2.05𝑥1 + 1.05𝑥2 subject to { 𝑥1 + 𝑥2 ≤ 16 𝑥1 ≥ 0, 𝑥2 ≥ 0
𝑥1 ≤ 8

First graph the inequalities. For the first two inequalities, find two solutions,
preferably the 𝑥1 -intercepts and 𝑥2 -intercepts of the graph, by setting first 𝑥1 = 0
and then 𝑥2 = 0. For the third inequality, the graph is the horizontal line: 𝑥1 = 8.
𝟐𝒙𝟏 + 𝒙𝟐 = 𝟐𝟎 𝒙𝟏 + 𝒙𝟐 = 𝟏𝟔 𝒙𝟏 = 𝟖

𝑥1 = 0, 𝑥2 = 20 𝑥1 = 0, 𝑥2 = 16 Treat as 𝑥1 = 8

𝑥2 = 0, 𝑥1 = 10 𝑥2 = 0, 𝑥1 = 16 Here the line is parallel to Y-axis.

208 Olaniyi Evans | University Mathematics

For each inequality, plot the two points and draw a line connecting them. The
shaded area is the feasible region.

Then find the corner points of the shaded polygon formed. Substitute the corner
points into the objective function (the Z function) and find the smallest value.
Corner Point 𝑍 = 2.05𝑥1 + 1.05𝑥2

(0, 0) 2.05(0) + 1.05(0) = 0

(8, 0) 2.05(8) + 1.05(0) = 16.4

(8, 4) 2.05(8) + 1.05(4) = 20.6

(4, 12) 𝟐. 𝟎𝟓(𝟒) + 𝟏. 𝟎𝟓(𝟏𝟐) = 𝟐𝟎. 𝟖

(0, 16) 2.05(0) + 1.05(16) = 16.8

The maximum value of the objective function Z = 20.8 at (4, 12).
Hence, 4 Grandeur and 12 Posh should be produced per week in order to obtain
the maximum profit of $20.80.

 EXAMPLE 16.3
Mach100 Ltd makes two products X and Y, and has a total production capacity
of 4.5 tons per week. The firm has a contract to supply at least 1 ton of X and at
least 0.5 ton of Y per week. In production, each ton of X requires 4 machine hours
and each ton of Y requires 12 machine hours. The available number of machine
hours is 38. If the profit is $4 per ton of X and $6 per ton of Y, determine the
production schedule that yields the maximum profit.
S O L U T I O N tips
Let 𝑥 = Number of tons of X produced per week.
𝑦 = Number of tons of Y produced per week.
Chapter 16| Linear Programming 209

Thus, the LP is:

Max 𝑍 = 4𝑥 + 6𝑦
𝑥 + 𝑦 ≤ 4.5 Production capacity
subject to {𝑥 ≥ 1; 𝑦 ≥ 0.5 Supply 𝑥 ≥ 0, 𝑦 ≥ 0
4𝑥 + 12𝑦 ≤ 38 Machine hours

𝒙 + 𝒚 = 𝟒. 𝟓 𝟒𝒙 + 𝟏𝟐𝒚 = 𝟑𝟖

𝑥 = 0, 𝑦 = 4.5 𝑥1 = 0, 𝑦 = 3.17
𝑦 = 0, 𝑥 = 4.5 𝑦 = 0, 𝑥 = 9.5

Corner Point 𝐶 = 4𝑥1 + 6𝑥2

(1, 0.5) 4(1) + 6(0.5) = 7

(4, 0.5) 4(4) + 6(0.5) = 19

(2, 2.5) 𝟒(𝟐) + 𝟔(𝟐. 𝟓) = 𝟐𝟑

(1, 2.83) 4(1) + 6(2.83) = 21
The maximum value is 23 at (2, 2.5).
Hence the company should produce 2 tons of product X and 2.5 tons of product
Y in order to yield a maximum profit of $23.
210 Olaniyi Evans | University Mathematics

 EXAMPLE 16.4
A global manufacturing outfit must decide on the optimal mix of two possible
plants of which the inputs and outputs per production run are as follows:
Input (tons) Output (tons)
Plants
A B X Y
Chicago 1 0.5 1.25 2
Lagos 1 1 1 1
The maximum amounts available of input A and B are 45 tons and 30 tons,
respectively. The market conditions require the production of at least 25 tons of
X and 20 tons of Y. The profits per production run for the Chicago and Lagos
plants are $15 and $20, respectively. Determine the production run for the
Chicago and Lagos plants.
S O L U T I O N tips
Let 𝑥 = Number of production run for the Chicago plant.
𝑦 = Number of production run of the Lagos plant.
Thus, the LP is:
𝑥 + 𝑦 ≤ 45
Input
0.5𝑥 + 𝑦 ≤ 30
Max 𝑍 = 15𝑥 + 20𝑦 subject to 𝑥 ≥ 0, 𝑦 ≥ 0
1.25𝑥 + 𝑦 ≥ 25 Output
{ 2𝑥 + 𝑦 ≥ 20

𝒙 + 𝒚 = 𝟒𝟓 𝟎. 𝟓𝒙 + 𝒚 = 𝟑𝟎 𝟏. 𝟐𝟓𝒙 + 𝒚 = 𝟐𝟓 𝟐𝒙 + 𝒚 = 𝟐𝟎

𝑥 = 0, 𝑦 = 45 𝑥 = 0, 𝑦 = 30 𝑥 = 0, 𝑦 = 25 𝑥1 = 0, 𝑦 = 10
𝑦 = 0, 𝑥 = 45 𝑦 = 0, 𝑥 = 60 𝑦 = 0, 𝑥 = 20 𝑦 = 0, 𝑥 = 20
Chapter 16| Linear Programming 211

Corner Point Z = 15𝑥1 + 20𝑥2

(0, 25) 15(0) + 20(25) = 500

(0, 30) 15(0) + 20(30) = 600

(30, 15) 𝟏𝟓(𝟑𝟎) + 𝟐𝟎(𝟏𝟓) = 𝟕𝟓𝟎

(45, 0) 15(45) + 20(0) = 675
(20, 0) 15(20) + 20(0) = 300
The maximum value is 750 at (30, 15).
Hence, the company should produce 30 tons in Chicago and 15 tons in Lagos in
order to achieve the maximum profit of $750.

 WORKOUT 16.1
1. Use the graphical method to solve the following LP problem:
𝑥1 + 2𝑥2 ≥ 12
a) Min 𝐶 = 𝑥1 + 18𝑥2 subject to {0.5𝑥1 + 𝑥2 ≥ 6
𝑥1 − 𝑥2 ≥ 9
1
𝑥1 + 𝑥2 ≤ 500
2
3
b) Max 𝑍 = 𝑥1 + 3𝑥2 subject to 4 𝑥1 + 𝑥2 ≤ 600
𝑥1 + 𝑥2 ≤ 700
{ 𝑥1 − 𝑥2 ≤ 350
2. Consider i-Fashions Factory which has two designs in its garment
production line—Paradise and Garden of Eden. The following table shows
the scheduling hours per garment in each department and the capacities of
the departments, in monthly hours.
Paradise Garden of Eden Capacity
(hours) (hours) (hours/month)
Purchasing 2.1 2.1 294
Manufacturing 1.575 1.05 210
Sales 1.05 2.1 210
The management has determined that the costs are $10 for each Paradise
and $5 for each Garden of Eden. Find a production plan to minimize cost.
3. A workshop has three machines: Mini, Mega and Pro. It can manufacture
two fragrances (Luxurious and Sumptuous) which passes through each
machine in the same order: First to Mini, then to Mega and then to Pro as
shown in the following table.
Luxurious Sumptuous Capacity
(hours/gram) (hours/gram) (hours/week)
Mini 1 4 60
Mega 5 2 48
Pro 3 1 26
Profit ($/g) 1 1
212 Olaniyi Evans | University Mathematics

How many of each fragrance should be produced in order that the profit is
maximum?
4. Magnet Manufacturing owns plants in two cities: London and Washington.
The London plant costs $500 per month to operate, and it can produce 200
barrels of A oil, 300 barrels of B oil, and 500 barrels of C oil each month.
The Washington plant costs $800 per month to operate, and it can produce
100 barrels of A oil, 800 barrels of B oil, and 500 barrels of C oil each month.
The company has orders totaling 1800 barrels of A oil, 11800 barrels of B
oil, and 8000 barrels of C oil. How many months should each factory be run
to fulfill the order on hand at minimum cost?
5. Zaz is on a diet that gives her calories, protein and carbohydrate from two
food items. The diet chart is as follows:
Food A Food B
Calories (grams) 350 250
Protein (grams) 5 2
Carbohydrates (grams) 7 3
Cost $5 $3
The diet has to be planned in such a way that it would contain at least 2300
calories, 25 grams of protein, and 36 grams of carbohydrates. Find a diet
plan to minimize cost.
6. Giantez Global makes two types of shoes: Cruiser and Sophisticated. Each
pair of Cruiser requires 5 labour hours for fabricating, 2 labour hours for
finishing and 1 labour hour for sales. Each pair of Sophisticated requires 1
labour hour for fabricating, 8 labour hours for finishing and 3 labour hours
for sales. For fabricating, finishing and sales, the maximum labour hours
available are 44, 48 and 20 respectively. The company makes a profit of
$100 on each pair of shoes. How many pairs of each type of shoes should be
manufactured per week to realise a maximum profit?
7. A manufacturer must decide on the optimal mix of two production processes
of which the inputs and outputs per production run are as follows:
Input (tons) Output (tons)
Process
A B X Y
P1 3 1 2.5 3
P2 3 2 2 1.5
The maximum amounts available of input A and B are 90 tons and 40 tons,
respectively. The market conditions require the production of at least 50
tons of X and 30 tons of Y. The profits per production run for the P1 and P2
processes are $3 and $4, respectively. Determine the production run for the
two processes.
ANSWERS RAPID
1. a) 𝑥1 = 12; 𝑥2 = 0; 𝐶 = 12 b) 𝑥1 = 0; 𝑥2 = 600; 𝑍 = 1800
2. Paradise = 0. Eden = 200. C = 1000
3. Luxurious = 4. Sumptuous = 14. Z = 18
4. London = 2 months. Washington = 14 months. C = 12200
5. Food A = 3. Food B = 5. C = $30
6. Cruiser = 8, Sophisticated = 4. Z = 1200
7. 𝑋 = 20, 𝑌 = 10, 𝑍 = 100.
Chapter 16| Linear Programming 213

M A TR IX M E T HO D
If the number of decision variables is equal to the number of constraints,
Cramer’s rule is easily applied to a LP problem. Cramer's rule is a method for
solving systems of linear equations using determinants.

 EXAMPLE 16.5
Given the LP problem
2𝑥1 + 𝑥2 + 𝑥3 ≤ 12
Max 𝑍 = 2.5𝑥1 + 𝑥2 + 1.4𝑥3 subject to { 𝑥1 + 𝑥2 + 𝑥3 ≤ 10
𝑥1 − 𝑥2 + 𝑥3 ≤ 4
S O L U T I O N tips
2 1 1 𝑥1 12
Set up the constraints as a matrix: [1 1 1] [𝑥2 ] ≤ [10]
1 −1 1 𝑥3 4
Use Cramer’s rule,
2 1 1 12 1 1
|𝐴| = |1 1 1| = 2 |𝑋1 | = |10 1 1| = 4
1 −1 1 4 −1 1
2 12 1 2 1 12
|𝑋2 | = |1 10 1| = 6 |𝑋3 | = |1 1 10| = 10
1 4 1 1 −1 4
|𝑋1 | 4 |𝑋2 | 6 |𝑋3 | 10
𝑥1 = = =2 𝑥2 = = =3 𝑥3 = = =5
|𝐴| 2 |𝐴| 2 |𝐴| 2
From the objective Function
𝑍 = 2.5𝑥1 + 𝑥2 + 1.4𝑥3 = 2.5(2) + (3) + 1.4(5) = 15
The maximum value is 15 at (2, 3, 5).
Hence, the optimal solution to the given LP problem is: 𝑥1 = 2, 𝑥2 = 3, 𝑥3 = 5
and 𝑍 = 15.

 EXAMPLE 16.6
GX Farms has determined the best mix of fertilizers (A, B and C) to provide its
crops with the desired amounts of active chemicals (nitrogen, phosphorus and
potash) as shown in the following table.
A (kg) B (kg) C (kg) Minimum daily
requirements (units)
Nitrogen 1 4 0 16
Phosphorus 3 8 3 92
Potash 0 2 1 18
Cost ($/kg) 2 10 1
Determine the best mix of fertilizers that minimize cost.

S O L U T I O N tips
Let 𝑥1 = amount of fertilizer A, 𝑥2 = amount of fertilizer B, and 𝑥3 = amount of
fertilizer C.

It is clear from the question that the LP minimization problem is

214 Olaniyi Evans | University Mathematics

𝑥1 + 4𝑥2 ≥ 16
Min 𝐶 = 2𝑥1 + 10𝑥2 + 𝑥3 subject to {3𝑥1 + 8𝑥2 + 3𝑥3 ≥ 92
2𝑥2 + 𝑥3 ≥ 18
1 4 0 𝑥1 16
Set up the constraints as a matrix: [3 8 3] [𝑥2 ] ≥ [92]
0 2 1 𝑥3 18
Use Cramer’s rule,
1 4 0 16 4 0
|𝐴| = |3 8 3| = −10 |𝑋1 | = |92 8 3| = −120
0 2 1 18 2 1
1 16 0 1 4 16
|𝑋2 | = |3 92 3| = −10 |𝑋3 | = |3 8 92| = −160
0 18 1 0 2 18
|𝑋1 | −120 |𝑋2 | −10 |𝑋3 | −160
𝑥1 = = = 12 𝑥2 = = =1 𝑥3 = = = 16
|𝐴| −10 |𝐴| −10 |𝐴| −10
The best mix of fertilizers: Fertilizer A = 12 kg, Fertilizer B = 1 kg, and Fertilizer
C = 16 kg.

From the objective function:

C= 2𝑥1 + 10𝑥2 + 𝑥3 = 2(12) + 10(1) + (16) = 50
The minimum cost at which the farm can fertilize the crops is $50.

 WORKOUT 16.2
1. Given the LP problem.
2𝑥1 + 𝑥2 + 𝑥3 ≤ 60
a) Min 𝐶 = 𝑥1 + 𝑥2 + 𝑥3 subject to { 𝑥1 + 𝑥2 + 𝑥3 ≤ 50
𝑥1 − 𝑥2 + 𝑥3 ≤ 20
0.5𝑥1 + 2𝑥2 ≤ 8
1
b) Max 𝑍 = 𝑥1 + 5𝑥2 + 𝑥3 subject to {1.5𝑥1 + 4𝑥2 + 1.5𝑥3 ≤ 46
2
𝑥2 + 0.5𝑥3 ≤ 9
2. Challenger Fashions produces only two designers: Flash and Blaze. Sewing
is limited to 600 hours per month, and sewing of Flash requires 7 hours
while sewing of Blaze requires 2.5 hours. Sales is $365 per month such that
no more than 1 Flash designer and 2 Blaze designers can be sold each month.
The profit are $10 for each type of designer. How many designers of each
type should be produced each month in order to maximize profit?
3. King Nebuchadnezzar owns two factories which cost $1,000 each per day to
operate. Factory 1 can produce 1 barrel of A-margarine and 8 barrels of B-
margarine each day. Factory 2 can produce 1.4 barrels of A-margarine and 2
barrels of B-margarine each day. The company has orders totaling 24 barrels
of A-margarine and 146 barrels of B-margarine. How many days should he
run each factory to minimize costs?
Chapter 16| Linear Programming 215

4. Manna Electric produces three brands of earpiece: Vax, Qax and Zax. The
table shows the production schedule and costs.
Vax Qax Zax Hours
(hours/unit) (hours/unit) (hours/unit) available
Fabrication 25 100 0 2000
Electronic 75 200 75 11500
Assembly 0 50 25 2250
Cost per unit $100 $500 $50
How many of each brand should be produced in order that the production
cost is minimum?
5. Consider Gorilla Inverters which has three brands in its production line—
G1, G2 and G3. The following table shows the scheduling hours per inverter
in each department and the capacities of the departments, in monthly hours.
G1 G2 G3 Capacity
(hours) (hours) (hours) (hours/month)
Purchasing 40 160 0 6400
Manufacturing 120 320 120 36800
Sales 0 80 40 7200
The management has determined that the costs are $10 for each G1, $50 for
each G2 and $5 for each G3. Find a production plan to minimize cost.
ANSWERS RAPID
1. a) 𝑥1 = 10, 𝑥2 = 15, 𝑥3 = 25; 𝐶 = 50
b) 𝑥1 = 12, 𝑥2 = 1, 𝑥3 = 16; 𝑍 = $25
2. a) Flash = 25, Blaze = 170, Z = $1950
3. a) Factory 1 = 17 days. Factory 2 = 5 days. C = $22,000
4. Vax = 60, Qax = 5 and Zax = 80. C = $12,500
5. G1 = 120. G2 = 10. G3 = 160. C = $2500

 WORKOUT EXTRA

I. FILL IN THE BLANKS

1. LP is an …………. technique used to maximize or minimize a linear function
(usually profit or cost of production), subject to a set of …………..
2. The inequalities are the constraints over which the …………. function is to be
optimized.
3. …………. variables describe the quantities that the decision makers would
like to determine.
II. MULTIPLE CHOICE QUESTIONS
4𝑥1 + 𝑥2 ≥ 2
1. Given: Min 𝐶 = 40𝑥1 + 30𝑥2 subject to { 𝑥1 + 3𝑥2 ≥ 3 , which of the
4𝑥1 + 𝑥2 ≥ 3.2
following is incorrect?
a. 𝑥1 = 0.6 b. 𝑥2 = 0.2 + 𝑥1 c. 𝐶 = 60𝑥2 d. 𝑥1 = 𝑥2
216 Olaniyi Evans | University Mathematics

2. The table shows the least costly mix required to produce workwear for
Equilateral Factory.
Experimental Synthetic Leather Orders

A 0.5 2 0 40
B 1.5 4 1.5 230
C 0 1 0.5 45
Cost ($) 1 3 1
If the optimal solutions are 𝑥1 , 𝑥2 and 𝑥3 , which of the following is correct?
a. 𝑥1 + 4𝑥2 = 𝑥3 b. 𝑥1 = 𝑥2 − 3𝑥3 c. 𝑥2 = 𝑥3 d. 𝑥1 /𝑥3 = 2
3. Consider a manufacturer of android phones with two models in its
production line— Grandeur and Posh. The assembly department assembles
each phone from component parts produced in the mechanical and
electronics departments. The following table shows the production hours
per phone in each department and the capacities of the departments, in
weekly hours.
Grandeur Posh Capacity
(hours) (hours) (hours/week)
Mechanical 3 4 60
Electronics 1 3 30
Assembly 1 1 18
The management has determined that the profit are $30 for each Grandeur
and $40 for each Posh. Determine a production plan to maximize weekly
profit.
a. 12, 6 b. 11, 7 c. 10, 5 d. 100, 8
4. A manufacturer produces butter and margarine. It takes 12 hours of work on
machine A and 6 hours on machine B to produce a package of butter. It takes
3 hours on machine A and 4 hours on machine B to produce a package of
margarine. The company earns a profit of $6 per package on butter and $3
per package on margarine. If he operates machine A and machine B for at
the most 240 and 300 hours respectively per week, how many packages of
each should be produced each week so as to maximise his profit?
a. 3; 75 b. 4; 77 c. 2; 72 d. 1; 76
5. Which theorem is crucial in the graphical method of solving LP problems?
a. Corner Point Theorem
b. Pythagorean Theorem
c. Fundamental Theorem of Calculus
d. Law of Sines and Cosines
ANSWERS RAPID

I II
1. optimization; constraints 1. D 2. A 3. A 4. C 5. A
2. objective
3. decision
 17
LINEAR PROGRAMMING:
THE SIMPLEX METHOD

CONTENTS
The Simplex Method 217
Steps in the simplex method 217
Maximization 217
Minimization 224

T H E S IM P LE X M E T HO D
Simplex method was developed by George Dantzig in 1949. It is an iterative
procedure for solving LP in a finite number of steps, in such a way that the value
of the objective function at each step is optimized.

Steps i n t h e si m p l e x m e t h o d :
• Convert the constraints into equations by introducing slack variables.
• Set up the initial tableau.
• Perform the pivot operation.
• Create a new tableau.
• Check for optimality. If optimal, then identify optimal values.

M A X IM IZ A T I O N
The simplex method is an effective algorithm for solving linear programming
problems, especially maximization of a linear function subject to linear
constraints.

 EXAMPLE 17.1
Musically Ltd produces only two instruments: Piano and Guitar. Both requires
strings and boards only. In production, each Piano requires 1 string and 1 board
while each Guitar requires 1 string and 2 boards. The company has a total of 40
strings and 75 boards. On each sale, the company makes a profit of $10 per
Piano sold and $12 per Guitar sold. Now, the company wishes to maximize its
profit. How many Pianos and Guitars should it produce respectively?
218 Olaniyi Evans | University Mathematics

S O L U T I O N tips
Let 𝑥1 equals the number of Pianos produced and 𝑥2 the number of Guitars
produced.
So, the decision variables are: 𝑥1 and 𝑥2 .

On each sale, the company makes a profit of $10 per Piano sold and $12 per
Guitar sold.
Thus, the objective function is:
𝑍 = 10𝑥1 + 12𝑥2

In production, each Piano requires 1 unit of strings and 1 unit of boards while
each Guitar requires 1 unit of strings and 2 units of boards. The company has a
total of 40 units of strings and 75 units of boards.
Therefore, the constraints are
𝑥1 + 𝑥2 ≤ 40
𝑥1 + 2𝑥2 ≤ 75

Number of Pianos and Guitars should be greater than or equal to 0. So, the non-
negativity restriction:
𝑥1 ≥ 0, 𝑥2 ≥ 0

Therefore, the LP problem is

Max 𝑍 = 10𝑥1 + 12𝑥2
𝑥 + 𝑥2 ≤ 40 (units of strings)
subject to { 1 𝑥1 ≥ 0, 𝑥2 ≥ 0
𝑥1 + 2𝑥2 ≤ 75 (units of boards)

Now, to apply the simplex method, introduce slack variables to convert the
inequalities into equalities.
𝑥1 + 𝑥2 + 𝑠1 = 40
𝑥1 + 2𝑥2 + 𝑠2 = 75
𝑠1 and 𝑠2 are slack variables where 𝑠1 ≥ 0, 𝑠2 ≥ 0.
Slack variables represent the amount of an unused resource.

Modify the objective function so that the RHS is zero:

Z = 10𝑥1 + 12𝑥2 ⟹ Z – 10𝑥1 − 12𝑥2 = 0

Convert the system of equations into a tableau in the following format.

Tableau I
Basic x1 x 2↓ s1 s2 RHS Ratio

s1 1 1 1 0 40 40 ⁄ 1 = 40

s2 1 2 0 1 75 75 ⁄ 2 = 37.5

Z -10 -12 0 0 0

Perform a pivot operation if there are negative entries in the Z row. The current
tableau is only optimal if and only if every entry in the Z row is nonnegative.
Chapter 17| Linear Programming: The Simplex Method 219

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 18
DUALITY IN
LINEAR PROGRAMMING

CONTENTS
Duality: Primal & Dual 231
Matrix Method 232
Simplex Method 237

D U A L ITY : P R I M A L & D U A L
The duality in linear programming indicates that every maximization problem
has a corresponding minimization problem and vice versa. The original linear
programming problem is called “Primal,” while the derived linear problem is
called “Dual.” If the primal objective function is maximized, then its dual is
minimized.

The von Neumann Duality Principle, after the American mathematician John
von Neumann, defines the primal-dual relation.

The Von Neumann duality principle or the strong

duality theorem: The optimal solution of a primal linear
programming problem, if it exists, has the same value as the
optimal solution of the dual.

𝐦𝐚𝐱𝒙 𝒄𝑻 𝒙 = 𝐦𝐢𝐧𝒚 𝒄𝑻 𝒚

The optimal solutions for the primal and dual problems are equivalent.
Maximising profits in the primal by finding the optimal outputs (𝑥1 , 𝑥2 ) is
comparable to minimizing the total shadow prices or opportunity cost of the
resource inputs (𝑦1 , 𝑦2 ) in the dual.

For example, given the primal maximization problem:

Max 𝑍 = 5𝑥1 + 6𝑥2
𝑥 + 3𝑥2 ≤ 7
subject to { 1 𝑥1 , 𝑥2 ≥ 0
2𝑥1 + 4𝑥2 ≤ 8
232 Olaniyi Evans | University Mathematics

The dual minimization problem is:

Min 𝐶 = 7𝑦1 + 8𝑦2
𝑦 + 2𝑦2 ≥ 5
subject to { 1 𝑦1 , 𝑦2 ≥ 0
3𝑦1 + 4𝑦2 ≥ 6

NOTE: The coefficient matrix of the constraints of the primal is the transpose of
the coefficient matrix of the constraints of the dual. If the objective of the primal
is to be maximized, the objective of the dual is to be minimized. The elements of
the right-hand side of the constraints in the primal are the respective coefficients
of the objective function in the dual.
Duality is a powerful tool for analyzing and solving optimization problems, and
has a wide range of applications in various fields, such as economics,
engineering, and operations research.
Dual LP problems can be solved using different methods. Here, we discuss the
matrices and simplex methods.

M A TR IX M E T HO D
If the number of decision variables is equal to the number of constraints,
Cramer’s rule is easily applied to a dual LP problem. Cramer's rule is a method
for solving systems of linear equations using determinants.

 EXAMPLE 18.1
Jon would like to optimize her food expenses. On sale at Amazon Supermarket
are brownies for $8/ounce and ice cream for $16/ounce. She wants to ensure she
gets enough cheese and chocolate in her diet, for which the recommended
monthly amounts are 52 ounces and 12 ounces respectively. The table gives the
amounts of these requirements in each food item.
Brownies Ice Cream
Cheese 7 3
Chocolate 1 5
a) Determine the least expensive combination of brownies and ice cream that
meet his requirements. Also, what is the least cost?
b) Assuming Blockbuster Delicacies supplies the supermarket with the
chocolate and cheese needed to make the treats. In order to maximize
revenue, how can the supplier set the prices so that the supermarket still
buys from him? Also, what is the maximum revenue?
S O L U T I O N tips
a) Let 𝑦1 = the ounces of brownies bought
𝑦2 = the ounces of ice cream bought

The primal problem is

7𝑦 + 3𝑦2 ≥ 52
Min 𝐶 = 8𝑦1 + 16𝑦2 subject to { 1 𝑦1 , 𝑦2 ≥ 0
𝑦1 + 5𝑦2 ≥ 12

Set up the minimization problem in matrix form

7 3 𝑦1 52
[ ][ ] ≥ [ ]
1 5 𝑦2 12

Use Cramer’s rule. Find the determinant of matrix:

7 3 52 3 7 52
|𝐴| = | | = 32 |𝐴𝑦1 | = | | = 224 |𝐴𝑦2 | = | | = 32
1 5 12 5 1 12
Chapter 18| Duality in Linear Programming 233

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 19
GAME THEORY

CONTENTS
The Prisoner’s Dilemma 243
Zero-Sum Games 244
Nash Equilibrium 245
Payoff Matrix 245
Pure Strategy Vs Mixed Strategy Games 246
The Maximin-Minimax Principle 247
The Minimax Theorem 247
Reduction by Dominance 249
Algebraic Method 252
Graphical Method 254
Simplex Method 256

Game theory, pioneered by John von Neumann and Oskar Morgenstern, is a

field of applied mathematics that provides methods for studying scenarios
where multiple individuals, referred to as players, make decisions that impact
each other. These decisions are interdependent, meaning that players must take
into account the possible choices or strategies of the other players when
devising their own strategies. The goal is to find a solution that outlines the best
decisions for all players involved, even if their interests align, conflict, or have a
combination of both, and to determine the potential outcomes that may arise
from these decisions.
Game theory has found widespread application, ranging from predicting the
formation of political alliances or business conglomerates, determining the
optimal pricing strategy in competitive markets, assessing the influence of
individual voters or voting blocs, selecting jury members, identifying ideal
locations for manufacturing facilities, examining the behavior of various
animals and plants in their struggle for survival, and even challenging the
legality of certain voting systems. A classic example of game theory is a
hypothesis called “Prisoners Dilemma”.

T H E P R I SO NE R ’ S D IL E M M A
The Prisoner’s Dilemma, a classic game theory problem, is a thought
experiment where two rational agents face a dilemma: to cooperate for mutual
reward, or betray (defect) for individual reward. Originally framed by Merrill
244 Olaniyi Evans | University Mathematics

Flood and Melvin Dresher in 1950, the game was formalized and named
"prisoner's dilemma" by Albert W. Tucker.
Consider the example of two members of a criminal gang arrested and
imprisoned. In solitary confinement, neither prisoner has the means to
communicate with each other. Prosecutors have no hard evidence to convict the
pair on the principal charge. However, to gain a confession, the police offer
each prisoner four deals (displayed as a 2 × 2 box in Figure 19.1):
1. If both remain silent, each will go to jail for only 2 years.
2. If A betrays B but B remains silent, then A will be set free while B goes to
jail for ten years.
3. If A remains silent but B betrays A, then A will go to jail for 10 years while
B is set free.
4. If both betrays each other, then both goes to jail for 5 years.

Figure 19.1 Prisoner’s Dilemma

B B stays B betrays
A silent
A stays -2 0
silent -2 -10
A -10 -5
betrays 0 -5
In this game, loyalty to one's partner is irrational. This assumption of
rationality suggests that the only possible outcome for two rational prisoners is
betrayal, although mutual cooperation would yield a higher net reward.
The prisoner's dilemma game models many real world situations involving
cooperative behavior such as oligopolistic competition and collective action to
produce a collective good. For example, in the absence of legislation and
penalties, members of a cartel can engage in a (multi-player) prisoner's
dilemma: Cooperation would mean keeping prices at a pre-agreed minimum
level while defection means selling below this minimum level, thus taking
business (and profits) from other members.

Z E R O -S U M G A M E S
A zero-sum game is a situation which involves two sides, where the result is
an advantage to one side and an equivalent loss to the other. Player A's gain is
equivalent to player B's loss; if the total gains of the players are added up and
the total losses are subtracted, they will sum to zero (see Figure 19.2). Examples
of zero-sum games include bridge, chess and poker where A gains and B loses.

Figure 19.2 Example of the Classic Zero-Sum Game

Option 1 Option 2

Option 1 3, −3 −3, 3

Option 2 −3, 3 3, −3

In contrast, a non-zero-sum game is a situation where the sum of gains and

losses by the players is more or less than zero. A zero-sum game is a strictly
competitive game
Chapter 19 | Game Theory 245

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 20
N ON - LINEAR P ROGRAMMING
AND E NVELOPE T HEOREM

CONTENTS
Concave programming 264
Karush-Kuhn-Tucker (KKT) conditions 264
The envelope theorem 271
Utility maximization: Roy’s identity 271
Cost minimization: Shephard’s lemma 272
The Lagrange multiplier as shadow value 273

Nonlinear programming is the optimization of a nonlinear objective function

subject to constraints, which can include linear constraints, or nonlinear
constraints. Non-linear programming extends the techniques of constrained
optimization by allowing inequality constraints into the problem, especially
constraints that may not be binding in the solution.

C O NC A VE PR O G R A M M I NG
Concave programming refers to a type of optimization problem where the
objective function is a concave function and the feasible region is a convex set.
Concave programming, a form of non-linear programming, is used to optimize
functions subject to inequality constraints. The objective and constraint
functions are assumed concave. Since the negative of a convex function is
concave, it also considers convex functions. Concave programming can minimize
a function by maximizing the negative of that function. The goal is to find the
point in the feasible region that minimizes the objective function. Some
applications of concave programming include portfolio optimization, resource
allocation, and revenue management.

K A R U S H -K U H N -T U C K E R (KKT) C O ND IT IO NS
The Karush-Kuhn-Tucker (KKT) conditions, also known as the Kuhn-
Tucker (KKT) conditions, are a set of first-order necessary conditions for
solving non-linear optimization problems (with equality and inequality
constraints), including concave programming problems.

The Kuhn–Tucker approach to nonlinear programming extends the Lagrange

multiplier method by accommodating inequality constraints in addition to
Chapter 20 | Nonlinear Programming and Envelope Theorem 265

equality constraints. Similar to the Lagrange approach, the optimization problem

with constraints is reformulated as a Lagrange function. The optimal point of this
Lagrange function represents a global saddle point, serving as both a global
maximum (minimum) over the domain of choice variables and a global
minimum (maximum) over the multipliers. This is why the Karush–Kuhn–
Tucker theorem is also known as the saddle-point theorem. Originally
introduced by Harold W. Kuhn and Albert W. Tucker in 1951, the Kuhn–Tucker
conditions were later found to have been articulated by William Karush in his
1939 master's thesis.

Given an optimization problem:

maximize 𝑓(𝑥1 , 𝑥2 )
Subject to 𝑔(𝑥1 , 𝑥2 ) ≤ 0 𝑥1 , 𝑥2 ≥ 0

The Lagrangian function is,

𝑍 = 𝑓(𝑥1 , 𝑥2 , 𝜆) + 𝜆𝑔(𝑥1 , 𝑥2 )

The Kuhn-Tucker conditions are

𝜕𝑍
1. a) = 𝑓𝑖 (𝑥̅1 , 𝑥̅2 ) + 𝜆̅𝑔𝑖 (𝑥̅1 , 𝑥̅ 2 ) ≤ 0 (≥ for a minimization problem)
𝜕𝑥𝑖

b) 𝑥𝑖 ≥ 0
𝜕𝑍
c) 𝑥̅𝑖 =0 𝑖 = 1,2
𝜕𝑥𝑖

𝜕𝑍
2. a) = 𝑔(𝑥̅1 , 𝑥̅2 ) ≥ 0 (≤ for a minimization problem)
𝜕𝜆

b) 𝜆̅ ≥ 0
𝜕𝑍
c. 𝜆̅ =0
𝜕𝜆

𝜕𝑍
where the condition 𝜆̅ = 0 is called the complementary-slackness condition,
𝜕𝜆
meaning that both 𝑥̅ and 𝑓′(𝑥̅ ) cannot simultaneously both be nonzero.

The rationale for the conditions (a) to (c) is demonstrated in the three scenarios
Figure 20.1 For a value 𝑥 to give a local maximum, it must satisfy the following
three conditions:

A: interior solution 𝑓 ′ (𝑥) = 0 and 𝑥>0

C: boundary solution 𝑓 ′ (𝑥) = 0 and 𝑥=0

D or F: both boundary solutions 𝑓 ′ (𝑥) < 0 and 𝑥=0

The three conditions can be summarized as

𝑓 ′ (𝑥) = 0 𝑥≥0 and 𝑥𝑓 ′ (𝑥) = 0

which are obviously part of the Kuhn-Tucker conditions.

266 Olaniyi Evans | University Mathematics

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 21
DIFFERENTIAL EQUATIONS

CONTENTS
General Formula 275
(Micro) Dynamic Model of a Market 278
Exact Differential Equations and Partial Integration 281
Integrating Factors 284
Separation of Variables 286
Phase Diagrams 291

GENERAL FORMULA
A differential equation is a mathematical equation that relates a function with
its derivatives.
Suppose we are given
𝑑𝑦
= 2𝑦
𝑑𝑡
It is a first-order linear differential equation: first-order because it
involves only the first derivative (𝑑𝑦/𝑑𝑡); linear because neither y nor its
derivative is raised to any power other than 1.

The general form of a first-order linear differential equation is

𝑑𝑦
+ 𝑎𝑦 = 𝑏
𝑑𝑡
where a and b may be constants or functions of time.

The formula for a general solution is

𝒚(𝒕) = 𝒆−∫ 𝒂𝒅𝒕 (𝑨 + ∫ 𝒃𝒆∫ 𝒂𝒅𝒕 𝒅𝒕)

where A is an arbitrary constant.

The solution consists of two components on the right-hand side: a
complementary function (𝑒 −∫ 𝑎𝑑𝑡 𝐴) and a particular integral
(𝑒 −∫ 𝑎𝑑𝑡 ∫ 𝑏𝑒 ∫ 𝑎𝑑𝑡 ). The particular integral 𝑦𝑝 represents the intertemporal
276 Olaniyi Evans | University Mathematics

equilibrium level of y, and the complementary function 𝑦𝑐 , the deviations of the

time path from that equilibrium. For y(t) to be dynamically stable, 𝑦𝑐 must
approach zero as t approaches infinity.

It is important to note that the solution of the differential equation is a function

of t (a time path: a corresponding value of y can be calculated by substituting for
a particular value of t), and the solution y(t) contains no derivatives.

NOTE: The solution of a differential equation can always be checked by

differentiation.

 EXAMPLE 21.1
𝑑𝑦
Solve the equation + 2𝑦 = 6, with the initial condition 𝑦(0) = 4.
𝑑𝑡

S O L U T I O N tips
𝑑𝑦 𝑑𝑦
Compare + 2𝑦 = 6 to + 𝑎𝑦 = 𝑏.
𝑑𝑡 𝑑𝑡
Since 𝑎 = 2 and 𝑏 = 6

𝑦(𝑡) = 𝑒 −∫ 2𝑑𝑡 (𝐴 + ∫ 6𝑒 ∫ 2𝑑𝑡 𝑑𝑡)

∫ 2𝑑𝑡 = 2𝑡 + 𝑐. Since c is absorbed by A,

𝑦(𝑡) = 𝑒 −2𝑡 (𝐴 + ∫ 6𝑒 2𝑡 𝑑𝑡)

Integrate the remaining integral: ∫ 6𝑒 2𝑡 𝑑𝑡 = 3𝑒 2𝑡 + 𝑐. Ignore the constant again,

𝑦(𝑡) = 𝑒 −2𝑡 (𝐴 + 3𝑒 2𝑡 ) = 𝐴𝑒 −2𝑡 + 3 Since 𝑒 −2𝑡 𝑒 2𝑡 = 𝑒 0 = 1.

As 𝑡 → ∞, 𝑦𝑐 = 𝐴𝑒 −2𝑡 → 0 and y(t) approaches 𝑦𝑝 = 3, the intertemporal

equilibrium level. Thus, y(t) is dynamically stable. Note that this is a general
solution considering that A is not specified. The definite solution is calculated as
follows:

At 𝑡 = 0, 𝑦(0) = 4 such that

4 = 𝐴𝑒 −2(0) + 3 → 4= A+3 Since e0 = 1

𝐴=1

Substitute A = 1 in 𝑦(𝑡) = 𝐴𝑒 −2𝑡 + 3, the definite solution is 𝑦 = 𝑒 −2𝑡 + 3.

 EXAMPLE 21.2
𝑑𝑦
Solve the equation = 5.
𝑑𝑡

S O L U T I O N tips
𝑑𝑦 𝑑𝑦
Compare = 5 to + 𝑎𝑦 = 𝑏. Here 𝑎 = 0 and 𝑏 = 5. Thus,
𝑑𝑡 𝑑𝑡

𝑦(𝑡) = 𝑒 −∫ 0𝑑𝑡 (𝐴 + ∫ 5𝑒 ∫ 0𝑑𝑡 𝑑𝑡)

Chapter 21 | Differential Equations 277

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 22
DIFFERENCE EQUATIONS

CONTENTS
Iterative Method 296
General Method 296
Dynamic Stability of Equilibrium 298
Cobweb Model 299
Lagged Income Determination Model 303
Harrod Model 304
Phase Diagrams 306

A difference equation is an equation that shows the relationship between

successive values of a sequence and the differences among them. It defines the
pattern of change of y between consecutive periods. Similar to differential
equations, difference equations can be either linear or nonlinear, and of the first
or second (or higher) orders.
Suppose we are given
𝑦𝑡+1 − 𝑦𝑡 = 3
It is a first-order linear difference equation: first-order because it contains only
a first difference involving a one-period time lag only; linear because neither y
nor its lags is raised to any power other than 1.
While differential equations is applied in the continuous-time context where the
pattern of change of a variable y is described by its derivative, difference
equations is applied in the discrete-time context where the variable t takes only
integer values. In difference equations, the pattern of change of the variable y
changes only when the variable t changes from one integer value to the next, such
as from 𝑡 = 1 to 𝑡 = 2. The pattern of change is represented by the difference
Δ𝑦 𝑑𝑦
quotient 𝑜𝑟 (Δ𝑦𝑡 ), which is the discrete-time equivalent of the derivative .
Δ𝑡 𝑑𝑡
The first difference is thus:
Δ𝑦𝑡 = 𝑦𝑡+1 − 𝑦𝑡
Where 𝑦𝑡 represents the value of y in the tth period, and 𝑦𝑡+1 its value in the
period immediately after.
An example of differential equations:
Δ𝑦𝑡 = 3
Which can be written as
𝑦𝑡+1 − 𝑦𝑡 = 3
Or 𝑦𝑡+1 = 𝑦𝑡 + 3
296 Olaniyi Evans | University Mathematics

I TE R A T IV E M E T HO D
Analogous to solving a differential equation, the objective is to find a time path.
Iteration of the pattern of change specified in the difference equation will permit
us to infer a time path.

 EXAMPLE 22.1
Find the solution of the difference equation 𝑦𝑡+1 − 𝑦𝑡 = 5, assuming an initial
value of 𝑦0 = 2.
S O L U T I O N tips
Rearrange
𝑦𝑡+1 = 𝑦𝑡 + 5
By iteration:
𝑦1 = 𝑦0 + 5
𝑦2 = 𝑦1 + 5 = (𝑦0 + 5) + 5
= 𝑦0 + 2(5)
𝑦3 = 𝑦2 + 5 = [𝑦0 + 2(5)] + 5
= 𝑦0 + 3(5)
Generalize for any period t
𝑦𝑡 = 𝑦0 + 𝑡(5) = 2 + 5𝑡

 EXAMPLE 22.2
Solve the difference equation 𝑦𝑡+1 = 0.7𝑦t , assuming an initial value of 𝑦0 = 3.
S O L U T I O N tips
By iteration
𝑦1 = 0.7𝑦0
𝑦2 = 0.7𝑦1 = 0.7(0.7𝑦0 ) = (0.7)2 𝑦0
𝑦3 = 0.7𝑦2 = 0.7(0.7)2 𝑦0 = (0.7)3 𝑦0
Generalize for any period t
𝑦𝑡 = (0.7)𝑡 𝑦0 = 3(0.7)𝑡

G E N E R A L M E T HO D
Given the first-order difference equation
𝑦𝑡+1 + 𝑎𝑦𝑡 = 𝑐
Where a and c are constants.
The general solution consists of two components: a particular integral and a
complementary function. The particular integral represents the intertemporal
equilibrium level of y, and the complementary function, the deviations of the
time path from that equilibrium.
Chapter 22 | Difference Equations 297

Case 𝑎 ≠ −1 Case 𝑎 = −1

General 𝒄
𝒚𝒕 = 𝑨(−𝒂)𝒕 + 𝒚𝒕 = 𝑨 + 𝒄𝒕
Solution 𝟏+𝒂

Definite 𝒄 𝒄
𝒚𝒕 = (𝒚𝟎 − ) (−𝒂)𝒕 + 𝒚𝒕 = 𝒚𝟎 + 𝒄𝒕
Solution 𝟏+𝒂 𝟏+𝒂

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Olaniyi Evans
 23
DIFFERENTIAL & DIFFERENCE
EQUATIONS OF HIGHER ORDER

CONTENTS
Second-order differential equations 309
Second-order difference equations 312
Characteristic roots 315
Complex roots in second-order differential equations 316
Complex roots in second-order difference equations 317
Applications of second-order differential equations 319
A market model with price expectations 319
Applications of second-order difference equations 322
Samuelson multiplier-accelerator interaction model 322

Recall that the order of a differential/difference equation is the highest

derivative/lag in the equation. After studying first-order equations in previous
chapters, it is natural to look at higher-order equations. We therefore embark on
the analysis of second-order equations because they arise in applications more
often than do other higher-order equations. Observe that all the results from
second-order equations can be extended to other higher-order (e.g., third-order,
fourth-order, etc) equations.

S E C O ND -O R D E R D I F F E R E N T I A L E Q U A TIO N S
A second-order linear differential equation has the form
𝑦 " (𝑡) + 𝑎1 𝑦 ′ (𝑡) + 𝑎2 𝑦(𝑡) = 𝑏

where 𝑎1 , 𝑎2 , and b are constants.

To solve a second-order differential equations, calculate the complementary

function yc and the particular integral 𝑦𝑝 separately. Together, the general
solution is: 𝑦(𝑡) = 𝑦𝑐 + 𝑦𝑝
The particular integral is
𝑏
𝑦𝑝 = 𝑎2 ≠ 0
𝑎2
𝑏
𝑦𝑝 = 𝑡 𝑎2 = 0 𝑎1 ≠ 0
𝑎1
310 Olaniyi Evans | University Mathematics

𝑏 2
𝑦𝑝 = 𝑡 𝑎1 = 𝑎2 = 0
2
The complementary function is

𝑦𝑐 = 𝐴1 𝑒 𝑟1𝑡 + 𝐴2 𝑒 𝑟2𝑡

And

−𝑎1 ± √𝑎12 − 4𝑎2

𝑟1 , 𝑟2 =
2
Where A1 and A2 are arbitrary constants; r1 and r2 are the characteristic roots.

 EXAMPLE 23.1
Given 𝑦 " (𝑡) − 3𝑦 ′ (𝑡) + 2𝑦(𝑡) = 10, (a) find the general solution and (b) the
definite solution when 𝑦(0) = 15 and 𝑦 ′ (0) = 14.

S O L U T I O N tips
a) Compare 𝑦 " (𝑡) − 3𝑦 ′ (𝑡) + 2𝑦(𝑡) = 10 to the general form of a second-order
linear differential equation 𝑦 " (𝑡) + 𝑎1 𝑦 ′ (𝑡) + 𝑎2 𝑦(𝑡) = 𝑏.

Thus, the particular integral is

𝑏 10
𝑦𝑝 = = =5
𝑎2 2

The complementary function is calculated thus,

−(−3) ± √(−3)2 − 4(2) 3 ± 1

𝑟1 , 𝑟2 = = = 1, 2
2 2
Substitute in 𝑦𝑐 = 𝐴1 𝑒 𝑟1𝑡 + 𝐴2 𝑒 𝑟2𝑡

𝑦𝑐 = 𝐴1 𝑒 𝑡 + 𝐴2 𝑒 2𝑡

The general solution consists of two components: the complementary

function 𝑦𝑐 and the particular integral 𝑦𝑝 , that is, 𝑦(𝑡) = 𝑦𝑐 + 𝑦𝑝 .

𝑦(𝑡) = 𝐴1 𝑒 𝑡 + 𝐴2 𝑒 2𝑡 + 5

b) To find the definite solution

Differentiate 𝑦(𝑡) = 𝐴1 𝑒 𝑡 + 𝐴2 𝑒 2𝑡 + 5
𝑦 ′ (𝑡) = 𝐴1 𝑒 𝑡 + 2𝐴2 𝑒 2𝑡

At 𝑡 = 0, 𝑦(0) = 15 and 𝑦 ′ (0) = 14,

𝑦(0) = 𝐴1 𝑒 0 + 𝐴2 𝑒 2(0) + 5 = 15 thus 𝐴1 + 𝐴2 = 10

𝑦 ′ (0) = 𝐴1 𝑒 0 + 2𝐴2 𝑒 2(0) = 14 thus 𝐴1 + 2𝐴2 = 14

Solve simultaneously: 𝐴1 = 6 and 𝐴2 = 4.

Chapter 23 | Differential and Difference Equations of Higher Order 311

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 24
SIMULTANEOUS SYSTEMS OF
DIFFERENTIAL & DIFFERENCE
EQUATIONS

CONTENTS
Simultaneous Differential Equations: Case I 326
Simultaneous Differential Equations: Case II 329
Simultaneous Difference Equations: Case I 331
Simultaneous Difference Equations: Case II 334

In this chapter, we want to take a look at systems of differential/difference

equations that are 2×2. These equations can be solved by writing them in
matrix form, which are then solved as standard differential/difference
equations.

SIMULTANEOUS DIFFERENTIAL EQUATIONS: CASE I

Given the following system of first-order linear differential equations.

𝑦1′ = 𝑎11 𝑦1 + 𝑎12 𝑦2 + 𝑏1

𝑦2′ = 𝑎21 𝑦1 + 𝑎22 𝑦2 + 𝑏2

The system is called homogeneous if all 𝑏𝑖 = 0, otherwise it is called non-

homogeneous.
In matrix form

𝑦′ 𝑎11 𝑎12 𝑦1 𝑏1
[ 1′ ] = [𝑎 𝑎22 ] [𝑦2 ] + [𝑏2 ]
𝑦2 21

𝑌 ′ = 𝐴𝑌 + 𝐵

The general solution of the system will compose of 2 equations, each with (i) a
complementary solution 𝑦𝑐 and (ii) a particular solution 𝑦𝑝 .

The complementary solution takes the form,

𝒚𝒄 = 𝒌𝟏 𝑽𝟏 𝒆𝒓𝟏𝒕 + 𝒌𝟐 𝑽𝟐 𝒆𝒓𝟐𝒕

where ki is a scalar or constant, Vi is (2 x 1) column vector of constants (also

known as the eigenvector), and ri is a scalar (also known as the characteristic
root).
Chapter 24 | Simultaneous Differential and Difference Equations 327

The characteristic roots (also known as eigenvalues) are computed by solving

the quadratic equation
𝑻𝒓(𝑨) ± √[𝑻𝒓(𝑨)]𝟐 − 𝟒|𝑨|
𝒓𝒊 =
𝟐
where |𝐴| is the determinant of A, Tr(A) is the trace of A and also the sum of all
the diagonal elements of A.
For A,
𝑻𝒓(𝑨) = 𝒂𝟏𝟏 + 𝒂𝟐𝟐
The solution of the system of simultaneous equations requires the eigenvalue
problem:
(𝑨 − 𝒓𝒊 𝑰)𝑽𝒊 = 𝟎

𝑎 𝑎12 1 0 𝑎11 − 𝑟𝑖 𝑎12

where (𝐴 − 𝑟𝑖 𝐼) = [𝑎11 𝑎22 ] − 𝑟𝑖 [0 ]=[ 𝑎 𝑎22 − 𝑟𝑖 ] = 0
21 1 21

The particular integral, yp, is simply the intertemporal or steady-state solution.

𝒚𝒑 = −𝑨−𝟏 𝑩
−1
where 𝐴 is the inverse of A. B is the column of constants.

The stability of the model is determined by the characteristic roots:

𝑟𝑖 < 0: dynamically stable

𝑟𝑖 > 0: dynamically unstable

In the case where ri has different signs, the solution is said to be at a saddle-
point equilibrium and the model is deemed unstable, except along the saddle
path.

 EXAMPLE 24.1
Solve the following system of first-order, autonomous, linear differential
equations,

𝑦1′ = 2𝑦1 − 3𝑦2 − 10 𝑦1 (0) = 18

𝑦2′ = −𝑦1 + 4𝑦2 − 15 𝑦2 (0) = 11

S O L U T I O N tips
In matrix form
′
𝑦 2 −3 𝑦1 −10
[ 1′ ] = [ ][ ] + [ ]
𝑦2 −1 4 𝑦2 −15

𝑌 ′ = 𝐴𝑌 + 𝐵

The general solution of the system will compose of 2 equations, each with (i) a
complementary solution yc and (ii) a particular solution yp.

The complementary solution takes the form,

𝑦𝑐 = 𝑘1 𝑉1 𝑒 𝑟1𝑡 + 𝑘2 𝑉2 𝑒 𝑟2𝑡
328 Olaniyi Evans | University Mathematics

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 25
OPTIMAL CONTROL THEORY

CONTENTS
The Hamiltonian & the Pontryagin’s Maximum Principle 338
Constraints in the Endpoints 343
The Current-Value Hamiltonian 344

Optimal control theory, an extension of the calculus of variations, is a branch of

mathematics that deals with finding the best way to control a dynamic system
over time such that an objective function is optimized. It is useful for solving
dynamic optimization problems expressed in continuous time. The system being
controlled is typically described by a set of differential equations, and the control
policy is a function that specifies the inputs to the system over time.
For example, the dynamical system might be a nation's economy, with the
objective to minimize inflation; the controls in this case could be interest rate
and money supply. For example, the dynamical system might be a firm's flow of
profits over time, with the objective to maximize the total profits; the controls in
this case could be the output and price.
Largely based on the work of Lev Pontryagin and Richard Bellman in the 1950s,
the optimal control theory has numerous applications in science, engineering
and operations research. It is used to design controllers for systems such as
aircraft, spacecraft, and robots, and to optimize resource allocation in industries
such as energy and transportation.
A control problem includes a functional that is a function of state
and control variables. An optimal control is a set of differential equations that
describe the paths of the control variables that minimize the functional.
The optimal control is derivable using Pontryagin's maximum principle (a
necessary condition), or by solving the Hamilton-Jacobi-Bellman equation (a
sufficient condition). In optimal control theory, the objective is to find the
optimal time path for the control variable, y. The state variable, x, helps us
to predict the behavior of the control variable and has equations of motion
(or transition) set equal to x’.
Optimal control theory problems could involve continuous time, a finite time
horizon, and fixed endpoints. A standard optimal control problem is of the form:
338 Olaniyi Evans | University Mathematics

𝑇
Maximize 𝑈 = ∫0 𝑓[𝑥(𝑡), 𝑦(𝑡), 𝑡] 𝑑𝑡
subject to 𝑥′ = 𝑔[𝑥(𝑡), 𝑦(𝑡), 𝑡] (1)
𝑥(0) = 𝑥0 𝑥(𝑇) = 𝑥𝑇
where U is the functional to be optimized; y(t) the control variable selected or
controlled to optimize U; x(t) the state variable which varies over time consistent
with the differential equation set equal to x’ in the constraint; and t time.

T H E H A M I LT O N IA N & T H E P O NT R Y A G I N ’ S
M A X IM U M P R I NC I P LE
The Hamiltonian function, similar to the Lagrangian function, is a technique
that combines the functional (being optimized) with the state variable
(describing the constraint or constraints) into a single equation.
In line with (1), the Hamiltonian is
𝐻[𝑥(𝑡), 𝑦(𝑡), 𝜆(𝑡), 𝑡] = 𝑓[𝑥(𝑡), 𝑦(𝑡), 𝑡] + 𝜆(𝑡)𝑔[𝑥(𝑡), 𝑦(𝑡), 𝑡] (2)
where H denotes the Hamiltonian, 𝜆(t) is the costate variable (similar to the
Lagrangian multiplier) which represents the marginal value or shadow price of
the state variable x(t).

Pontryagin’s Maximum Principle

For maximization of the Hamiltonian in (2), the necessary conditions are derived
from the maximum principle:
𝜕𝐻
i. =0
𝜕𝑦
𝜕𝑥 𝜕𝐻
ii. = 𝑥′ = state equation
𝜕𝑡 𝜕𝜆
𝜕𝜆 𝜕𝐻
iii. = 𝜆′ = − costate equation
𝜕𝑡 𝜕𝑥
iv. 𝑥(0) = 0 𝑥(𝑇) = 𝑥𝑇 boundary condition
v. 𝜆(𝑇) = 0 transversality condition
The first three conditions are known as the maximum principle. The two
equations of motion in conditions (ii) and (iii) are referred to as the Hamiltonian
system or the canonical system. Condition (v) is applicable to a free endpoint
problem only.
For minimization of the Hamiltonian, multiply the objective function by -1.

The sufficient conditions

The sufficient conditions are fulfilled if:

1. The objective functional and the constraint are continuously differentiable

and jointly concave in x and y.
2. 𝜆(𝑡) ≥ 0, when the constraint is non-linear in x or y. If the constraint is
linear, 𝜆 can assume any sign.

A linear function is both concave and convex, but neither strictly concave
nor strictly convex. For a nonlinear function, the discriminant can test for
joint concavity.

Given the discriminant of the second-order derivatives of a function,

𝑓𝑥𝑥 𝑓𝑥𝑦
|𝐷| = | |
𝑓𝑦𝑥 𝑓𝑦𝑦
Chapter 25 | Opimal Control Theory 339

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 Suggestions for Further Reading

Barnett, R. A., Ziegler, M. R., & Byleen, K. E. (2015). College mathematics for
business, economics, life sciences, and social sciences.

Brechner, R. (2011). Contemporary mathematics for business and consumers.

Cengage Learning.

Cheney, W. (2013). Analysis for applied mathematics (Vol. 208). Springer

Science & Business Media.

Cleaves, C. (2017). Business math: Books a la Carte Edition. Prentice Hall.

Evans, O. (2024). University Mathematics: Volume 1. 5-Profz International.

Harrison, M., & Waldron, P. (2011). Mathematics for Economics and Finance.
Routledge.

Jacques, I. (2009). Mathematics for Economics and Business. Pearson

Education.

Klein, M. W. (2014). Mathematical methods for economics. Harlow, Essex:

Pearson.

Lancaster, K. (2012). Mathematical economics. Courier Corporation.

Larouche Jr, L. H. (2015). So You Wish To Learn All About Economics?: A Text
on Elementary Mathematical Economics. Executive Intelligence Review.

Mavron, V. C., & Phillips, T. N. (2007). Elements of mathematics for economics

and finance. Springer Science & Business Media.

Miller, C. D., Salzman, S. A., & Clendenen, G. (2009). Business mathematics.

Pearson/Addison Wesley.

Na, N. (2016). Mathematical economics. Springer.

Nicola, P. (2013). Mainstream mathematical economics in the 20th century.

Springer Science & Business Media.

Salvatore, D., & Diulio, E. A. (2011). Schaum's Outline of Principles of

Economics. McGraw-Hill.

Schwartz, J. T. (2018). Lectures on the mathematical method in analytical

economics. Courier Dover Publications.

Sydsæter, K., & Hammond, P. J. (2008). Essential mathematics for economic

analysis. Pearson Education.

Sydsæter, K., Hammond, P., Seierstad, A., & Strom, A. (2008). Further
mathematics for economic analysis. Pearson education.

Wainwright, K. (2005). Fundamental methods of mathematical economics.

McGraw-Hill.

Werner, F., & Sotskov, Y. N. (2006). Mathematics of economics and business.

Routledge.

Wisniewski, M. (2013). Mathematics for economics: an integrated approach.

Palgrave.
350 Olaniyi Evans | University Mathematics

INDEX
A Convex function, 48

Acceleration principle, 304 Convexity, 15

Adjoint, 149-153 Corner point theorem, 205

Arbitrary constant, 106 Cost functions, 132

Area bounded by a curve, 128 Cramer's rule, 159, 213, 232

Average value of a function, 136 Cross-price elasticities, 66, 67

B D

Binomial expansion, 100, 101 Decision variables, 205, 218

Binomial series, 104 Definite integrals, 108, 123

Binomial theorem, 100 Definite integrals, 123

Binomial, 85, 100, 104 Definite matrix, 169

Bordered Hessian, 174, 179 Definite solution, 326-324

Break-even point, 24 Determinant, 327

C Determinants, 147

Calculus, 106, 123 Difference equations, 312-314, 322,

331-334, 337
Chain rule, 6
Differentiability, 81
Characteristic roots, 315-325, 345
Differential calculus, 1, 15
Cobb-Douglas production function, 62
Differential equations, 275-292, 309-
Cobweb model, 299 311, 319, 326-329

Cofactor, 147-153 Differentiation, 1, 29, 32, 42

Comparative statics, 59 Discriminant test, 170, 338
Complementary solution, 275, 326-333 Dual, 224, 231
Complex roots, 316-325 Dynamic stability, 279, 332, 335
Concave function, 48 E
Concave programming, 264 Eigenvalues test, 170
Concavity, 15 Eigenvalues, 172, 326-334
Constraints, 204-216, 225-229 Eigenvectors, 172, 326-334, 345
Consumer surplus, 130 Endogenous variables, 59
Continuity, 70 Envelope theorem, 271
Convergence, 306 Equation of the tangent, 3, 43
Index: 351

Equilibrium price, 279,281 Income determination multipliers, 59

Equilibrium, 165, 193-201, 319 Income elasticity of demand, 66, 67

Exact differential equations, 281 Incremental changes, 51

Exogenous variables, 59 Incremental changes, 51

Exponential functions, 32 Indefinite integrals, 107

Exponential growth, 298 Indifference curves, 64

F Inequality constraints, 264-266, 343

Factor theorem, 92 Infinite series, 100

Feasible region, 205 Inflection point, 16, 48

Frequency functions & probability, 134 Input-output analysis, 182

Functional dependence, 167 Input-output table, 182

Functional, 337, 338 Integrating factor, 284,

Fundamental theorem of calculus, 123 Integration by parts, 114

G Integration by substitution, 109

Game theory, 243, 244-257 Integration by substitution, 109

Gauss-Jordan elimination, 162 Integration rules, 107

General equilibrium, 193, 195 Integration, 106, 123

Global maximum, 15 Intertemporal equilibrium, 276, 296,

319-324
Global minimum, 15
Intertemporal solution, 327-333
Graphical limits, 69
Inventory model, 137
Graphical method, 205, 254
Inverse function rule, 12
H
Inverse matrix, 147
Hamiltonian, 334, 335-348
Inverse matrix, 155, 184
Harrod model, 304
IS-LM analysis, 200
Hicks-Hansen model, 200
J
Higher order derivatives, 10
Jacobian, 167
Higher-order equations, 309-322
K
I
Karush-Kuhn-Tucker (KKT)
Identity matrix, 145 conditions, 264
Implicit differentiation, 11 L
Implicit function rule, 54 Lagged income determination model,
303
Improper integrals, 126
Lagrange multiplier, 49, 273, 344
352 Olaniyi Evans | University Mathematics

Lagrangian function, 265-273 Negative definite, 170

Laplace expansion, 147 Non-linear programming, 264

Leontief matrix, 183 Non-negativity restrictions, 205

L'Hôpital’s rule, 78 Non-singular matrix, 147

Limit rules, 71 Non-zero-sum games, 244

Limits, 69, 70-82 O

Linear programming, 204, 217, 231 Objective function, 205, 217-226, 338

Local maximum, 48 One-sided limits, 71

Local minimum, 48 Optimal control theory, 337

Logarithmic functions, 32 Optimal strategy, 250-252

Long division, 89 Optimization, 47-49, 174, 179, 204-216,

337
M
P
Marginal rate of substitution (MRS), 64
Partial derivatives, 42, 59
Marginal rate of technical substitution
(MRTS), 62 Partial equilibrium, 193

Market model, 165, 193, 319, 324 Partial fraction decomposition, 96

Matrices, 142, 155, 169, 213, 232 Partial fractions, 96

Matrix operations, 143 Particular integral, 275, 326-335

Maximin-minimax principle, 247 Pascal's triangle, 101

Maximization, 217-228, 231, 266, 274 Payoff matrix, 245

Micro dynamic model of a market, 278 Phase diagrams, 291, 306

Minimax theorem, 247 Pivot operation, 221-226

Minimization, 224, 231, 264, 274 Point elasticity of demand, 27

Minor, 147-150 Polynomial models, 85

Mixed strategy, 246 Polynomials, 85, 86-89

Monomial, 85 Positive definite, 170

Multipliers, 49-56, 59-63 Price elasticity of demand, 66, 67

Multivariable calculus, 42 Price expectations, 319

Multivariate functions, 42 Primal, 231

N Primary input coefficients, 184

Nash equilibrium, 245 Producer surplus, 130

National income models, 59, 165, 197 Product rule, 7, 43, 48

Index: 353

Profit functions, 132 Sufficient conditions, 266, 338

Pure strategy, 246 Supply and demand, 319

Q Synthetic division, 89

Quadratic forms, 169 T

Quotient rule, 9, 43 Tableau, 217-219

R Technology matrix, 188

Rate of change, 1 Tests for definiteness, 170

Reduction by dominance, 249-251 The prisoner’s dilemma, 243

Relative extrema, 15 Total derivatives, 51

Remainder theorem, 92 Total differentials, 51

Residual input coefficients, 185 Transpose, 145

Revenue functions, 132 Transversality condition, 338, 341, 343

Roy's identity, 272 Trigonometric differentiation, 38

Rules of differentiation, 4 Trinomial, 85

Rules of partial differentiation, 42 Two-sided limits, 71

S V

Saddle point, 48, 246, 247-262 Vector multiplication, 144

Scalar multiplication, 143 Von Neumann duality principle, 225,

231
Second-order partial derivatives, 47
W
Sensitivity analysis, 222
Walrasian general equilibrium, 195
Separation of variables, 286
Warranted rate of growth, 305
Shadow prices, 227, 231
Y
Shepard's lemma, 272
Young's theorem, 47
Simplex method, 205, 217-226, 237,
256 Z

Simultaneous equations, 155, 326-324, Zero-sum games, 244

346

Singular matrix, 149-154

Slack variables, 217-226