## Methods and Tools of Economic Analysis [Syllabus, Elms]

Professor Peter Cramton

The methodology of economics employs mathematical and logical tools to model and analyze markets, national economies, and other situations where people make choices. Understanding of many economic issues can be enhanced by careful application of the methodology, and this in turn requires an understanding of the various mathematical and logical techniques. This course reviews concepts and techniques usually covered in algebra, analytical geometry, and the first semester of calculus. It also introduces the components of subsequent calculus and linear algebra courses most relevant to economic analysis. The course emphasizes the reasons economists use mathematical concepts and techniques to model behavior and outcomes.

The course will meet three times a week, twice for lectures and once in discussion section conducted by a teaching assistant. Lectures will demonstrate the power of math to answer economic questions, stressing the reasons economists use math and explaining mathematical logic and techniques. Discussion sections will demonstrate solutions for problems, answer questions about material presented in the lectures or book, and focus on preparing students for exams.

Students should be prepared to devote at least 4 hours per week outside class meetings, primarily working on problem sets as well as reviewing materials and practicing. *Students with weak math skills will need to spend additional time mastering techniques.*

## Course objectives

Each student should be able by the end of the semester to

- Recognize and use the mathematical terminology and notation typically employed by economists
- Explain how specific mathematical functions can be used to provide formal methods of describing the linkages between key economic variables
- Employ the mathematical techniques covered in the course to solve economic problems and predict economic behavior
- Explain how mathematical concepts enable economists to analyze complicated problems and generate testable hypotheses

# Teaching Assistants

Hector Lopez, Tydings 4101D, Office hours Tue 2:30-3:30, Fri 12-1:00

section 2 Fri 9am Tydings 2102

section 3 Fri 10am Tydings 2102

section 5 Fri 11am Tydings 2110

Gloria Chen, Tydings 4128, Office hours Mon 1-2, Fri 11-12

section 1 Fri 9am Tydings 1114

section 4 Fri 10am Tydings 1132

section 6 Fri 12pm Tydings 1108

Academic Achievement Programs Tutor for Econ 300: Ryan Suess

# Problems Sets

There are six problem sets. Answers will be posted after the due date at the following links: PS1, PS2, PS3, PS4, PS5, PS6. If it is after the due date and you still see “Suggested Answers are not yet available.” then press F5 to refresh the page.

Here are some relevant Mathematica Demonstrations of topics in this course.

# Class Schedule and Materials

Note well: the schedule may change as a result of snow events and other factors. Please watch your email for notification of such changes, which will then be reflected below once you press F5 to refresh the page.

The “nb” files are Mathematica Notebooks; you will need Mathematica to open these. The “cdf” files are the same as the “nb” files but you only need the free cdf player installed to use these; download here.

Date Topic

Jan 28 01 – Mathematical Framework of Economic Analysis, Khan Academy, Math Review, The Math Page, Wolfram TED talk

Jan 30 02 – An Introduction to Functions, [nb, cdf], Limits

Feb 4 02 – An Introduction to Functions (continued)

Feb 6 03 – Exponential Functions, [nb, cdf], The Mating Game.nb cdf

Feb 7 Problem set 1 due

Feb 11 03 – Logarithmic Functions, Visual Guide to Simple, Compound, and Continuous Interest Rates

Feb 13 04 – Section 1 only – Systems of Equations and Comparative Statics, [nb, cdf]

Feb 18 05 – Basics of Differential Calculus, [nb, cdf]

Feb 20 05 – Basics of Differential Calculus (continued)

Feb 21 Problem set 2 due

Feb 25 05 – Basics of Differential Calculus (continued)

*Feb 27 First Midterm *[Review Sheet, Prior Midterm, Prior Answers, W version, W answers, T version, T answers]

Mar 4 06 – Univariate Calculus, [nb, cdf]

Mar 6 06 – Univariate Calculus – Elasticity

Mar 7 Problem set 3 due

Mar 11 07 – Multivariate Calculus, [nb, cdf]

Mar 13 07 – Multivariate Calculus (continued)

Spring Break

Mar 25 08 – Extreme Values of Univariate Functions

Mar 27 09 – Extreme Values of Multivariate Functions, [nb, cdf]

Apr 1 09 – Extreme Values of Multivariate Functions (continued)

Apr 3 09 – Extreme Values of Multivariate Functions (continued)

Apr 4 Problem set 4 due

*Apr 8 Second Midterm* [Review Sheet, Prior Midterm, Prior Answers, W version, W answers, T version, T answers ]

Apr 10 10 – Constrained Optimization, [nb, cdf]

Apr 15 10 – Constrained Optimization (continued)

Apr 17 10 – Constrained Optimization (continued)

Apr 18 Problem set 5 due

Apr 22 11 – Probability

Apr 24 12 – Decision making under Uncertainty, [Coin Flip Problem.nb, cdf]

Apr 29 13 – Risk Theory, [nb, cdf]

May 1 14 – Game Theory

May 2 Problem set 6 due

May 6 14 – Game Theory (continued)

May 8 15 – Market Games

May 13 Review

*May 15 Final Exam 8:00 am – Marie Mount Hall 1400 * [Final Review Sheet, Final Review Problems, Answers**]**