Topic 4 - Maths For Econ Flashcards
1
Q
Why are logarithms useful in economics
A
- Nonlinear equations are often linear in logs
2
Q
Name the one log rule we always forget
A
- ln(1 + a) = a for small a
3
Q
What is an important property of the natural log
A
- It is a positive monotonic transformation
- if A > B, then ln(A) > ln(B)
4
Q
What is exp(x) equal to
A
- e^x
5
Q
Which numbers are not classified as real numbers
A
- Imaginary numbers or positive/negative infinity
6
Q
What two functions are commonly used in macro
A
- Production function and utility function
7
Q
What is a general production function
A
- Y = F(K,L)
8
Q
How are the marginal products of capital and labour calculated
A
- ∂Y/∂K and ∂Y/∂L
9
Q
How do marginal products change as an input is increased
A
- The marginal product decreases
- Diminishing returns
10
Q
What do utility functions represent
A
- The welfare of one or more people
- Higher values of U are preffered to lower U
11
Q
What does indifference between bundles U(x,y) and U(x’,y’) mean
A
- U(x,y) = U(x’,y’)
12
Q
What does an indifference curve show
A
- The different combinations of two goods that give the same utility
13
Q
How is the marginal utility calculated in the case of U(x,y)
A
- ∂U/∂x and ∂U/∂y
14
Q
Write out the differentiation by first principles formulae
A
- f’(x) = lim h->0 of f(x+h) - f(x) / h
15
Q
Why do we not deal with many minimization problems in macro
A
- Minimization problems can be re-stated as maximization problems
