Optimisation Techniques for Economists
Optimising decision behaviour is at the core of most economic analysis. Whether we ask how a consumer should behave, how firms should compete in a market or how governments should decide on their monetary policy, the ability to solve optimisation problems is key to finding an answer. This module provides a thorough introduction to the techniques involved in unconstrained and constrained optimisation. It expands on the optimisation techniques introduced in the microeconomics and macroeconomics courses in the first term and lays the foundation for many advanced economic option courses in the second term.
Additional Information: Internationalisation
Microeconomics is relevant across countries as it is based on mathematical models.
All of the resources for this module are available on the ELE (Exeter learning Environment).
This module equips students with logical thinking, numeracy and writing skills, as well as an understanding and theoretical knowledge of economic issues. These help students think like economists, a quality highly valued by employers.
[PLEASE NOTE THIS MODULE IS NOT AVAILABLE TO MATHS STUDENTS]
Full module specification
|Module title:||Optimisation Techniques for Economists|
This module is not available to Maths students.
|Duration of module:||
Duration (weeks) - term 1: |
Economic problems are often expressed using mathematical models which are to be formulated, analysed and to be confronted with real-world data. The module aims to make you familiar with those mathematical tools and methods which are used frequently in most economic models and to demonstrate how they are applied.
ILO: Module-specific skills
- 1. demonstrate the skill to differentiate functions in several variables
- 2. solve economic optimisation problems
ILO: Discipline-specific skills
- 3. explain the important role of mathematical tools in economics and related disciplines in a global setting
- 4. apply essential skills to analyse models from microeconomics and macroeconomics
- 5. demonstrate familiarity with concepts of linear algebra that are essential for econometrics
ILO: Personal and key skills
- 6. demonstrate numeracy and the ability to handle logical and structured problem analysis
- 7. present written and quantitative data effectively
- 8. demonstrate independent learning and time management
- 9. demonstrate inductive and deductive reasoning
Learning activities and teaching methods (given in hours of study time)
|Scheduled Learning and Teaching Activities||Guided independent study||Placement / study abroad|
Details of learning activities and teaching methods
|Category||Hours of study time||Description|
|Scheduled learning and teaching activities||22||Lectures|
|Scheduled learning and teaching activities||11||Tutorials|
|Guided independent study||117||Reading, preparation for classes and assessments.|
|Form of assessment||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Bi-weekly problem sets (homework)||4 problem sets with 3 questions each||1-9||ELE|
Summative assessment (% of credit)
|Coursework||Written exams||Practical exams|
Details of summative assessment
|Form of assessment||% of credit||Size of the assessment (eg length / duration)||ILOs assessed||Feedback method|
|Problem Set 1||8||Week long window for 3 questions||1-9||ELE|
|Problem Set 2||8||Week long window for 3 questions||1-9||ELE|
|Problem Set 3||8||Week long window for 3 questions||1-9||ELE|
|Problem Set 4||8||Week long window for 3 questions||1-9||ELE|
Details of re-assessment (where required by referral or deferral)
|Original form of assessment||Form of re-assessment||ILOs re-assessed||Timescale for re-assessment|
|Examination (68%)||Examination (68%)||1-9||August/September Reassessment Period|
|Problem Set 1||Problem Set 1 (8%)||1-9||August/September Reassessment Period|
|Problem Set 2||Problem Set 2 (8%)||1-9||August/September Reassessment Period|
|Problem Set 3||Problem Set 3 (8%)||1-9||August/September Reassessment Period|
|Problem Set 4||Problem Set 4 (8%)||1-9||August/September Reassessment Period|
Univariate functions and their properties, differentiation of univariate functions, unconstrained univariate optimization
Multivariate functions and their properties, differentiation of multivariate functions, unconstrained multivariate optimization and applications
Constrained optimization and applications, the Lagrange multiplier method, the Kuhn-Tucker theorem
Infinite horizon constrained optimization problems
Indicative learning resources - Basic reading
- Knut Sydsæter, Peter Hammond, Arne Størm, and Andrés Carvajal (2016): Essential Mathematics for Economic Analysis, 5th edition, Pearson
Alternative textbooks covering the same topics. You may find some more accessible than our main textbook:
- Carl P. Simon and Lawrence Blume (2010): Mathematics for Economists, International student edition, W. W. Norton
- Ian Jacques (2015): Mathematics for Economics and Business, 8th edition, Pearson
- Teresa Bradley (2013) Essential Mathematics for Economics and Business, 4th edition, Wiley.
- Kevin Wainwright and Alpha C. Chiang (2005): Fundamental Methods of Mathematical Economics, 4th edition, McGraw-Hill
More advanced textbooks for the interested reader:
- Knut Sydsaeter, Peter Hammond, Atle Seierstad, and Arne Strøm (2008): Further Mathematics for Economic Analysis, 2nd edition, Pearson
- Avinash K. Dixit (1990) Optimization in Economic Theory, 2nd edition, Oxford University Press. A superb text on optimization, but out of print and it has always been very expensive.
- Daniel Leonard and Ngo van Long (1991): Optimal Control Theory and Static Optimization in Economics, Cambridge University Press
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