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UNIVERSITY OF BUFFALO DEPARTMENT OF ECONOMICS Economics 451 & 515 Mathematics for Economists Fall 2011 Course Outline

The Purpose of the Course: The crucial idea in modern economics is rational choice. Simply put, a choice is rational when it is most preferred from the choices that are available for selection. An example is a consumer with a given amount of money to spend on consumption goods. The consumer wants a combination of goods that pleases her as much as is possible but her limited amount of money restricts the choices available to her. A combination that makes her as happy as is possible given the restriction on her choices imposed by her limited budget is a rational choice. Similarly, a firms profitability is limited by the relationship between quantities of inputs used and the quantity of output produced. This technological restriction, the firms production function, imposes limits on the firms profitability. A combination of inputs and an output level that makes the firms profit as large as is possible given the restriction that is its production function is a rational choice for the firm. Rational choice is an idea with almost endless application. Economics is the study of the consequences of scarcity. Scarce resources, whatever they may be, impose hard choices. Using an extra unit of some scarce resource for purpose A makes that resource unit unavailable for purpose B. For which purpose, then, should the resource unit be used? Scarcity thus imposes limitations upon what may be achieved from the resources that are available. A rational choice is one that extracts the greatest possible value from the limited available resources. As such, rational choices are at the heart of the solution to any economic problem. Studying how to make rational choices is therefore at the very core of the study of economics. Also of great importance is the study of the properties of rational choices. For example, how does our consumers rationally chosen combination of goods alter as the amount of money she possesses changes, or as the price of some commodity changes? Economists want to know these things in order to predict the effects of price inflation, changes to income taxes, or changes to interest rates, for example. And how does the firms demand for labor change if a new law insists that the firm provide health insurance for its workers, or if the payroll tax rate is changed? This course provides a relatively general explanation of the practical mathematics used by economists to explain most of the rational choices we observe in reality. The mathematics is a specific blend of basic algebra and partial differentiation called differentiable constrained optimization theory. It is a very geometric subject that allows its content to be explained visually, so the course proceeds by explaining each core idea with geometric figures and then formalizes the idea with a mathematical statement of it. The Emphasis of the Course: The persistent emphasis is on understanding each idea. What is it is used for? How is it used? What do we learn from its use? Also persistent is the Peter B. Morgan

demonstration of each ideas practical value by applying it to an important economic issue. These same emphases will be apparent in all of the courses assessments. How to Study the Course: This is not a cook-book course in which one memorizes materials or crams just before a test. Nor is it a course that a math major can pass from a knowledge of the contents of other math classes. The emphasis of this course on developing and using constrained optimization theory makes it relatively unique at UB. This is a course that is relatively easy to master if its content is studied and understood using the methodical, week-at-a-time study regime that should be the hallmark of a mature, motivated student. About once per week, students will be given an assignment that is a combination lecture note and problems. Before the beginning of the next week, all of this assignment should be carefully studied, remembering that the material is to be understood and not merely memorized. Professor Morgan is available to you to clear up the inevitable difficulties that will appear. Any such difficulty should be attended to right away dont let troubles accumulate since they will increasingly inhibit your ability to understand later parts of the course. The course seems to move at a relatively slow pace but this is deceptive and it does not take long before a considerable amount of material has been covered. Prerequisites: A student entering Economics 451 or 515 must have knowledge of calculus and linear algebra equivalent to that obtained by passing both Mathematics 121 and 122, or both Mathematics 141 and 142. These prerequisites are intended to ensure that students enter the course with good understandings of at least one-variable calculus and of elementary linear algebra ideas such as vectors. If you do not remember much about them then you should immediately dust off your old textbook (or your newly acquired copy of Simon and Blume) and get busy reviewing these topics. Lectures: Tuesday and Thursday; 12:30 p.m. - 1:50 p.m., in Fronczak 422. Instructor Information: Peter B. Morgan. Office: Fronczak 449. Ph: 716-645-8690. Email: pbmorgan@buffalo.edu. Office Hours: Tuesday & Thursday 2:00 4:00 p.m. Reference Materials: The textbook assigned to this course is Mathematics for Economists by Carl Simon and Lawrence Blume, published by W. W. Norton. You should be able to buy a good used copy at about half of the price of a new copy. From time-to-time additional reference materials will be provided to the class. Assignments: Assignments will be issued about once per week. Answers will follow one week later. Assignments are graded by you. The sole purpose of each assignment is to provide to you an opportunity to determine for yourself how well you have understood the materials covered in that assignment. Students are encouraged to assist one another after making serious individual efforts to complete an assignment. Understand that it really is important that each week you attempt by yourself the assignment for that week. Leaving assignments until answers are issued almost certainly dooms a student to a disappointing grade for the course.

Listening and watching as someone else works through a problem is not enough. You must develop the ability to do this for yourself and to understand what you are doing. Thus the repeat and memorize study method is not appropriate for this course, no matter how well it may have worked for you in other courses. Concentrate upon developing understanding, not mere familiarity with examples and notes. Be well-organized. Be systematic. Leave nothing to chance. When, inevitably, you discover that you do not understand some part of the course materials you should immediately seek assistance in Professor Morgans office hours. Dont let misunderstanding of one idea inhibit your ability to understand later ideas. Dont even think about leaving study until a test is almost upon you. Assessment: There is no curve. Each student is assigned a letter grade that depends only upon that students performance in the courses assessment scheme. That scheme consists of two midterm tests, each contributing 20% to the overall score for the course, and a final examination that contributes the remaining 60%. Neither midterm test is cumulative. The final examination is cumulative. Letter grades will be assigned according to the overall score intervals that are displayed in the following table. At the end of the course only, the D grade interval will be divided into D and D+ intervals, the C and B intervals will be divided into C-, C and C+, and BB, and B+ intervals respectively, and the A interval will be divided into A- and A intervals. Overall Score 0% - 399% 40% - 499% 50% - 649% 65% - 749% 75% - 100% Letter Grade F D C B A

The midterm tests will be held in Fronczak 422 on Tuesday October 11th, 7:00 p.m. 8:30 p.m. and on Tuesday November 8th, 7:00 p.m. 8:30 p.m. The final examination will also be held in Fronczak 422, on Thursday December 15th, 11:45 a.m. 2:45 p.m. Assessment Conflicts: If a midterm test or the final examination conflicts with another assessment or a scheduled class, then contact Professor Morgan at soon as you know of the conflict and at least one week in advance of the test or examination. Requests for a makeup received with less than one week of warning will be refused, unless there is acceptable evidence of an exceptional circumstance such as an unforeseen emergency. Students are never permitted to take the final examination before the date scheduled by the University. Makeups: Makeups for midterm tests or the final examination are given only when there is a class or test conflict or when a student can satisfactorily document a circumstance beyond his or her control that very seriously and adversely affects his or her study for the course at a time close to the test or examination. Understand that it is expected that you will study the courses content weekly, instead of leaving it to try to cram shortly before an assessment event.

Makeups cannot be taken on a walk-in basis. Professorial permission must be obtained beforehand. Please consult Professor Morgan if you need advice on whether or not a particular circumstance merits a makeup test or exam. Requests for a makeup received with less than one week of warning will be rejected, unless there is acceptable evidence of an unforeseen conflict. Conduct in the Classroom: Professor Morgan is obliged both professionally and by UB policy to maintain a classroom environment in which students can learn. Consequently, students who indulge in persistent talking or other disruptive behaviors must cease upon request. Repetitive poor conduct or refusal by a student to conduct him or herself properly will result in that student's removal from the course. Student Athletes: Reasonable efforts are made to accommodate the timetabling needs of UB athletes. However, an athlete will receive an accommodation only if he or she informs Professor Morgan at least one week in advance of a sporting event. Exceptions will not be made. An athlete with a quiz, midterm test or final examination conflict due to a sporting event must provide a letter (not an email) on UB stationery from his or her coach to confirm the athlete's special timetabling need and that the coach will administer the quiz, midterm test or final examination as directed by Professor Morgan. Academic Integrity: Cheating in any test or examination will, without exception, result in a failing grade for the class and reporting of the cheating to the University at Buffalo. Undergraduate students should view the materials provided at http://undergrad-catalog.buffalo.edu/policies/course/integrity.shtml. Graduate students should view the materials provided at http://www.grad.buffalo.edu/policies/index.php. Special Needs: Any student who needs a special accommodation for study of the course or for the courses assessment should, within the first two weeks of the course, inform Professor Morgan of that need and provide appropriate documentation to him.

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