Optimization for Economists

Second year module

Lecturer: Ralph Bailey

In this course, students who have taken Advanced Quantitative Economic Methods will continue to develop the mathematical background necessary to cope with intermediate economic theory and intermediate econometrics. The core topic covered will be the optimization of quantities (such as profit, utility, social welfare, or likelihood) which depend on several variables: variables which may have to satisfy certain constraints. We will try to understand the concepts and results in geometric terms as far as possible, though learning to handle the relevant algebra correctly and confidently at the same time.

Learning outcomes

On completion of this module the student will be able to:

  • understand the most fruitful methods of optimization and apply some of these methods in micro-economics and econometrics;
  • understand, from an algebraic and a geometric point of view, vector calculus, convex sets and functions, numerical methods, the Kuhn-tucker theorem, dynamic optimization, and linear programming.

Assessment

  • 2 hr written examination 75%
  • Problem sheets 25%