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Differential Equations

The document discusses the fundamentals of differential equations, including their definition, order, degree, and types, as well as their applications in economics. It explains the general and particular solutions of first-order linear differential equations, both homogeneous and non-homogeneous cases, and highlights the importance of these equations in analyzing equilibrium and stability in economic models. The document concludes by emphasizing the role of differential equations in understanding market dynamics and growth models.

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12 views16 pages

Differential Equations

The document discusses the fundamentals of differential equations, including their definition, order, degree, and types, as well as their applications in economics. It explains the general and particular solutions of first-order linear differential equations, both homogeneous and non-homogeneous cases, and highlights the importance of these equations in analyzing equilibrium and stability in economic models. The document concludes by emphasizing the role of differential equations in understanding market dynamics and growth models.

Uploaded by

epavinbro9047
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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DIFFERENTIAL

EQUATIONS
SEM 3 ECONOMICS HONOURS
Differential
Equations
•Differential Equations were begun by Newton

and Leibniz in the seventeenth century.


• Differential Equations are often used in
economics.
• A Differential Equation is an equation which
involves derivatives.
• It is an implicit functional relationship
between
variables and their differentials.
Order and degree of
Differential Equations
• The order of a Differential Equation is the highest
order of any of the derivatives contained in it.
A Differential Equation is of order n if the nth
derivative is the highest order derivative in it.
• The highest power to which the derivative of the
highest order occur is the degree of a Differential
Equation.
Example of
Differential Equation

• Y = dy/dt + t2 Differential Equation of


order 1 and degree 1
• (d2y/dt2 )3 – 6 (dy/dt)2 +ty = 0
Differential Equation of
order 2 and degree 3
Kinds of
Differential Equations
• Ordinary Type:
involving only one independent variable and its
derivatives.

• Partial Differential Equations:


involving more than one independent variable and
partial derivatives.
Solution of
Differential Equation
• Differential Equation of order n has a General
solution containing n arbitrary independent
constants.
• A Particular solution may be obtained from the
general solution by assigning certain specific
values [which are obtained from any given
information of the initial conditions given in the
problem] to the arbitrary constants .
First- order linear Differential
Equation with constant
coefficient and constant term

General form of the equation:


dy/dt + u(t) y = w(t)
• derivative is taken with respect to time (t)
• u and w are functions of t
• When u and w are taken as constant, the is
termed as First- order linear Differential Equation
with constant coefficient and constant term.
Homogeneous
Case
• U = a constant ; a
• W=0
• the form of the Equation becomes :
dy/dt + ay = 0 ……… 1
=> 1/y dy/dt = -a
=> ∫ 1/y dy = - ∫ a dt [taking integration of both side]

From left side, ∫ 1/y dy = log │y│ + c1 (y#0)

From right side, - ∫ a dt = -at + c2

By equating, log │y│ = -at + c


• Now taking anti log of log│y│implies, elog y = x

• therefore, , log │y│ = -at + c becomes,


elog │y│= e-at + c => │y│= e-at . ec = A. e-at
• Therefore the solution is
y(t) = A. e-at ……………… 2
This is general solution, where A is arbitrary.

• For any particular value of ‘A’ the solution becomes “particular.”

• There may be infinite number of particular solution.

• Setting t=o , y(0) = A . e0 => A = Y (0)

• Therefore Y(t) = Y(0)e-at …………….. 3

• This is the Definite Solution as the arbitrary constant is definitized here. Y(0)
is the only value that makes the solution satisfy the initial condition.
Note:
• The solution is a function of Y(t) – a time
path where “ t” symbolizes time.

• No derivative is present in the solution.


The Non-homogeneous
Case
• The equation is
dY/dt + aY = b ....... 4
The solution is the sum of Complementary function
and Particular Integral.
• To find Particular integral ( Yp ) , y is taken as a
constant.
Here Y = k , dY/dt = 0
Equation 4 becomes, ak = b => k = b/a = Yp ... 5a
• To get the Complementary Function (Yc ), the process is
to get the homogeneous equation which is termed as
reduced equation.
The Trial solution is
Yc = A e –at ....5b
So, the general solution becomes
Y(t) = Yc + Yp = A e –at + b/a ........6
.
• Now the constant A is definitized by means of an
initial condition.
When t = 0 , y takes the value Y(0) .
• Equation 6 becomes,
Y(0) = A + b/a => A = Y(0) - b/a
• Therefore the definite solition is
Y(t) = [ Y(0) – b/a] e -at
+ b/a ........7
Use of Differential Equation in
Economics

• Differential Equations have wide use to explain


different concepts of Economics. Equilibrium,
Stability of different Market models can be easily
explained by this mathematical method.
• Growth models also use linear differential
Equation.
Analysis of Equilibrium is an important part of Economics.
Differential Equations explains the Euilibrium as well as the investigates the
Stability of Equilibrium.
In the above discussed linear differential equation, the time path of Y is obtained.
The solution is given here once more:
Y(t) = [ Y(0) – b/a] e -at
+ b/a ............ 7
Equilibrium can be attained if , Y(0) = b/a

When Y(0) ≠ b/a , it requires to analyse whether the time path converges
to equilibrium over time or not and this is called the Stability Analysis.
The stability depends on the value of “a”.
From equation 7 it can be shown that, starting from a non-equilibrium position,
Convergence is obtained if e-at → 0 as t→ ∞ It is possible only when a > 0
Divergence is obtained e-at → ∞ as t→ ∞ It is possible only when a < 0
Thank you

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