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.
• The unknown is often a function of time.
Ordinary Differential Equations
Equations which are composed of an unknown
function and its derivatives are called differential
equations.
Differential equations play a fundamental role in
engineering because many physical phenomena are
best formulated mathematically in terms of their
rate of change.
dv c v- dependent variable
g v
dt m t- independent
variable 3
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 n th
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.
When a function involves one dependent variable,
the equation is called an ordinary differential
equation (or ODE). A partial differential equation
(or PDE) involves two or more independent
variables.
Differential equations are also classified as to their
order.
A first order equation includes a first derivative as its
highest derivative.
A second order equation includes a second derivative.
Higher order equations can be reduced to a system
of first order equations, by redefining a variable.
by Lale Yurttas, Texas
A&M University Part 7 5
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
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 ( Y ) , y is taken as a
p
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
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