UWIN ME11 s29

Course : Matematika Ekonomi (1508ME11)
online.uwin.ac.id
Bachelor in Economics (S.E): Manajemen
UWIN eLearning Program
Session Topic : Penggunaan Matriks dalam

Masalah Ekonomi & Bisnis
Course: Matematika Ekonomi
By Handri Santoso, Ph.D
Content
Part 1
Solusi Persamaan Linier X=A-1B
Part 2
Cramers Rule
Part 3
Matrix Application
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S.3
Part1: Solusi Persamaan Linier X=A-1B
Matrix Division: Properties of Matrices
The concept of matrix division is,

approached in matrix algebra by
deriving the inverse of a matrix.
Q: What is one reason for wanting to find a matrix inverse?
A: Because it can be used to help solve a set of simultaneous
equations specified in matrix format
For example, consider the set of 4 simultaneous equations:
3x1 + 8x2 + x3 + 2x4
= 96
20x1 2x2 + 4x3 + 0.5x4 = 69
11x1 + 3x2 + 3x3 5x4
= 75
x1 + 12x2 + x3 + 8x4 = 134
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Matrix Division: Properties of Matrices (Cont.)
These equations can be represented in matrix format by putting:

The
Coefficients of the 4 unknown variables x1, x2, x3 & x4 into a
4 4 matrix A
4 unknown variables themselves into a 4 1 vector x
Constant terms from the right-hand side of the equations into
the 4 1 vector b.
These can be written as:
3x1 + 8x2 + x3 + 2x4
= 96
20x1 2x2 + 4x3 + 0.5x4 = 69
11x1 + 3x2 + 3x3 5x4 = 75
x1 + 12x2 + x3 + 8x4 = 134
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Matrix Division: Generalization
The same matrix format,

As that derived above can be used for the general case.
Assume that there are n unknown variables x1, x2, . . . , xn &
n constant values b1, b2, b3, . . . , bn, such that
a11x1 + a12x2 + . + a1nxn = b1
a21x1 + a22x2 + . + a2nxn = b2
... ...
...
...
an1x1 + an2x2 + . + annxn = bn
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Matrix Inversion: General
Inverse matrices can be used,

to solve systems of linier equations in 3 unknown
can be written as
Ax = b
where
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Matrix Inversion: Vector
The vector of unknowns, x,

can be found by inverting the coefficient matrix, A, &
Multiplying by the right hand side vector, b, to get.
x = A-1 b
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Matrix Inversion: Example
>>Example
Determine the equilibrium prices of 3 interdependent commodities that satisfy
>>Solutions
In matrix notation this system of equations can be written as
Ax = b
where
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Matrix Inversion: Example (Cont.)
>>Solutions
The inverse of the coefficient matrix has already been found in the previous
example & is
The equilibrium prices are therefore given by,

P1 = 10
P2 = 13
P3 = 5
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Matrix Inversion: Equations
>>Solve the equations
>>Solutions
AX = B
X = A-1 B
Fungsi Invers Matrik

= MINVERSE()
Fungsi Perkalian
Matrix = MMULT()
A-1
A
0.026266 -0.07692
0.146341 0.097561
-17
24
-1
-4 -0.13696
-1
-7 0.277674 0.115385 -0.02439 -0.18293
40
-16
-4
0.115385 -0.04878
-0.06004 -0.03846 -0.04878

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0.134146
0.134146
S.12
Matrix Inversion: Equations (Cont.)
Solve the equations
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Matrix Inversion: Solutions
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Part2: Cramers Rule
Cramers Rule: Definition
Cramers Rule
Defn: Another method of,
using matrices for solving sets of
simultaneous equations, but
it finds the values of unknown variables
one at a time.
This means that,
it can be quicker & easier to use than
the matrix inversion method if you
only wish to find the value of one
unknown variable.
Gabriel Cramer
Swiss Mathematician (1704-1752)
This speed of manual calculation advantage is not that important if,

you can use an Excel spreadsheet for matrix inversion and multiplication.
However, Cramers rule is still useful in economics
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Cramers Rule: Definition (Cont.)
We already know that,

A set of n simultaneous equations involving n unknown variables x1, x2,.,
xn &
n constants values can be specified in matrix format as
Ax = b
where
A is an n x n matrix of parameters
x is an n x 1 vector of unknown variables &
b is an n x 1 vector of constant values
Cramers rule says that,

The value of any one of the unknown variables, xi, can be found by
Substituting the vector of constant values b for the ith column of matrix A &
then dividing the determinant of this new matrix by the determinant of the
original A matrix.
Thus, if the term A, is used to denote matrix A with column i replaced by
the vector b then Cramers rule gives
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Cramers Rule: Example
Solution
These simultaneous equations can be represented in matrix format as
Using Cramers rule,

to find x1 by substituting the
vector b of constants
for column 1 in matrix A
gives
In a similar fashion,
by substituting vector b
for column 2 in matrix
A we get
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Cramers Rule: Exercise
1. Use Cramers rule to find the unknown x & y when

24x + 2y = 86
15x + y = 52
2. Given the set of simultaneous equations

3x1 + 4x2 + 9x3 = 45
5x2 + 2x3 = 32
4x1 + 2x2 + 4x3 = 32
Use Cramers rule to find the value of x2 only
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Part3: Matrix Application
Matrix Application: Application
One important use of,

the matrix method of solution for a set of unknown variables is in
econometrics,
where estimates of the parameters of an economic model are
derived using observations of different values of
the variables in the model.
Normally,
relatively large data sets are used to estimate parameters, &
a stochastic (random) error term has to be allowed for.
However, to explain the basic principles involved we will work with
only 3 observations & assume no error term.
This should help you to understand the more sophisticated models
that you will encounter if
.you go on to study intermediate econometric analysis of
multivariable models.
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Matrix Application: 3 Exogenous Variables
Assume that y is,

A linear function of 3 exogenous variables x1, x2 & x3 so that
where,
the subscript i denotes the observation number &
1, 2 & 3 are the parameters whose values we wish to find.
There are 3 observations, which give the values shown below:
Observation Number
x1
x2
x3
240
10
12
20
150
15
300
12
18
20
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Matrix Application: 3 Exogenous Variables (Cont.)
Q: How can these observations be used to estimate the parameters 1,

2 & 3 ?
A:
If the function yi = 1x1i + 2x2i + 3x3i holds for all 3 observations
(i.e. all three values of i)
then there will be 3 simultaneous equations
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Matrix Application: Matrix
These can be written in matrix format as y = X, where
Since,
multiplying both sides by inverse B-1 gives
A matrix times its inverse gives the identity matrix.
Thus & so the vector of parameters will be
X = y
X-1 X = X-1y
I = X-1y
= X-1y
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Matrix Application: Adjoint
The adjoint matrix will then be the transpose of this cofactor matrix
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Matrix Application: Example
The determinant of matrix X can be calculated as

|X| = 10(160 270) 12(100 180) + 20(90-96) = -260
Inserting these values into the formula for the inverse matrix gives
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Matrix Application: Vector
Therefore the vector of coefficient is
Please compare yours results calculation using excel
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Matrix Application: Vector (Cont.)
To check,
the parameters in vector have been calculated correctly,
we can insert the values computed above into the first of the set of 3
simultaneous equations in this example.
Thus, from equation (1)
y1 = 110 + 212 + 320

= 9.23(10) + 6.92(12) + 3.23(20)
= 240
- 1508ME11-
S.28
Course : Matematika Ekonomi (1508ME11)
online.uwin.ac.id
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Course : Matematika Ekonomi (1508ME11)

UWIN eLearning Program

Session Topic : Penggunaan Matriks dalam

Solusi Persamaan Linier X=A-1B

Part1: Solusi Persamaan Linier X=A-1B

Matrix Division: Properties of Matrices

The concept of matrix division is,

Matrix Division: Properties of Matrices (Cont.)

These equations can be represented in matrix format by putting:

Matrix Division: Generalization

The same matrix format,

Matrix Inversion: General

Inverse matrices can be used,

Matrix Inversion: Vector

The vector of unknowns, x,

Matrix Inversion: Example

Matrix Inversion: Example (Cont.)

The equilibrium prices are therefore given by,

Matrix Inversion: Equations

>>Solve the equations

Fungsi Invers Matrik

-7 0.277674 0.115385 -0.02439 -0.18293

-0.06004 -0.03846 -0.04878

Matrix Inversion: Equations (Cont.)

Solve the equations

Matrix Inversion: Solutions

Part2: Cramers Rule

Cramers Rule: Definition

This speed of manual calculation advantage is not that important if,

Cramers Rule: Definition (Cont.)

We already know that,

Cramers rule says that,

Cramers Rule: Example

Using Cramers rule,

Cramers Rule: Exercise

1. Use Cramers rule to find the unknown x & y when

2. Given the set of simultaneous equations

Part3: Matrix Application

Matrix Application: Application

One important use of,

Matrix Application: 3 Exogenous Variables

Assume that y is,

Matrix Application: 3 Exogenous Variables (Cont.)

Q: How can these observations be used to estimate the parameters 1,

Matrix Application: Matrix

These can be written in matrix format as y = X, where

Matrix Application: Adjoint

Matrix Application: Example

The determinant of matrix X can be calculated as

Matrix Application: Vector

Therefore the vector of coefficient is

Please compare yours results calculation using excel

Matrix Application: Vector (Cont.)

y1 = 110 + 212 + 320

Course : Matematika Ekonomi (1508ME11)

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