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MATHEMATICS
FOR ECONOMICS AND BUSINESS
IAN JACQUES
TENTH EDITION
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The right of Ian Jacques to be identified as author of this work has been asserted by him in accordance with the Copyright,
Designs and Patents Act 1988.
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or use of this text may be a direct infringement of the author’s and the publisher’s rights and those responsible may be liable in
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in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any
affiliation with or endorsement of this book by such owners.
Pearson Education is not responsible for the content of third-party internet sites.
10 9 8 7 6 5 4 3 2 1
27 26 25 24 23
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
Preface xiii
Chapter 1 682
Chapter 2 692
Chapter 3 701
Chapter 4 705
Chapter 5 716
Chapter 6 723
Chapter 7 727
Chapter 8 733
Chapter 9 737
Glossary 741
Index 748
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This textbook is intended primarily for students on economics, business studies and manage-
ment courses. It assumes very little prerequisite knowledge, so it can be read by students who have
not undertaken a mathematics course for some time. The style is informal, and the text con-
tains a large number of worked examples. Students are encouraged to tackle problems for
themselves as they read through each section. Solutions are provided so that all answers can
be checked. Consequently, it should be possible to work through this text on a self-study
basis. The material is wide ranging and varies from elementary topics such as percentages
and linear equations to more sophisticated topics such as constrained optimisation of multi-
variate functions. The text should therefore be suitable for use on both low- and high-level
quantitative methods courses.
This text was first published in 1991. The prime motivation for writing it then was to try
to produce a book that students could actually read and understand for themselves. This
remains the guiding principle when writing this tenth edition. Extra features and resources
requested by students over the years are now incorporated into the printed book. These
include end-of-chapter multiple-choice tests and longer examination questions. All of these
are designed to help students pass the course.
Online resources include access to the eBook and a bank of new problems in MyLab Math.
The latter provides students with an interactive learning environment where they can concen-
trate on topics that they find difficult and measure their own progress. There is a ‘help me solve
it’ mode which provides step-by-step guidance to solve a problem with the system acting like
a personal tutor. Lecturer’s resources include fully worked solutions to all of the standard
problems in the textbook, PowerPoint slides, and material on more advanced topics.
Many of the examples and questions in this edition have been updated to make them more
contemporary. New material on the second-order conditions for Lagrange multipliers and a
new section on Lorenz curves and Gini coefficients are provided. Case studies are now
included to give an indication how the mathematics covered in each chapter can actually be
used by businesses and individuals in practice, which we hope students will find relevant and
interesting.
Ian Jacques
by solving problems yourself that you are ever going to become confident in using and applying
mathematical techniques. For this reason, several problems are interspersed within the text, and
you are encouraged to tackle these as you go along. You will require writing paper, graph paper,
pens and a calculator for this. There is no need to buy an expensive calculator unless you are
feeling particularly wealthy at the moment. A bottom-of-the-range scientific calculator should
be good enough. Answers to every question are printed at the back of this text so that you
can check your own answers quickly as you go along. However, please avoid the temptation
to look at them until you have made an honest attempt at each one. Remember that in the
future you may well have to sit down in an uncomfortable chair, in front of a blank sheet of
paper, and be expected to produce solutions to examination questions of a similar type.
At the end of each section there are two parallel exercises. The non-starred exercises
are intended for students who are meeting these topics for the first time and the questions are
designed to consolidate basic principles. The starred exercises are more challenging but still
cover the full range so that students with greater experience will be able to concentrate their
efforts on these questions without having to pick-and-mix from both exercises. The chapter
dependence is shown in Figure I.1. If you have studied some advanced mathematics before,
you will discover that parts of Chapters 1, 2 and 4 are familiar. However, you may find that
the sections on economics applications contain new material. You are best advised to test
yourself by attempting a selection of problems from the starred exercise in each section to
see if you need to read through it as part of a refresher course. Economics students in a
desperate hurry to experience the delights of calculus can miss out Chapter 3 without any
loss of continuity and move straight on to Chapter 4. The mathematics of finance is probably
more relevant to business and accountancy students, although you can always read it later if
it is part of your economics syllabus.
At the end of every chapter, you will find a multiple-choice test and some examination
questions. These cover the work of the whole chapter. We recommend that you try the
multiple-choice questions when you have completed the relevant chapter. As usual, answers
1
Linear equations
7 8
Matrices Linear programming
2
Non-linear equations
3
Mathematics of finance
4
Differentiation
5 6
Partial differentiation Integration
9
Dynamics
Figure I.1
are provided at the back of the book so that you can check to see how well you have done.
If you do get any of the questions wrong, it would be worth redoing them, perhaps writing
down full working so that you can spot your mistake more easily. The final section contains
several examination-style problems which are more challenging. They tend to be longer than
the questions encountered so far in the exercises and require more confidence and experience.
You might like to leave these until the end of the course and use them in your build-up to the
final exams.
I hope that this text helps you to succeed in your mathematics course. You never know,
you might even enjoy it. Remember to wear your engineer’s hat while reading the text. I have
done my best to make the material as accessible as possible. The rest is up to you!
3. CHAP. III.
The third chapter, an Ode or Rhapsody, is ascribed to Habakkuk
by its title. This, however, does not prove its authenticity: the title is
too like those assigned to the Psalms in the period of the Second
Temple.[339] On the contrary, the title itself, the occurrence of the
musical sign Selah in the contents, and the colophon suggest for the
chapter a liturgical origin after the Exile.[340] That this is more
probable than the alternative opinion, that, being a genuine work of
Habakkuk, the chapter was afterwards arranged as a Psalm for
public worship, is confirmed by the fact that no other work of the
prophets has been treated in the same way. Nor do the contents
support the authorship by Habakkuk. They reflect no definite
historical situation like the preceding chapters. The style and temper
are different. While in them the prophet speaks for himself, here it is
the nation or congregation of Israel that addresses God. The
language is not, as some have maintained, late;[341] but the
designation of the people as Thine anointed, a term which before
the Exile was applied to the king, undoubtedly points to a post-exilic
date. The figures, the theophany itself, are not necessarily archaic,
but are more probably moulded on archaic models. There are many
affinities with Psalms of a late date.
At the same time a number of critics[342] maintain the
genuineness of the chapter, and they have some grounds for this.
Habakkuk was, as we can see from chaps. i. and ii., a real poet.
There was no need why a man of his temper should be bound down
to reflecting only his own day. If so practical a prophet as Hosea,
and one who has so closely identified himself with his times, was
wont to escape from them to a retrospect of the dealings of God
with Israel from of old, why should not the same be natural for a
prophet who was much less practical and more literary and artistic?
There are also many phrases in the Psalm which may be interpreted
as reflecting the same situation as chaps. i., ii. All this, however, only
proves possibility.
The Psalm has been adapted in Psalm lxxvii. 17–20.
* * * * *
Look[365] round among the heathen, and
look well,
Shudder and be shocked;[366]
For I am[367] about to do a work in your days,
Ye shall not believe it when told.
For, lo, I am about to raise up the Kasdim,[368]
A people the most bitter and the most hasty,
That traverse the breadths of the earth,
To possess dwelling-places not their own.
Awful and terrible are they;
From themselves[369] start their purpose and rising.
Fleeter than leopards their steeds,
Swifter than night-wolves.
Their horsemen leap[370] from afar;
They swoop like the eagle a-haste to devour.
All for wrong do they[371] come;
The set of their faces is forward,[372]
And they sweep up captives like sand.
They—at kings do they scoff,
And princes are sport to them.
They—they laugh at each fortress,
Heap dust up and take it!
Then the wind shifts,[373] and they pass!
But doomed are those whose own strength is
their god![374]
His questions, too, are bold with that sense of God’s absolute power,
which flashed so bright in Israel as to blind men’s eyes to all
secondary and intermediate causes. Thou, he says,—
We have already seen[382] that the text of the first line of this
couplet is uncertain. Yet the meaning is obvious, partly in the words
themselves, and partly by their implied contrast with the second line.
The soul of the wicked is a radically morbid thing: inflated, swollen
(unless we should read perverted, which more plainly means the
same thing[383]), not level, not natural and normal. In the nature of
things it cannot endure. But the righteous shall live by his
faithfulness. This word, wrongly translated faith by the Greek and
other versions, is concentrated by Paul in his repeated quotation
from the Greek[384] upon that single act of faith by which the sinner
secures forgiveness and justification. With Habakkuk it is a wider
term. ’Emunah,[385] from a verb meaning originally to be firm, is
used in the Old Testament in the physical sense of steadfastness. So
it is applied to the arms of Moses held up by Aaron and Hur over the
battle with Amalek: they were steadiness till the going down of the
sun.[386] It is also used of the faithful discharge of public office,[387]
and of fidelity as between man and wife.[388] It is also faithful
testimony,[389] equity in judgment,[390] truth in speech,[391] and
sincerity or honest dealing.[392] Of course it has faith in God as its
secret—the verb from which it is derived is the regular Hebrew term
to believe—but it is rather the temper which faith produces of
endurance, steadfastness, integrity. Let the righteous, however
baffled his faith be by experience, hold on in loyalty to God and duty,
and he shall live. Though St. Paul, as we have said, used the Greek
rendering of faith for the enforcement of trust in God’s mercy
through Jesus Christ as the secret of forgiveness and life, it is rather
to Habakkuk’s wider intention of patience and fidelity that the author
of the Epistle to the Hebrews returns in his fuller quotation of the
verse: For yet a little while and He that shall come will come and will
not tarry; now the just shall live by faith, but if he draw back My soul
shall have no pleasure in him.[393]
Such then is the tenor of the passage. In face of experience that
baffles faith, the duty of Israel is patience in loyalty to God. In this
the nascent scepticism of Israel received its first great
commandment, and this it never forsook. Intellectual questions
arose, of which Habakkuk’s were but the faintest foreboding—
questions concerning not only the mission and destiny of the nation,
but the very foundation of justice and the character of God Himself.
Yet did no sceptic, however bold and however provoked, forsake his
faithfulness. Even Job, when most audaciously arraigning the God of
his experience, turned from Him to God as in his heart of hearts he
believed He must be, experience notwithstanding. Even the
Preacher, amid the aimless flux and drift which he finds in the
universe, holds to the conclusion of the whole matter in a command,
which better than any other defines the contents of the faithfulness
enforced by Habakkuk: Fear God and keep His commandments, for
this is the whole of man. It has been the same with the great mass
of the race. Repeatedly disappointed of their hopes, and crushed for
ages beneath an intolerable tyranny, have they not exhibited the
same heroic temper with which their first great questioner was
endowed? Endurance—this above all others has been the quality of
Israel: though He slay me, yet will I trust Him. And, therefore, as
Paul’s adaptation, The just shall live by faith, has become the motto
of evangelical Christianity, so we may say that Habakkuk’s original of
it has been the motto and the fame of Judaism: The righteous shall
live by his faithfulness.
CHAPTER XI
TYRANNY IS SUICIDE
HABAKKUK ii. 5–20
In the style of his master Isaiah, Habakkuk follows up his Vision with
a series of lyrics on the same subject: chap. ii. 5–20. They are taunt-
songs, the most of them beginning with Woe unto, addressed to the
heathen oppressor. Perhaps they were all at first of equal length,
and it has been suggested that the striking refrain in which two of
them close—
was once attached to each of the others as well. But the text has
been too much altered, besides suffering several interpolations,[394]
to permit of its restoration, and we can only reproduce these taunts
as they now run in the Hebrew text. There are several quotations
(not necessarily an argument against Habakkuk’s authorship); but,
as a whole, the expression is original, and there are some lines of
especial force and freshness. Verses 5–6a are properly an
introduction, the first Woe commencing with 6b.
The belief which inspires these songs is very simple. Tyranny is
intolerable. In the nature of things it cannot endure, but works out
its own penalties. By oppressing so many nations, the tyrant is
preparing the instruments of his own destruction. As he treats them,
so in time shall they treat him. He is like a debtor who increases the
number of his creditors. Some day they shall rise up and exact from
him the last penny. So that in cutting off others he is but forfeiting
his own life. The very violence done to nature, the deforesting of
Lebanon for instance, and the vast hunting of wild beasts, shall
recoil on him. This line of thought is exceedingly interesting. We
have already seen in prophecy, and especially in Isaiah, the
beginnings of Hebrew Wisdom—the attempt to uncover the moral
processes of life and express a philosophy of history. But hardly
anywhere have we found so complete an absence of all reference to
the direct interference of God Himself in the punishment of the
tyrant; for the cup of Jehovah’s right hand in ver. 16 is simply the
survival of an ancient metaphor. These proverbs or taunt-songs, in
conformity with the proverbs of the later Wisdom, dwell only upon
the inherent tendency to decay of all injustice. Tyranny, they assert,
and history ever since has affirmed their truthfulness—tyranny is
suicide.
The last of the taunt-songs, which treats of the different subject
of idolatry, is probably, as we have seen, not from Habakkuk’s hand,
but of a later date.[395]
We have seen the impossibility of deciding the age of the ode which
is attributed to Habakkuk in the third chapter of his book.[417] But
this is only one of the many problems raised by that brilliant poem.
Much of its text is corrupt, and the meaning of many single words is
uncertain. As in most Hebrew poems of description, the tenses of
the verbs puzzle us; we cannot always determine whether the poet
is singing of that which is past or present or future, and this difficulty
is increased by his subject, a revelation of God in nature for the
deliverance of Israel. Is this the deliverance from Egypt, with the
terrible tempests which accompanied it? Or have the features of the
Exodus been borrowed to describe some other deliverance, or to
sum up the constant manifestation of Jehovah for His people’s help?
The introduction, in ver. 2, is clear. The singer has heard what is
to be heard of Jehovah, and His great deeds in the past. He prays
for a revival of these in the midst of the years. The times are full of
trouble and turmoil. Would that God, in the present confusion of
baffled hopes and broken issues, made Himself manifest by power
and brilliance, as of old! In turmoil remember mercy! To render
turmoil by wrath, as if it were God’s anger against which the singer’s
heart appealed, is not true to the original word itself,[418] affords no
parallel to the midst of the years, and misses the situation. Israel
cries from a state of life in which the obscure years are huddled
together and full of turmoil. We need not wish to fix the date more
precisely than the writer himself does, but may leave it with him in
the midst of the years.
There follows the description of the Great Theophany, of which,
in his own poor times, the singer has heard. It is probable that he
has in his memory the events of the Exodus and Sinai. On this point
his few geographical allusions agree with his descriptions of nature.
He draws all the latter from the desert, or Arabian, side of Israel’s
history. He introduces none of the sea-monsters, or imputations of
arrogance and rebellion to the sea itself, which the influence of
Babylonian mythology so thickly scattered through the later sea-
poetry of the Hebrews. The Theophany takes place in a violent
tempest of thunder and rain, the only process of nature upon which
the desert poets of Arabia dwell with any detail. In harmony with
this, God appears from the southern desert, from Teman and Paran,
as in the theophanies in Deuteronomy xxxiii. and in the Song of
Deborah;[419] a few lines recall the Song of the Exodus,[420] and
there are many resemblances to the phraseology of the Sixty-Eighth
Psalm. The poet sees under trouble the tents of Kushan and of
Midian, tribes of Sinai. And though the Theophany is with floods of
rain and lightning, and foaming of great waters, it is not with hills,
rivers or sea that God is angry, but with the nations, the oppressors
of His poor people, and in order that He may deliver the latter. All
this, taken with the fact that no mention is made of Egypt, proves
that, while the singer draws chiefly upon the marvellous events of
the Exodus and Sinai for his description, he celebrates not them
alone but all the ancient triumphs of God over the heathen
oppressors of Israel. Compare the obscure line—these be His goings
of old.
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