Intro to Mathematical Economics

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Eigenvalue Theorem

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Intro to Mathematical Economics

Definition

The Eigenvalue Theorem states that for a square matrix, if there exists a non-zero vector such that when the matrix multiplies this vector, the result is a scalar multiple of the same vector, then this scalar is called an eigenvalue and the vector is called an eigenvector. This theorem connects matrices to linear transformations and provides insight into the properties of these transformations, especially in terms of stability and dynamic systems.

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5 Must Know Facts For Your Next Test

  1. The Eigenvalue Theorem applies specifically to square matrices, meaning they must have the same number of rows and columns.
  2. Eigenvalues can be real or complex numbers, depending on the nature of the matrix.
  3. The eigenvalue associated with an eigenvector can be found by solving the characteristic equation, which involves setting the determinant of the matrix minus lambda times the identity matrix equal to zero.
  4. Understanding eigenvalues and eigenvectors helps in analyzing stability in systems of differential equations, particularly in economics for modeling dynamic systems.
  5. Not all matrices have eigenvalues; for example, a non-square matrix does not have eigenvalues as defined in this context.

Review Questions

  • How does the Eigenvalue Theorem facilitate understanding linear transformations represented by matrices?
    • The Eigenvalue Theorem helps us understand linear transformations by identifying specific vectors (eigenvectors) that maintain their direction when transformed by a matrix. This means that instead of altering their direction, the transformation only scales these vectors by a factor (the eigenvalue). Recognizing these key vectors allows us to analyze how systems behave under transformations and provides insight into their stability and dynamics.
  • Discuss how to compute eigenvalues from a given square matrix using the characteristic polynomial.
    • To compute eigenvalues from a square matrix, you first create its characteristic polynomial by subtracting lambda (the unknown scalar) times the identity matrix from the original matrix and then finding the determinant. Set this determinant equal to zero to derive the characteristic equation. Solving this equation yields the eigenvalues of the matrix. This process reveals important properties about the matrix and its corresponding transformations.
  • Evaluate the implications of having complex eigenvalues for a system described by a matrix in economic models.
    • Complex eigenvalues in economic models can indicate oscillatory behavior in dynamic systems, suggesting that certain variables may not converge to equilibrium but rather oscillate indefinitely. This can have significant implications for predicting market behaviors or economic stability. Understanding these complex dynamics allows economists to develop better strategies for managing systems that exhibit cyclical patterns rather than straightforward trends.
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