ABSTRACT
Vectors and matrices are very important tools in economic analysis. This chapter outlines the algebra of vectors. Students will not only be able to add and subtract vectors but also to multiply vectors. For economic modeling, linear independence is indispensable in that economic models must have unique solutions, and linear independence provides these solutions. Similarly, linear and convex combinations are also important for economics. An extension of vector analysis is matrix algebra. The types of matrices and matrix operations are outlined in this chapter. A system of equations is solved by using matrix methods such as the inverse method, Cramer’s rule and the Gauss-Jordan method. Eigenvalues and vectors are explained and used for diagonalizing matrices. Finally, various economic applications of matrices are provided.
