Difference Equations

Abstract

In Chapter 9 we saw that differential equations express the relationship between two variables (e.g. x and y) and also the rate of change of one variable with respect to the other, (i.e. dy/dx). We know that this rate of change (or derivative) relates to variables which change continuously. In this chapter we will be considering variables which change in discrete steps and in particular variables which are measured at or over certain periods of time. Examples of such variables are the level of stocks at the end of a month, the national income earned during a calendar year, the daily closing price of shares on the stock exchange, and the value of a bank deposit at the end of a year.