Abstract
For many problems in economics it is more adequate to give them a discrete formulation than a continuous one. This leads to difference equations instead of differential equations. Their theories are quite similar. We discuss linear difference equations of first and second order and present some models: the growth model of Harrod, settlement of bond issues, distribution of wealth, and the multi-sector multiplier model. The chapter continues with systems of linear difference equations and finishes with nonlinear difference equations, which necessarily in most cases leads to a phenomenon, which is called chaos in mathematics.
Difference equations relate to differential equations as discrete mathematics does to continuous mathematics.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Eichhorn, W., Gleißner, W. (2016). Difference Equations. In: Mathematics and Methodology for Economics. Springer Texts in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-23353-6_12
Download citation
DOI: https://doi.org/10.1007/978-3-319-23353-6_12
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-23352-9
Online ISBN: 978-3-319-23353-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)