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Modeling Functions.... real life business, money, probability, etc.

  1. Jun 1, 2015 #1

    I'm now studying economics and applied math, and I'm currently wanting to know what book or online resource could help me in learning how to model real life situations into functions. Most math and econ textbooks are garbage at this.

    I'll be more specific. In my study of Microeconomics, they introduce the concept of a production function. They just tell me that it is mostly a function of two variables, and the problems in the book already have the function given. No where do they teach (or give you problems) on how one can create their own production function given a specific situation. That's what I want to know.

    Most undergrad math book also suffer from this. Yes, there is simple function modeling with costs in some pre-cal books, but that is very easy and basic.

    My goal is to become better at modeling real life business, money, probability situations with functions. I'm working towards either doing computer programming, operation analyst, or actuarial work, and I want to become better at modeling. So which book (that is not too difficult, but not too easy) or online resource can help me?

    Thank you.
  2. jcsd
  3. Jun 4, 2015 #2


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    In broad modeling like national GDP and interest rates, you can find many macroeconomics model like keyesian model. This offers great simplification to real world situation. But this seems not to be in your interest according to your post. "Quantitative finance" does offer a much more mathematical approach and specifically to finance and market. So any introductory book on quantitative finance will do.
    For real life personal business, you will find microeconomics useful but it is more qualitative and theoretical than quantitative and statistical. You found it easy and basic because math is not its stress. It can go really difficult in theory. I think the most complicated one would be actuarial science, which involves a lot of statistical techniques, but it has more to do with insurance and risk management. But actuarial science should be the most challenging one.
  4. Jun 5, 2015 #3
    You could look for a cheap used copy of https://www.amazon.com/Loss-Models-From-Data-Decisions/dp/1118315324, though you may find some of the content challenging. You could also learn statistical technicques such as regressions and ANOVA.

    I'll tell you that those are all tools, and that ultimately the actual modeling work is not easily taught in class. Which tehcniques you use and how you go about it depend on the problem, what tools you have available, and often the degree of accuracy needed.
    Last edited by a moderator: May 7, 2017
  5. Jun 5, 2015 #4
    Thanks for the responses.

    I am still personally begging to know how one comes up with a production function for a firm given labor and capital as inputs. Again, the microeconomic textbooks do give good practice problems, but they already give you the function in the problem. I want to practice creating my own production function, and I wish to model other business (or real life) situations into functions. This is where I need help, and I know if there is a resource (like a textbook with problems + solutions), I can do it.
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