Algebra and Discrete Mathematics for Economics: Numbers, Graphs and Matrices in Input-Output Economics (De Gruyter Textbook)

Algebra and Discrete Mathematics are essential tools also for economists.

Globalization makes that goods and services are exchanged worldwide. Input-output analysis uses the advantage of a relatively stable flow of commodities and services. The essential principles can be described by input-output tables. Such tables correspond to systems of linear equations, written as single equations consisting of matrices whose entries are non-negative rational numbers. The flow itself can be described by a directed edge-valued graph where the sets of values consist of positive rational numbers. Therefore numbers, especially non-negative rational numbers, multiple-partite graphs and matrices with non-negative rational entries play an important role in input-output analysis. Thus knowledge from Algebra and Discrete Mathematics becomes more and more useful in this area.

We will consider a particular set of graphs, the so-called input-output graphs and a particular set of matrices, the input-output matrices, define a partial binary operation on each of these sets and prove that we obtain weakly isomorphic weakly partial semigroups. The result of considering this situation can be applied to multiple-step production processes, to material reqirements planning and to internal cost allocation of a business.
The results show that Algebra and Discrete Mathematics are quite useful for mathematical modeling in Economy.