• Dynamic economics is about explaining
economic behaviors through time.
• Explain the time paths of economic
• Optimization concept.
• The choice is the use of resources in
different time periods.
function of variables in many periods,
subject to budget or resource constraints
on these variables through time.
• Find optimal time path for every
• Three major approaches:
Calculation of variation, maximum
principle or optimal control theory
(Hamiltonian), and dynamic
programming (Bellman equation).
• And also method of Lagrange