Abstract
This chapter deals with linear first-order difference equations. Dynamics of two economic models, a price dynamic model with adaptation, and a model of amortization are examined. Some basic concepts, which are used not only for one-dimensional problems but also for higher dimensional ones, are introduced. Concepts of stability and some basic theorems about stabilities of one-dimensional difference equations are discussed. The results are applied to the cobweb model and a dynamic model with inventory. The chapter deals with dissipative maps. It introduces difference equations of higher order and provides general solutions to the system. Difference equations of higher orders with constant coefficients are examined. Limiting behavior of the Samuelson multiplier-accelerator interaction model is examined.
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