Toward Formal Models of the Theoretical Framework of Fundamental Economics

Many fundamental theories and doctrines of micro- and macro-economics are not formally studied in economics. This paper presents a rigorous treatment and explanation of a set of fundamental empirical theories of economics. It is recognized that the adaptive equilibrium of market systems is rooted in the negative feedbackmechanisms of demands and supplies. A mathematical model of economic equilibrium developed in this paper provides a formal proof of Adam Smith's hypothesis of the 'invisible hand'. An economic equilibrium theorem is derived to deal with more complicated multivariable equilibrium problems that could not be handled in conventional economic theories. Then, a set of mathematical models is developed for dynamic cost analyses and the estimation of economical outcomes of engineering projects.