Math Review: Week 1

1
Yoshifumi Konishi
Ph.D. in Applied Economics
COB 337j
E-mail: konis005@umn.edu
1. Preliminaries and Notations
First, we will learn basic notations we will be using throughout the course and possibly through-
out your degree program.
\: For all ...
: There exists ... or for some ...
=: " =1" means "If holds, then 1 holds" or " implies 1". is a sucient condition for 1.
=: " = 1" means " holds if and only if 1 holds" or " is equivalent to 1". is a necessary
and sucient condition for 1.
: An element of.... For example, "a " means that a is an element of .
_: " _ 1" means that " is contained in 1" or "1 contains ".
or (: " ( 1" means " is strictly contained in 1" " is a proper subset of 1".
: Negation. For example, (a ) =a , .
=: Equality.
Question: Whats the dierence between ar = /r and ar = /r? Answer: = (identity) must
hold for every r, so that this implies a = /, while = (equality) hold for a particular value of r, but
may or many not be true for every situation, so that this implies that r = 0 or a = /.
): Therefore ...
*: Because ..., for the following reason...
N: Set of natural numbers. i.e. N = 1, 2, 3...
Z: Set of integers. i.e. Z = 0, 1, 2, ...
Q: Set of rational numbers. i.e. Q = ,j : j ,= 0, j, Z
R: Set of real numbers. i.e. the set includes N, Q and 3.141, c 2.718,
_
3, etc.
C: Set of complex numbers. a +i/, where a, / R and i =
_
1.
Obviously, N Q R C. Question: Why? Can you make a case so that any a R is a special
case of a C?
In this course, we will focus on real numbers with natural, rational numbers being a special
case. We will not talk about complex numbers or any other topological or metric spaces. Set of real
numbers is a special case of metric spaces. Complex numbers and real numbers share very similar
1
This lecture note is adapted from the following sources: Simon & Blume (1994), W. Rudin (1976), A. Takayama
(1985), M. Wadachi (2000), and Toda & Asano (2000).
1
properties. So, many theorems in real numbers apply in complex numbers as well. Real numbers
are often represented as points on an oriented line with an origin, O, such that any real number a
there corresponds a point whose length O1 = a. In many cases throughout the course, it is often
convenient to add two more elements to R, denoted by + and , which satisfy the following
properties: For each a R,
+ = ()() = (+)(+) = a + (+) = a ()
= ()(+) = (+)() = a + () = a (+)
a(+) = (+)a = (a)() = ()(a) = +
a
+
=
a

= 0
The set R together with the elements + and is called the extended (augmented) real
number system and is denoted by

R. In the real line, we call the following sets intervals:
(a, /) = r R : a < r < / Open interval
[a, /] = r R : a _ r _ / Closed interval
(a, /] = r R : a < r _ / Right half-closed interval (or Left half-open interval)
Question: How can we write the set of all positive real numbers, using the intervals? Answer:
[0, +) = r R : r _ 0, r < +.
Denition 1-1: An integer a Z is called an even number if there is an integer : Z such that
a = 2:. An integer that is not even is called an odd number and we represent it 2: + 1.
Denition 1-2: A natural number a N is called a prime number if there is no pair of natural
numbers j, N1 such that a = j .
Question: What are the examples of prime numbers? Answer: 1, 2, 3, 5, 7, 11, 13, 17, 19, ...
2. Basics of Set Theory & Logic
Now, we are ready to discuss basic operations on sets and logic.
2-1. Elementary operations on sets
Lets rst discuss elementary operations on sets. Suppose that and 1 are two sets. Their
union ' 1 is dened to be the set of elements that belong to at least one of the sets and 1.
(See the picture). Their intersection 1 is dened to be the set of elements that belong to
both and 1. The dierence 1 is dened to be the set of elements that belong to but
not to 1. If 1 = ?, then the sets and 1 are said to be disjoint. If 1 ,= ?, then we say
that the sets and 1 intersects. If 1 A, the dierence A 1 is called the complement of
1 relative to A and we denote it by 1
c
or A1 or 1. is equal to 1 if and only if _ 1 and
1 _ . The power set of , denoted by 1(), is the collection of all subsets of . For example,
if = a, /, then 1() = ?, a, /, a, /. The cardinality of , card(), is the number
of elements in A.
2
Properties of elementary operations on sets.
(1) (1 ' C) = ( 1) ' ( C)
(2) ' (1 C) = (' 1) (' C)
(3) (' 1) =
(4) ' ( 1) =
(5) Given the set A, A? = A and AA = ?
(6) Given the set A, 1 =A A1
(7) Given the set A, (A) = ?
Proof of Property (1):
r (1 ' C) =
_
_
_
r
and
r 1 or r C
_
_
_
=
_
_
_
r and r 1
or
r and r C
_
_
_
=
_
_
_
r 1
or
r C
_
_
_
=r ( 1) ' ( C) Q11
Try to prove other properties yourself at home. Note also that the sets can be interpreted as logical
statements. For example, 1 =r implies r 1.
Theorem 2-1 (de Morgan): Suppose that there is a countable family of sets
1
,
2
, ... We have
the following formulae:
(i) For any set 1, ('
1
i=1

i
) 1 = '
1
i=1
(
i
1) and (
1
i=1

i
) ' 1 =
1
i=1
(
i
' 1).
(ii) ('
1
i=1

i
)
c
=
1
i=1

c
i
and (
1
i=1

i
)
c
= '
1
i=1

c
i
.
Proof : The proof of (i) can be done by simply applying (1) and (2). So, do it yourself at home.
To see (ii), rst notice that: (
1
'
2
)
c
=(r
1
or r
2
) =r ,
1
and r ,
1
=
c
1

c
2
.
Now, also note that we can write ('
1
i=1

i
)
c
= (
1
'('
1
i=2

i
))
c
. Then, applying the above argument,
we can see that (
1
' ('
1
i=2

i
))
c
=
c
1
('
1
i=2

i
)
c
. We can continue this process one by one, so
that we have:
c
1

c
2
...
c
n
('
1
i=n+1

i
)
c
for any :. We let : and we are done (Note:
This one-by-one operation is valid, because the family of sets is at most countable). We can apply
similar argument to the other formula (Do it yourself at home). Q11
Denition 2-1 (Partition): Given a set , a family of sets
i
, i = 1, 2, ...:, is called a partition
of if it has the following properties:
(i) \i,
i
,= ?,
i

(ii) \i ,= ,,
i

j
= ?
(iii) '
n
i=1

i
=
Denition 2-2 (Order): Let be a set. An order on is a relation, denoted by <, with the
following properties:
(i) For all r, j , only one of the following statements is true: r < j, r = j, r j (often
called, "complete").
(ii) For all r, j, . , if r < j and j < ., then r < . (often called "transitive").
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Denition 2-3: An ordered set is a set A in which an order is dened.
Note that N, Z, Q, R are all ordered sets with an order <. However, in economics, we frequently
use a dierent order, denoted by - .
Denition 2-4 (Upper & lower bounds): Let o be an ordered set. Let 1 o. If there exists
c o such that \r 1, r _ c, we say that c is an upper bound for 1 and that 1 is bounded
above by c. A lower bound is similarly dened.
Denition 2-5 (Least upper bound & greatest lower bound): Let o be an ordered set,
1 o, and 1 is bounded above. Then, we say that c is the least upper bound (or supremum) of
1 if it has the following properties:
(i) c is an upper bound of 1 (i.e. for all r 1, r _ c).
(ii) For any < c, is not an upper bound of 1.
We write c = sup1. Similarly, the greatest lower bound or inmum of 1 is written c = inf 1.
Question: Can you write the denition for the inmum?
By denition, there is at most one such c. Of course, c = sup1 may or may not exist. If c = sup1
does exist, it may or may not be an element of 1. Example 1: Let 1
1
= [0, 3) and 1
2
= [0, 3],
1
1
, 1
2
R. What is sup1
1
? What is sup1
2
? Answer: sup1
1
= sup1
2
= 3, but 3 , 1
1
and
3 1
2
. Example 2: Let 1 = 1,: : : = 1, 2, 3, ... R. What are sup1 and inf 1? Answer:
sup1 = 1 and inf 1 = 0.
Theorem 2-2 (Least-upper-bound property): Let o be any subset of R. If S has an upper
bound, then o has a least upper bound in R.
Proof of this theorem involves construction of the set of real numbers, which is way beyond the
scope of this course. This theorem can be stated as an axiom and derive other properties of real
numbers as theorems. Those who are interested may refer to Rudin, Principles of Mathematical
Analysis, Chap.1.
2-2. Logical statements and Proofs
Now, we will discuss logical statements and logic of proofs. Throughout your degree program,
you will be asked to "prove" things. In economics, no matter how intuitively right it may sound,
failure to rigorously prove it would be regarded as seriously awed. So, techniques of proofs are
essential tools you must have in your pocket. Techniques of proofs are essentially those of logics.
The following statement is true by denition of rational numbers: "For all (positive) rational
numbers a, there exist natural numbers j, with j ,= 0 such that a = ,j." We write this in a more
compact way.
\a Q
++
, j, N, a = ,j
Now, we want to negate the whole statement. Question: Whats the negation of this statement?
Answer: The simplest way is to say "it is not true that for all (positive) rational numbers a,
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there exist natural numbers j, with j ,= 0 such that a = ,j." But, this means that "there exist
some rational number a, for which we cannot nd any natural numbers j, with j ,= 0 such that
a = ,j." Or equivalently, we say that "there exists some rational number a, such that for all
natural numbers, a ,= ,j."
(\a Q
++
, j, N, a = ,j) =a Q
++
, \j, N, a ,= ,j
So, the general rule of thumb is:
(\..., ..., statement) = ..., \..., (statement)
(..., \..., statement) = \..., ..., (statement)
We have in general four ways of delivering a proof that =1:
(1) Deductive reasoning (direct proofs)
(2) Proofs by contrapositive (direct proofs)
(3) Proofs by contradiction (indirect proofs)
(4) Inductive reasoning (called mathematical induction)
The rst method is straightforward, and consists of a chain of logic. Find a sequence of accepted
axioms and theorems of the forms
i
, i = 1, .., : such that:
=
1
, 1 =
n
and
i
=
i+1
for all i = 1, ..: 1
As a result, we have a chain of statements: =
1
=
2
=... =
n
= 1.
Example 1: Statement A: Let : be an even integer. Let j be an integer. Statement B: : j is an
even integer. We want to prove =1.
Proof : By denition, : is an even integer if and only if there exists some integer such that : = 2.
Thus, : j = (2 ) j. By associative property of multiplication, we can write : j = 2 ( j). Now,
it is important to prove that j is also an integer. But, this is trivially true. Thus, by denition,
: j is an even integer. Q11
Before discussing the second method, lets dene two more important propositions.
Denition 2-6: Given a proposition P of the form = 1, the converse of P is a proposition
1 =.
Denition 2-7: Given a proposition P of the form =1, the contrapositive of P is a propo-
sition 1 =.
Recall that contrapositive of a true proposition is always true, while the converse may not. For
example, it is true that if an animal belongs to a family of cats, then it is a mammal. But it is
not true that if an animal is an mammal, it belongs to the family of cats. Yet, it is true that if an
animal is not an mammal, then it cannot be in the family of cats. The second method utilizes this
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property. That is, to prove a statement =1, it may be sometimes easier to prove 1 =. (I
dont have a good example. But, I have encountered several cases in which this method turns out
to be useful).
The third method is essentially an extension of the second method. If the statement is true
and the statement 1 is not true, then we should not nd a chain of arguments such that 1 =.
For otherwise, it would prove = 1 by contrapositive. This is called a method of proofs by
contradiction, because we seek a case that the statement 1 is not true leads to a contradiction.
Probably, this method is most commonly used and the easiest of all to employ in many cases.
However, we need to be careful in using this method. Some mathematicians do not like to use
this method too often, because there are cases in which this method may fail if falsely set up and
because we should be able to use direct proofs if the statement truly holds.
Example 2: Prove that for every : Z, if :
2
is even, then : is also even.
Proof : Suppose :
2
Z is an even integer. Suppose by contradiction that : is not even. Then, we
should be able to write : = 2:+ 1 for some integer :. Then, :
2
= (2:+ 1)
2
= 4:
2
+ 4:+ 1 =
2(2:
2
+2:) +1. We know that 2(:
2
+:) is an integer. Thus, 2(2:
2
+2:) is even by denition,
which implies that 2(2:
2
+ 2:) + 1 is odd. This contradicts that :
2
is even. Q11
The fourth method is called mathematical induction. We need this method often when the
propositions of interest are indexed by a set of natural numbers. The principle of induction works
as follows:
Step 1. Prove that statement 1(1) is true;
Step 2. Pick an arbitrary natural number /. Prove that, whenever 1(/) is true, then 1(/ + 1)
is true.
Because we have proved 1(1) is true in Step 1, by the result of Step 2, 1(2) is also true. Because
1(2) is true, 1(3) is true, and so on. Thus, since propositions are indexed by a set of natural
numbers, an at most countable set, we can safely infer that 1(/) is true for any / N.
Example 3: Prove that the sum of rst : odd natural numbers is :
2
. That is, 1 + 3 + 5 + ... +
(2: 1) = :
2
.
Proof : For : = 1, we can easily verify that 1 = 1
2
. Now, pick an arbitrary number /. Suppose that
it is true that 1+3+5+... +(2/1) = /
2
. If we can prove that 1+3+5+... +(2/1) +(2/+1) =
(/ +1)
2
, we are done. But, because 1 +3 +5 +... +(2/ 1) = /
2
, we can replace the rst / terms
of LHS. Thus, we have:
1 + 3 + 5 +... + (2/ 1) + (2/ + 1) = /
2
+ (2/ + 1)
Then, we trivially see that /
2
+ (2/ + 1) = (/ + 1)
2
. Q11
3. Basic Topology: Functions, Limits, and Open Sets
3-1. Functions
Denition 3-1: Consider two sets and 1, whose elements may be any objects. ) is said to be a
function from to 1 (or mapping of into 1) if for each element r of , there exists an associated
6
element of 1 in some manner. We denote this element of 1, )(r). We write ) : 1. In this
case, is called the domain of ) and the set of all possible values of ), denoted as )() _ 1, is
called the image of ).
Denition 3-2: Let ) be a mapping of into 1, ) : 1. If )() = 1, then we say that
) maps onto 1. For every subset 1 1, the inverse image of 1, )
1
(1), is the set of all
r such that )(r) 1. Similarly, for every element j 1, the inverse image of j, )
1
(j), is
the set of all r such that )(r) = j. If, for each and every j 1, )
1
(j) consists of at most
one element of , then ) is said to be one-to-one mapping of into 1.
Example 1: Onto and one-to-one properties are relative to the spaces of interest. If )(r) = r
2
,
then ) is a mapping of R onto R
+
. But, it is not a mapping of R onto R.
Example 2: Any strictly increasing or decreasing real-valued function is a one-to-one mapping.
Denition 3-3: If there exists a one-to-one mapping of onto 1, then we say that and 1 have
the same cardinality or and 1 are equivalent.
Denition 3-4 (Finite, innite, countable sets): For any set ,
(i) is nite if has the same cardinality as the set 1, 2, ...: for some nite : N.
(ii) is innite if is not nite.
(iii) is countable (enumerable/denumerable) if has the same cardinality as N.
(iv) is uncountable if is neither nite nor countable.
(v) is at most countable if is nite or countable.
A set is specially called countably innite if ~ N.
Example 3: Q and Z are countably innite sets. R is uncountable. Every (innite) subset of a
countable set is countable.
Denition 3-5 (Sequence): A sequence is a function ) : Z , for any set . We denote the
sequence by r
i

n
i=1
. The elements r
i
are called the terms of the sequence.
We note the following theorems without proof.
Theorem 3-1. (Countable union & intersection): Let 1
n
, : = 1, 2, ..., be a sequence of
countable sets. Then, the set o dened by:
o = '
1
n=1
1
n
is countable.
Corollary 3-2: Suppose is at most countable. For every c , 1

is at most countable. Then,

the set T dened by:
T = '
2A
1

is at most countable.
3-2. Distance and limit of sequences
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In our everyday life, we talk about a distance without carefully thinking what it means. For
example, we say something like, "I went to a very good Chinese restaurant yesterday. The place is
very close to our house". When you hear the word close, you will immediately catch the meaning
without a specic denition to it. However, if I need to explain how close to give you a more
detailed sense of distance, I may need to say, "its a ve minute distance by car from my place". In
mathematics and economics, we need a more rigorous denition of distance to avoid ambiguity,
as we usually talk about a more abstract space such as a space of real numbers.
Denition 3-6 (Metric & metric spaces): A set A is called a metric space if, for any points
j, of A, there is associated a real number d = d(j, ), called a distance from j to , such that:
(i) d(j, ) 0 if j ,= ; d(j, ) = 0 if j = ;
(ii) d(j, ) = d(, j);
(iii) d(j, ) _ d(j, r) +d(r, ) for any r A.
We call any function with these properties a distance function or a metric.
In R, the absolute value is the natural choice for a metric. That is, d(r, j) = [rj[ for any r, j R.
Question: Can you prove that the absolute value is a metric? Answer: Properties (i) and (ii)
are obvious. The third property can be proved as follows. First, prove that [r + j[ _ [r[ + [j[.
[r + j[
2
= (r + j)
2
= r
2
+ 2rj + j
2
= [r[
2
+ 2rj + [j[
2
_ [r[
2
+ 2[r[[j[ + [j[
2
= ([r[ + [j[)
2
.
Thus, [r +j[ _ [r[ +[j[. Now, pick any arbitrary r, j, .. And let a = r ., and / = . j. Then,
a+/ = r.+.j = rj. Thus, using the above result, [a+/[ = [r.[ _ [r.[+[.j[ = [a[+[/[.
We can easily apply the same to the Euclidean norm in R
n
, : _ 1, dened by:
d(x, y) = [[x y[[ =

_
n

i=1
(r
i
j
i
)
2
Now, with the notion of distance, we can formally discuss limit of a sequence.
Denition 3-7 (Limit of a real sequence): Let r
n
be a sequence of real numbers. The
sequence is said to converge if there exists a real number r such that: For every (small) - 0,
there is an integer such that \: _ ,we have,
[r
n
r[ < -
We call r the limit of this sequence.
We can of course extend this denition to any metric space.
Denition 3-7
0
(Limit of a sequence): Let j
n
be a sequence in a metric space A. The
sequence is said to converge if there exists an element j in X such that: For every (small) - 0,
there is an integer such that \: _ ,we have,
d(j
n
, j) < -
8
Unless otherwise noted, I will focus on real sequences below. However, keep in mind that we can
usually extend our denitions/theorems to metric spaces. The above denition essentially says that
if the sequence r
n
converges, r
n
should become arbitrarily close to a point r, as : goes to innity.
We write:
lim
n!1
r
n
= r
If r
n
does not converge, then we say it diverges. There are two kinds of divergent sequences:
The sequence decreases or increases without bound. e.g.: r
n
= 2
n
= 2, 4, 8, ...
The sequence jumps back and forth (or exhibits some cyclical behaviors). e.g. r
n
= (1)
n
(
n
n+1
) =

1
2
,
2
3
,
3
4
, ...
In the second example, their entries jumps back and forth and get arbitrarily close to either 1 or
1. We call these points, accumulation points. More formally,
Denition 3-8: Let r be a real number. We call r an accumulation point of a real sequence r
n

if for any - 0, the set:

r
i
: [r
i
r[ < -
contains innitely many elements of r
n
.
Question: So, how many accumulation points are there in the sequence: r
n
= (1)
n
(
n
n+1
) =

1
2
,
2
3
,
3
4
, ...? Answer: There are two: 1 and 1. So, there can be multiple accumulation points
in any sequence, but there should be at most one limit in any sequence. Question: Why? Can
you prove it? Answer: If there are two distinct limits r
1
and r
2
, by the property of metric,
there exists a real number - 0 such that [r
1
r
2
[ -. But, by denition of limit, for any
-,2 0, we must have [r
n
r
1
[ < -,2 and [r
n
r
2
[ < -,2 for a large enough :. Thus, we have
[r
1
r
2
[ _ [r
n
r
1
[ +[r
n
r
2
[ < -,2 +-,2 = -. A contradiction to [r
1
r
2
[ -.
Denition 3-9 (Subsequence): Given a sequence j
n
, consider a strictly increasing sequence
:
k
of positive integers (i.e. :
1
< :
2
< :
3
...). Then, the sequence j
n
i
is called a subsequence
of j
n
. If the subsequence converges, its limit is called a subsequential limit of j
n
.
Theorem 3-3: Suppose r
n
and j
n
are real sequences, and limr
n
= r and limj
n
= j. Then,
the following are true:
(i) lim(r
n
+j
n
) = r +j.
(ii) limcr
n
= cr for any number c.
(iii) limr
n
j
n
= rj.
(iv) lim
1
xn
=
1
x
, provided r
n
,= 0 and r ,= 0.
Proof : You will be asked to prove (ii)-(iv) in your HW. So, we only prove (i) here. Note rst that we
want to prove that, for every - 0, there exists
0
0 such that \: _
0
, [(r
n
+j
n
)(r+j)[ < -.
So, rst pick any arbitrarily small - 0 and x it. Now, we know that r
n
and j
n
both converge
9
to r and j, respectively. So, by denition, for a number -
0
= -,2, there exist numbers
1
and
2
,
respectively, such that
\: _
1
, [r
n
r[ < -
0
= -,2
\: _
2
, [j
n
r[ < -
0
= -,2
Then, letting
0
= max
1
,
2
, we have:
\: _
0
, [r
n
r[ < -
0
= -,2
\: _
0
, [j
n
r[ < -
0
= -,2
Therefore, for - 0, we have found an integer
0
0 such that: \: _
0
,
[(r
n
+j
n
) (r +j)[ = [r
n
r +j
n
j[ _ [r
n
r[ +[j
n
j[ < -,2 +-,2 = -
Because - 0 is chosen arbitrarily, we can do the same operation for every possible - 0. So, we
have proved (i). Q11
We can dene a sequence and the limit of the sequence in the multi-dimensional space R
m
.(we
call this space, the Euclidean space). We can do so exactly in the same manner as we did for R.
But, here we use the Euclidean norm [[ [[, instead of [ [. Because of the multi-dimensionality, the
sequence can move in all kinds of spirals in R
m
. For example, in R
2
, we might have a sequence
x
n
= (1,:, :
2
). So, it is the sequence: (1, 1), (1,2, 4), (1,3, 9), (1,4, 16), .... This is obviously not
convergent.
Theorem 3-4: Suppose x
n
is a sequence in R
m
. x
n
converges to r = (r
1
, ..., r
m
) if and only
if its all component r
j;n
converge to r
j
, , = 1, ...:.
Proof : We skip the proof. Make sure you understand the proof in p.262-263 in S&B, especially
the only if part.
3-3. Open, Closed, and Compact Sets.
In any metric space, we can dene the concepts of open and closed sets. Recall that for any
a, / R, we call (a, /) an open interval and [a, /] a closed interval. Open intervals are open sets in
R and closed intervals are closed sets in R. However, any line in R
2
is not an open set. In fact, in
R
m
, there are sets that are neither open nor closed. To determine whether or not a set is open, we
need to know the denition.
Denition 3-10 (Neighborhood): For any metric space A, a neighborhood of a point r is a
set
r
(r) consisting all points j such that d(r, j) < r, for some r 0. That is,

r
(r) = j A : d(r, j) < r for some r 0
Denition 3-11 (Interior): For any set 1 A, a point r is an interior point of 1 if there exists
a neighborhood of r such that 1.We denote the set of all interior points of 1 as i:t(1).
10
Denition 3-12 (Open sets): A set 1 A is said to be open if every point of 1 is an interior
point of 1. That is, 1 is open if and only if,
\r 1, r 0,
r
(r) 1
Example 1: An open interval (1, 2) is an open set in R. To see why, pick any r in (1, 2). So,
by denition, 1 < r < 2 and r ,= 1, 2. Thus, [1 r[ = r
1
0, [r 2[ = r
2
0. Then, let
r =
1
2
minr
1
, r
2
. Clearly, the set
r
(r) = j : [j r[ < r is contained in (1, 2). See the
diagram. Question: Prove yourself that
r
(r) (1, 2). Answer: Suppose by contradiction that
j
r
(r), j , (1, 2). Then, j _ 1 or j _ 2. What happens to the distance between j and r?
Example 2: Any line in R
2
cannot be open. To see this, at any point on the line, construct
its neighborhood (an open ball), using a Euclidean metric. Then there are many points in this
neighborhood that is not on the line. So, remember that openness is a concept relative to the
metric space in question.
The following theorem is very useful.
Theorem 3-5:
(i) Every neighborhood is an open set.
(ii) Any (nite or innite) union of open sets is open.
(iii) The nite intersection of open sets is open.
Proof : Prove (i) by yourself. I will prove (ii) and (iii). Let G = '

. Pick any r in G. Then,

by denition of a union, x must belong to some set G

, for some c. Since each G

is open, we
can nd a neighborhood
r
(r) such that
r
(r) G

. Thus, all points in

r
(r) are contained in
G

. But, then, by denition, all points of

r
(r) must be contained in G, as all points of G

are
contained in G.
To prove (iii), consider a nite collection of open sets,G
1
, ..., G
n
. Let G =
n
i=1
G
i
. Suppose r
is in G. (Note here that G may be empty. An empty set is open and closed by denition. Why?).
Then, r must be contained in each and every G
i
. Since each G
i
is open, there exists a neighborhood

r
i
(r) such that
r
i
(r) G
i
, for each i. Put,
r = minr
1
, ..., r
n

Then, the neighborhood

r
(r) must be contained in each and every G
i
, so that
r
(r) G. Thus,
G is open. Q11
Example 3: For part (iii) of Theorem 7, the niteness of the collection is essential. To see why,
consider the following innite collection of open sets: G
n
= (1,:, 1,:), : = 1, 2, ... Each G
n
is an
open set in R. Put G =
n
G
n
. If : stops at some nite number , then, G is clearly an open set
(1,, 1,). However, if : , then G consists of only one point, i.e. 0. (Note that the open
interval (1,, 1,) does not include endpoints 1,, 1,, so this is the set of points between
1, and1, excluding the endpoints. Thus, lim
N!1
1, does not become actually 0, the set
lim
N!1
(1,, 1,) becomes a singleton set 0). Therefore, it is not an open set in R.
Now, what is a closed set? There are several but equivalent ways to denite a closed set.
11
Denition 3-13 (Closed sets): A set 1 A is said to be closed if and only if its complement
1
c
is open.
Denition 3-13
0
(Closed sets): A set 1 A is said to be closed if and only if. for every
convergent sequence r
n
contained in 1, its limit r is also contained in 1.
These denitions can be, in fact, proved as theorems from a more basic denition of closed sets.
That is,
Denition 3-13
00
(Closed sets): A set 1 A is said to be closed if every limit point of 1 is a
point of 1.
Denition 3-14 (Limit points): A point r is a limit point of 1 if every neighborhood (r) of
r contains a point j ,= r such that j 1.
Theorem 3-6:
(i) Any (nite or innite) intersection of closed sets is closed.
(ii) The nite union of closed sets is closed.
The proof of this theorem is left as an exercise. We only note the importance of the niteness in
(ii). To see why, consider the following innite collection of closed sets: 1
n
= [:,(: + 1), :,(: +
1)], : = 1, 2, ... Put 1 = '
n
1
n
. If : stops at some nite number , then 1 is clearly an closed set
1 = [,( + 1), ,( + 1)]. But, if : , then :,(: + 1) converges to 1 but never equals to
1. Thus, 1 = (1, 1).
Denition 3-15 (Closure): A closure of a set 1 A is the intersection of all closed sets
containing 1 (i.e. the smallest closed set containing 1). We denote the closure of 1, c|1 or

1.
How do we use these concepts in economics? We need these concepts to dene/analyze prefer-
ences. For example, we say that a preference _ is continuous on A if and only if for each r A,
the sets j A : j _ r and j A : j _ r are closed. Finally, we dene bounded and compact
sets in a metric space A.
Denition 3-16 (Bounded sets): A set 1 A is said to be bounded if there is a (nite) real
number ' and a point j such that d(r, j) _ ' for all points r in 1.
Denition 3-17 (Compact sets): A set 1 A is said to be compact if, for every open cover
G

of 1, there exists a nite collection such that:

1 '
n
i=1
G

i
Denition 3-18 (Open cover): An open cover of a set 1 A is a collection G

of open
subsets such that 1 '

.
For most economic applications, the following theorem is very useful.
Theorem 3-7: In R
m
(: _ 1), a set 1 R
m
is compact if and only if 1 is closed and bounded.
Proof : Omitted. Interested readers may refer to Rudin, Principles of Mathematical Analysis.
4. One-variable Calculus
12
As we have seen, a function describes a relationship from A to B such that, for every element
r , there is an associated element )(r) in 1. A real-valued function takes a form, ) : R
1
,
where is a subset of R
n
. In this section, we restrict our attention to : = 1: i.e. one-variable
functions. These functions are the simplest of all kinds of functions, because a careful graphical
analysis could help our understanding.
Types of one-variable functions:
Linear functions: j = ar +/, a =slope, / =intercept.
Non-linear functions:
Polynomial functions: j = a
k
r
k
+a
k1
r
k1
+... +a
1
r +a
0
.
Exponential functions: j = ac
bx
.
Logarithmic functions: j = log
b
r. i.e. /
y
= r.
Trigonometric functions: j = a sinr +/ cos r.
Of course, there are many other kinds of functions. For example, the following is also a one-variable
function:
)(r) =
_
2r i) r 0
2r i) r _ 0
4-1. Continuity
We are often interested in the continuity of a function, because the nature of the solution to
our economic problem may be signicantly aected by the existence of discontinuity. Formally, we
dene continuity as follows:
Denition 4-1 (Continuity): Let A and 1 be metric spaces and 1 A. Then, a function
) : 1 1 is continuous at r
0
if and only if, for every - 0, there exists c 0 such that,
d
x
(r, r
0
) < c = d
y
()(r), )(r
0
)) < -
Moreover, the function is continuous on A if and only if it is continuous at every point in A.
In R
1
, we can simplify the denition,
Denition 4-1
0
(Continuity): Let A R
1
. A real-valued function ) : A R
1
is continuous
at r
0
if and only if, for every - 0, there exists c 0 such that,
[r r
0
[ < c =[)(r) )(r
0
)[ < -
Intuitively, this says that, given the point r
0
, if the other value r is arbitrarily close to r
0
, then the
distance between the mapped values )(r) and )(r
0
) must be very close. For example, the following
function is not continuous at r
0
= 0:
)(r) =
_
2r i) r 0
r
2
+ 1 i) r _ 0
13
To see this, pick - = 1,2 0. At r
0
= 0, )(0) = 0 + 1 = 1. But, pick any point to the right of
r
0
(i.e. r 0). Then, no matter how close we make this r to 0, the value of )(r) goes only to 0
and never gets to 1. This can be seen very easily in a graph. But, clearly, the following function is
continuous:
)(r) =
_
2r i) r 0
r
2
i) r _ 0
Although the concept is intuitively clear, determining whether or not a function is continuous is
sometimes very dicult. There are two kinds of discontinuities. The rst kind is called jump
discontinuity and is easy to detect. The second kind is more dicult, because even the right-hand
or left-hand limit of ) cannot be dened. To investigate the continuity of functions, we often rely
on the following theorem:
Theorem 4-1: Let A R
n
. A real-valued function ) : A R
1
is continuous at r
0
if and only if,
for every sequence r
n
with limr
n
r
0
, we have:
lim
xn!x
0
)(r
n
) = )(r
0
)
(This theorem essentially states that ) is continuous at r
0
if and only if the left-hand limit of )
and the right-hand limit of ) exist at r
0
and are equal to each other).
Theorem 4-2: Let A R
n
. Let ) and q be real-valued continuous functions from A to R
1
. Then,
(i) )(r) +q(r)
(ii) )(r)q(r)
(iii) )(r),q(r) (where q(r) ,= 0)
are also continuous on A.
Lastly, we have the following results:
Theorem 4-3: Let A, 1, 7 be metric spaces and 1 A. If ) : 1 1 and q : )(1) 1 7 are
continuous, then the composite function / = (q )) of these two functions, dened as:
/(r) = q()(r)) )or r 1
is also continuous. The function /(r) is called a composite function. This is an intuitively trivial
but very important result. Most of the results applied economists rely on would break down if this
werent true.
4-2. Dierential calculus
Probably, one of the most frequently used concepts in applied economics is marginal eect.
We often use utility functions, production functions, etc to model our economy. For example, we
are often interested in the eect of a small change in labor input r on the production of a good, j.
If our production function has the form, j = )(r), such eect can be represented by the derivative
d),dr and is called marginal productivity of labor. Let r denote the change in labor input and
14
) = j the change in production. We want to nd the exact relationship when we make r
very very small. That is,
lim
4x!0
)
r
=
d)
dr
But, how can we derive this mathematically? Suppose that our labor input was at r = r
0
initially.
Then, we can represent the change in labor input r = (r
0
+ /) r
0
, for some small number /.
Note that / does not need to be positive. Now, how about the change in )? ) = )(r
0
+/))(r
0
).
Thus, we can dene the derivative as:
Denition 4-2 (Derivative): Let A R
1
. The derivative of a function ) : A R
1
at r = r
0
is given by:
d)
dr
(r
0
) = )
0
(r
0
) = lim
h!0
)(r
0
+/) )(r
0
)
/
(1)
Denition 4-3 (Dierentiability): Let A R
1
. A function ) : A R
1
is said to be dieren-
tiable at r = r
0
if and only if the limit (1) exists. The function is dierentiable on an open set
A if and only if it is dierentiable at every point on A.
Note that, for the derivative to exist, / must be able to take both negative and positive values
(that is, it can approach from above and below). Thus, if a function is dened on a closed interval
[a, /], it is not dierentiable at the endpoints r = a and r = /, by denition. Formally, we have the
following:
Denition 4-2
0
: A function ) : A R
1
is dierentiable at r = r
0
if and only if both the
right-hand derivative,
)
0
+
(r
0
) = lim
h&0
)(r
0
+/) )(r
0
)
/
and the left-hand derivative,
)
0

(r
0
) = lim
h%0
)(r
0
+/) )(r
0
)
/
exist and are equal to each other.
Question: Yes or no. If a function is dierentiable at r, is it necessarily continuous? Answer:
Yes. Formally, we have the following theorem.
Theorem 4-4: Let ) be dened on [a, /]. If ) is dierentiable at r [a, /], then it is continuous
at r.
Proof : Let )
0
(r
0
) = . By denition, for every - 0, there exist c 0 such that,
[/ 0[ < c =

)(r +/) )(r)

/

< -
So, let - = 1 and c
1
be the c that makes this statement holds for - = 1. Note that we can rewrite
the right-hand side:
15
[)(r +/) )(r) /[ =

)(r +/) )(r)

/
/ /

)(r +/) )(r)

/

[/[ < 1 [/[

Moreover, we can also manipulate [)(r +/) )(r) /[ to get:
)(r +/) )(r)[ _ [)(r +/) )(r) /[ +[/[
Or,
)(r +/) )(r)[ [/[ _ [)(r +/) )(r) /[
Combining these two, we have:
) [)(r +/) )(r)[ < [/[ +[[[/[
Now, for each - 0, take c = min
"
1+jAj
, c
1
. Then, the following must hold:
[/[ < c =[)(r +/) )(r)[ < [/[ +[[[/[ = [/[(1 +[[) <
-
1 +[[
(1 +[[) = -
Now, since / is arbitrary, rewrite r + / = r
0
. Then, this exactly coincides with the denition of
continuity. Q11
Example 1. Lets compute the derivative of )(r) = r
2
at r = 3, using the denition.
)
0
(3) = lim
)(3 +/) )(3)
/
= lim
(3 +/)
2
3
2
/
= lim
9 + 6/ +/
2
9
/
= lim
/(6 +/)
/
= lim6 +/
On the other hand, we know that )
0
(r) = 2r, so that )
0
(3) = 6.
Question: When does derivatives not exist? Answer: By the contrapositive of Theorem 4-4,
we know that if ) is not continuous, it is not dierentiable. But, even if f is continuous, it may not
be dierentiable. The important case is when there is a kink in the graph, it is not dierentiable.
Recall that the derivative of a function at r is the slope of the tangent line at r. There is no tangent
line when there is a kink.
We know the following derivative rules from the elementary calculus.
16
Theorem 4-5: Suppose that ) and q are dened on [a, /] and are dierentiable at r (a, /). Then,
) +q, )q, and ),q are dierentiable at r, and
(i) () +q)
0
(r) = )
0
(r) +q
0
(r)
(ii) ()q)
0
(r) = )
0
(r)q(r) +)(r)q
0
(r) (Product Rule)
(iii) (),q)
0
(r) = [)
0
(r)q(r) )(r)q
0
(r)],q
2
(r) (Quotient Rule)
Moreover, let / be an arbitrary constant in R
1
. Then,
(iv) (r
k
)
0
= /r
k1
Finally, for any a in R
1
,
(v) (a
x
)
0
= a
x
log(a)
Example 2.
(i) Recall derivatives of some special functions (Try to prove them at home):
(c
x
)
0
= c
x
(log r)
0
=
1
r
(sinr)
0
= cos r
(cos r)
0
= sinr
(ii)
(2r
k
log(r)) = (2r
k
)
0
(log(r)) + (2r
k
)
0
(log(r))
= 2/r
k1
log(r) + 2r
k
(1,r)
= 2/r
k1
log(r) + 2r
k1
= 2r
k1
(/ log(r) + 1)
(iii)
(c
ax
,r)
0
=
(c
ax
)
0
r c
ax
(r)
0
r
2
=
ac
ax
r c
ax
r
2
= c
ax
_
ar 1
r
2
_
Theorem 4-6 (Chain Rule): Suppose that ) : [a, /] R
1
is dierentiable on (a, /) and q : 1
R
1
is also dierentiable on 1 (where )([a, /]) 1 ). Then, the composite function / : [a, /] R
1
,
dened by:
/(r) = q()(r)) )or r (a, /)
17
is also dierentiable on (a, /) and its derivative is given by:
/
0
(r) = q
0
()(r)))
0
(r) )or r (a, /)
Example 3.
(i) For example, if )(r) = j = r
2
and q(j) = . = 3j + 1, then, the composite of two functions
is /(r) = q()(r)) = 3(r
2
) + 1 = 3r
2
+ 1. We can derive the derivative of this function either
directly or by using Chain Rule. It is easy to see /
0
(r) = 6r. What if we use Chain Rule?
/
0
(r) = q
0
()(r)))
0
(r) = (3) (2r) = 6r.
(ii) Consider the function /(r) = (r
2
+ 2r + 1)
3
. We can consider this as a composite of
two functions: j = r
2
+ 2r + 1 and . = j
3
. Therefore, .
0
= 3j
2
and j
0
= 2r + 2. Thus,
/
0
(r) = 3(r
2
+ 2r + 1)
2
(2r + 2).
There are several other theorems that are sometimes useful in economic analysis. I will state
them without proof.
Theorem 4-7 (Mean Value Theorem): If ) is a real-valued continuous function on [a, /] and
is dierentiable on (a, /), then there exist a point r [a, /] such that:
)
0
(r) =
)(/) )(a)
/ a
(See the graph).
Theorem 4-8 (Intermediate Value Theorem): Let ) be a real-valued continuous function on
[a, /]. If)(a) < )(/) and if c is a number such that )(a) < c < )(/), then there exists a point
r (a, /) such that:
)(r) = c
(See the graph). This theorem is often used to prove the existence of a competitive equilibrium.
For example, let j be the price of a good and 1(j), o(j) be demand and supply for that good. If
1 and o are continuous functions and 1(j
0
) o(j
0
) 0 for some j
0
and 1(j
00
) o(j
00
) < 0 for
j
0
< j
00
, then there exists a market clearing price p (j
0
, j
00
) such that 1(j) o(j) = 0.
Theorem 4-9 (LHopitals Rule): Suppose that ) and q are real-valued dierentiable functions
on (a, /). Suppose further that:
lim
x!a
)
0
(r)
q
0
(r)
= 1 (with q(r) ,= 0)
Then, we have:
lim
x!a
)(r)
q(r)
= 1
if one of the following is true:
(i) lim
x!a
)(r) = 0 and lim
x!a
q(r) = 0,
(ii) lim
x!a
q(r) = +.
18
Example 4. The LHopitals rule is very useful in determining the limit of an indeterminate
expression. For example, consider:
lim
x!0
(1 +r)
n
1
r
=
(1 + 0)
n
1
0
=
0
0
?
This expression is clearly indeterminate, because both the numerator and the denominator go to
zero. Thus, the limit depends on which one approaches to zero faster. In such case, we use the
LHopitals rule.
lim
x!0
(1 +r)
n
1
r
= lim
x!0
:(1 +r)
n1
1
= :(1 + 0)
n1
= :
Example 5. LHopitals rule can be used to prove the following interesting results:
1. The exponential function c
x
grows faster than r
n
for any : _ 0.
2. The log function log r grows slower than r
n
for any : _ 0.
To see this, consider:
lim
x!1
c
x
r
2
= lim
x!1
c
x
2r
= lim
x!1
c
x
2
= +
lim
x!1
log r
r
2
= lim
x!1
1,r
2r
= lim
x!1
1
2r
2
= 0
Now, in Example 5 (ii), we used the second derivative. Of course, there is no guarantee that
this derivative exists. In economic applications, however, we typically use functions that are dier-
entiable as many times as we want. Lets rst dene the second derivative:
Denition 4-3 (Second Derivative): Let A R
1
. Suppose that a function ) : A R
1
is
dierentiable on A. (Thus, the derivative function: )
0
: A R
1
is well-dened). The second
derivative of the function )
0
at r = r
0
is given by:
d)
0
dr
(r
0
) = )
00
(r
0
) = lim
h!0
)
0
(r
0
+/) )
0
(r
0
)
/
The function ) is said to be twice-dierentiable at r
0
if and only if this derivative exists.
The higher-order derivatives are dened similarly:
Denition 4-4 (Higher-Order Derivative): Let A R
1
. Suppose that a function ) : A R
1
is :-times dierentiable on A. The (n+1)-th derivative of the function )
(n)
at r = r
0
is given
by:
d)
(n)
dr
(r
0
) = )
(n+1)
(r
0
) = lim
h!0
)
(n)
(r
0
+/) )
(n)
(r
0
)
/
We also say that a function ) is continuously dierentiable if its rst-derivative exists and is
continuous. Continuous dierentiability is not the same as continuous and dierentiable functions.
The latter simply means that they are continuous and dierentiable. As we know, the higher-order
19
derivative rules are exactly the same as the rst derivative rules. We denote a class of continuously
dierentiable functions as C
1
, twice continuously dierentiable functions as C
2
, and so on.
Example 6. The rst, second, and third derivative of the function )(r) = r
n
is:
)
0
(r) = :r
n1
)
00
(r) = :(: 1)r
(n1)1
= :(: 1)r
n2
)
000
(r) = :(: 1)(: 2)r
(n2)1
= :(: 1)(: 2)r
n3
Question: Is a function )(r) = a dierentiable how many times? Answer: It is dierentiable
innitely many times. To convince yourself, note that its rst derivative exists and it is )
0
(r) = 0.
This is also a constant function, which is generically the same as the original function. We can
apply the reasoning for higher-order derivatives.
Now, we are ready to state a very important theorem, which you are likely to see very often in
economic applications. Its proof is essentially a straightforward application of Mean Value Theorem.
Theorem 4-10 (Taylors Theorem): Let 1 be an interval in R
1
. Suppose that ) : A R
1
is
:-times continuously dierentiable on 1 and that its (: + 1)-th derivative exists on 1. Then, for
any points a and / in 1, there exists a point c with a < c < / such that:
)(/) = )(a) +)
0
(a)(/ a) +
1
2!
)
00
(a)(/ a)
2
+
1
3!
)
000
(a)(/ a)
3
+... +
1
(: + 1)!
)
(n+1)
(c)(/ a)
n+1
Notice that the last term with a function of an unknown constant will go to zero as : increases
at the order of
1
(n+1)!
(if, of course, a and / are suciently close to each other). This means that we
can approximate a function )(/) with the : derivatives of known constants. This is called Taylor
expansion of ) of order : or Taylor approximation of ) of order :..It is written:
)(/) = )(a) +)
0
(a)(/ a) +
1
2!
)
00
(a)(/ a)
2
+
1
3!
)
000
(a)(/ a)
3
+... +
1
:!
)
(n)
(a)(/ a)
n
+1
n+1
where 1
n+1
=
1
(n+1)!
)
(n+1)
(c)(/ a).
Now, suppose )(r) is dierentiable everywhere. Let a = 0 and / = r. Then, we have Maclaurin
expansion of f as a special case of Taylor expansion.
)(r) = )(0) +)
0
(0)r +
1
2!
)
00
(0)r
2
+
1
3!
)
000
(0)r
3
+... +
1
:!
)
(n)
(0)r
n
+1
n+1
Example 7.
(i) The third-order Taylor approximation of )(r) = r
3
at r = 0 is obtained as follows:
)
0
(r) = 3r
2
20
)
00
(r) = 6r
)
000
(r) = 6
)(r) - )(0) +)
0
(0)r +
1
2
)
00
(0)r
2
+
1
3!
)
000
(0)r
3
= 0 + 0 r + 0 r
2
+
1
3!
6r
3
= r
3
This means that Taylor approximation of )(r) = r
3
is exactly r
3
.
(ii) Using Maclaurin expansion, we can prove the well-know result )(r) = c
x
=

1
n=0
r
n
,:!.
)(0) = c
0
= 1
)
0
(0) = c
0
= 1
)
00
(0) = c
0
= 1
)(r) = )(0) +)
0
(0)r +
1
2!
)
00
(0)r
2
+
1
3!
)
000
(0)r
3
+... +
1
:!
)
(n)
(0)r
n
+1
n+1
= 1 +r +
1
2!
r
2
+
1
3!
r
3
+... +
1
:!
r
n
+1
n+1
=
1

n=0
r
n
:!
(letting : )
We often use this theorem in econometrics or in the analysis of dynamic systems.
To conclude this section, we discuss the inverse of a function. Suppose that we have a linear
demand function:
r = 10 2j
Then, its inverse (called an inverse demand function) is obtained by solving for j:
j = 5
1
2
r
The derivative of the inverse function is obviously dj,dr = 1,2. Notice that this derivative is
the inverse of the derivative of the original function. i.e. dj,dr = 1,(dr,dj). However, this is not
always the case. For this to work, we need to have a well-dened inverse. Recall the denition 3-2
on the one-to-one (or injection) mapping. For the inverse to be well-dened, it must be one-to-one.
In other words, the function ) : A R
1
has a well-dened inverse )
1
: )(A) A if, for every
r
1
, r
2
A, r
1
,= r
2
implies )(r
1
) ,= )(r
2
) (that is, for every j )(A), )
1
(j) has at most one
21
point in A. For example, )(r) = r
2
does not have a well-dened inverse. As our intuition tells us,
) has a well-dened inverse if and only if it is strictly increasing or strictly decreasing. Now, we
are ready to state the following theorem (without proof).
Theorem 4-11 (Inverse Function Theorem): Let ) : A R
1
be a C
1
function. Suppose that
)
0
(r) ,= 0 for all r in some interval 1 A, then:
(i) well-dened inverse )
1
exists on 1;
(ii) )
1
is also continuously dierentiable on )(1);
(iii) for all j )(1), we have:
()
1
)
0
(j) =
1
)
0
()
1
(j))
4-3. Critical points, local minima, local maxima
In economic applications, we are often interested in nding maximum and minimum of certain
objectives. For example, we are interested in the solution to a consumers utility maximization
problem. We will take up the optimization techniques in the week 3. Here, we learn how to analyze
the graphical characteristics of functions. In one-variable cases, it is usually as simple as looking
at graphs. Thus, our task here is to learn to be able to determine how a function translates into a
graph. First, lets consider the following theorem.
Theorem 4-11: Suppose that ) : A R
1
is continuously dierentiable at r = r
0
. Then, the
following are true:
(i) if )
0
(r
0
) 0, there exists a (small) open interval 1 such that ) is (strictly) increasing on 1;
(ii) if )
0
(r
0
) < 0, there exists a (small) open interval 1 such that ) is (strictly) decreasing on 1.
Denition 4-5 (Monotonic functions): Suppose that ) : [a, /] R
1
. Then,
(i) ) is said to be (weakly) increasing if for any r, j [a, /], r < j implies )(r) _ )(j).
(ii) ) is said to be (strictly) increasing if for any r, j [a, /], r < j implies )(r) < )(j).
(iii) ) is said to be (weakly) decreasing if for any r, j [a, /], r < j implies )(r) _ )(j).
(iv) ) is said to be (strictly) decreasing if for any r, j [a, /], r < j implies )(r) )(j).
Corollary 4-12: Suppose that ) : [a, /] R
1
is continuously dierentiable on (a, /). Then,
(i) if )
0
(r) 0 for all r (a, /), ) is (strictly) increasing on (a, /);
(ii) if )
0
(r) < 0 for all r (a, /), ) is (strictly) decreasing on (a, /);
(iii) if ) is (strictly) increasing on (a, /), )
0
(r) _ 0 for all r (a, /);
(iv) if ) is (strictly) decreasing on (a, /), )
0
(r) _ 0 for all r (a, /).
Denition 4-6 (Critical points): Suppose that ) : [a, /] R
1
is dierentiable on (a, /). Then,
a point r (a, /) is called a critical point of ) if )
0
(r) = 0.
As we all know from elementary calculus, critical points can be classied into local max, local
min, or degenerate critical (inection) points.
Denition 4-7 (Maxima and minima): Let ) : A R
1
. Then,
22
(i) a point r

A is said to be a global maximum of ) on A if )(r

) _ )(r) for all r A;

(ii) a point r

A is said to be a local maximum of ) on A if there exists an open interval

1 with r 1 such that )(r

) _ )(r) for all r 1 A.

For minima, simply change the inequality.
We have the following important theorems.
Theorem 4-13 (Necessary Condition for Local Min/Max): Suppose that ) : [a, /] R
1
is
dierentiable on (a, /). If ) has a local maximum or minimum at a point r (a, /), then )
0
(r) = 0.
Theorem 4-14 (Sucient Conditions: Suppose that ) : [a, /] R
1
is twice-dierentiable on
(a, /).
(i) if )
0
(r) = 0 and )
00
(r) < 0, then r is a local maximum of );
(ii) if )
0
(r) = 0 and )
00
(r) 0, then r is a local minimum of );
(iii) if )
0
(r) = 0 and )
00
(r) = 0, then r may be either a local max, local min, or inection point.
To see why this must be true, it is easiest to see it graphically.
Example 8.
(i) )(r) = r
2
. )
0
(r) = 2r, so that )
0
(0) = 0. )
00
(0) = 2 0. Thus, r = 0 is a minimum (it is a
global min).
(ii) )(r) = r
3
.)
0
(r) = 3r
2
, so that )
0
(0) = 0. )
00
(r) = 6r, so that )
00
(0) = 0. Clearly from the
graph, r = 0 is not a min or max, it is an inection point.
In economic applications, we use so-called rst-order conditions that set )
0
(r) = 0 and solve
for such r. But, as these theorem indicates, this is simply a necessary condition and not a sucient
condition. Moreover, this is a condition for local maxima or minima. Though we are interested in
global maxima or minima, we rarely obtain them, unless the objective function has a well-behaved
functional form. We will take up discussion on sucient conditions and functional forms in more
depth later (Week 3). For now, we have the following theorem:
Theorem 4-15 (Global max/min): Suppose that ) : 1 R
1
is twice-dierentiable and 1 is a
connected interval. Suppose further that:
(i) r is a local maximum of );
(ii) r is the only critical point of ) on 1.
Then, r is the global maximum (minimum) of ).
Theorem 4-16 (Global max/min): Suppose that ) : [a, /] R
1
is twice-dierentiable on (a, /).
(i) If )
00
is never zero on (a, /), then ) has at most one critical point in (a, /).
(ii) This critical point is a global minimum if )
00
0 and global maximum if )
00
< 0.
Of course, a max or min of a function can occur at an endpoint of the domain. It is very
important to pay attention to the domain of a function. The max/min of a function, whether
global or local, is a concept relative to its domain. The maxima or minima at an endpoint of the
domain is called boundary maxima or boundary minima.
23
Lastly, we have the following important theorem. It is this theorem that we are safe (at least
in most economic applications) to assume the existence of a global maximum or minimum. This
theorem is more general and applies to more than one variable cases.
Theorem 4-17 (Weierstrasss Theorem): Let C R
n
be a compact set (i.e. closed and
bounded set). Let ) : C R
1
be a continuous function. Then, there exist points x
min
, x
max
such
that:
(i) )(x) _ )(x
min
), \x C
(ii) )(x) _ )(x
max
), \x C
These points are obviously a global minimum and a global maximum, by denition.
What does this mean in one-variable case? A compact set in R
1
is simply a closed interval of
the form [a, /]. Thus, it states that on the closed interval [a, /], there are always a global max and
a global min, as long as the function is continuous. So, if ) is also dierentiable, then we have the
simplest way of calculating a global max. Question: How would you go about nding a global
max? Answer: First, nd critical points by setting )
0
(r) = 0. Second, evaluate ) at every critical
point and both boundary points. Then, pick r that gives the highest value of ).
5. Calculus of Several Variables
5-1. Preliminaries
In economics, we often consider multivariate calculus, because in the real world we have many
input and output goods. It is rarely the case that functions of our interest, such as utility functions
or production functions, have only one variable as an argument. Thus, we often analyze functions
) : A R
1
where A R
n
instead of A R
1
.
Example 1.
(i) A consumer in the real world would be aware of nitely many goods, say :, for her possible
consumption. She would choose a consumption bundle r = (r
1
, r
2
, ..., r
n
). Thus, she would solve
a maximization problem:
max l(r
1
, r
2
, ..., r
n
) :.t.
n

i=1
j
i
r
i
_ '
(ii) A production of a good j may require three (primary) inputs r
1
, r
2
, r
3
:
j = r

1
1
r

2
2
r

3
3
(ii) An aggregate demand may exhibit some substitution eects between two goods, so that:
r
1
= j

1
+j

2
Example 2.
Typical functional forms for utility and production functions:
(i) Linear/log-linear functions: n = ar
1
+/r
2
, n = a log r
1
+/ log r
2
;
(ii) Cobb-Douglas functions: n = r

1
1
r

2
2
;
24
(iii) Leontif functions: n = minr
1
, r
2
;
(iv) Constant-elasticity-of-substitution functions: n = (c
1
r
a
1
+c
2
r
a
2
)
b=a
.
In addition, we may sometimes study the functions f : A R
m
where A R
n
.
f (x) =
_

_
)
1
(r
1
, r
2
, ..., r
n
)
)
2
(r
1
, r
2
, ..., r
n
)
.
.
.
)
m
(r
1
, r
2
, ..., r
n
)
_

_
Example 3.
Two dierent output goods j
1
, j
2
may require inputs of three goods r
1
, r
2
, r
3
with dierent
technologies:
j
1
= ar
1
+/r
2
+cr
3
j
2
=
_
r
1
r
2
r
3
We may want to analyze them jointly, instead of separately one-by-one.
It is always a good idea to draw a graph of functions to understand them. However, it is
impossible to represent functions of more than two arguments and sometimes drawing in a three-
dimensional space does not help our intuition. So, economists often use two-dimensional diagrams
to represent a function of two-variables.
Denition 5-1 (Level Sets): Suppose ) : A R
1
where A R
n
. Then, the level set for a
point a )(A) is the set 1 A such that:
1(a) = x A : )(x) = a
Example 4.
(i) Suppose )(r, j) = r
2
+j
2
. Then, for )(r, j) = 5, lets nd the level set. By denition,
1(5) = (r, j) : r
2
+j
2
= 5
We know from the property of right-angled triangles, it is a circle in the (r, j)-plane whose radius
is
_
5. If level sets can be drawn as curves, we sometimes call level curves.
(ii) Suppose a production function has the Cobb-Douglas form: = rj. Then, nd the level
set for = 3.
1(3) = (r, j) : rj = 3
Note that we can simply solve rj = 3 for j as a function of r.
1(3) = (r, j) : j = 3,r
25
Thus, it is simply the graph of j = 3,r.
Sometimes, we call these level sets isoquants or indierence sets, depending on our economic
context.
In the next week, we are going to talk about linear algebra and Euclidean vector space.
For us to be able to use linear-algebraic operations, the functions in R
n
needs to be linear. So,
what does it mean for functions to be linear?
Denition 5-2 (Linear Operator): A function f : A R
n
R
m
is called a linear operator
or linear transformation if ) preserves the following properties:
(i) \x, y A, we have f (x +y) = f (x) +f (y); and
(ii) \x A, \r R, we have f (rx) = rf (x).
Question: Is a real-valued function )(r) = ar+/ linear in this sense? Answer: No, it is often
called a linear function but it is not a linear operator. To see this, suppose a, / 0. Take r = 2.
)(2r) = a(2r) +/ = 2ar+/ ,= 2)(r) = 2ar+2/. (The functions of the form )(r) = ar+/ is called
ane functions, to be more precise). As implied by this, for a one-variable real-valued function
to be a linear operator, it must be of the form )(r) = ar. The following theorem generalizes this
notion for functions of several variables.
Theorem 5-1: Let ) : A R
n
R
1
be a linear operator. Then, there exists a vector a R
n
such that )(x) = a x for all x A.
Proof : First, we write the canonical basis of R
n
:
e
i
=
_
_
_
_
_
_
_
_
0
.
.
.
1
.
.
.
0
_
_
_
_
_
_
_
_
for i = 1, 2, ...:
Dene a
i
= )(e
i
) for all i = 1, 2, ...:. Let a = (a
1
, a
2
, ..., a
n
). Now, recall that every x A R
n
can be written:
x =
_
_
_
_
_
r
1
r
2
.
.
.
r
n
_
_
_
_
_
= r
1
e
1
+r
2
e
2
+... +r
n
e
n
Thus, by denition of the linear operator,
)(x) = )(r
1
e
1
+r
2
e
2
+... +r
n
e
n
)
= )(r
1
e
1
) +)(r
2
e
2
) +... +)(r
n
e
n
) by property (i)
= r
1
)(e
1
) +r
2
)(e
2
) +... +r
n
)(e
n
) by property (ii)
= r
1
a
1
+r
2
a
2
+... +r
n
a
n
= a x
26
Q11.
This theorem can be extended to vector-valued functions f : A R
n
R
m
.
Theorem 5-2: Let f : A R
n
R
m
be a linear operator. Then, there exists a (: :)-matrix
A such that f (x) = x for all x A.
We are sometimes, though not too often, interested in quadratic forms of multivariate functions.
The notion of quadratic function )(r) = ar
2
can be extended to two-variable cases:
)(r
1
, r
2
) = a
11
r
2
1
+a
22
r
2
2
+a
12
r
1
r
2
and to three-variable cases:
)(r
1
, r
2
, r
3
) = a
11
r
2
1
+a
22
r
2
2
+a
33
r
2
3
+a
12
r
1
r
2
+a
13
r
1
r
3
+a
23
r
2
r
3
Denition 5-3 (Quadratic Forms): A quadratic form on R
n
is a real-valued function Q : A
R
n
R
1
such that:
Q(x) =

ijn
a
ij
r
i
r
j
Just like a linear operator, a quadratic form has a convenient matrix representation. For
example,
a
11
r
2
1
+a
22
r
2
2
+a
12
r
1
r
2
= (r
1
r
2
)
_
a
11
1
2
a
12
1
2
a
12
a
22
__
r
1
r
2
_
Question: Can you compute the RHS to prove this? Answer: To compute this, it is easiest to
do it backward:
( r
1
r
2
)
_
a
11
1
2
a
12
1
2
a
12
a
22
__
r
1
r
2
_
= ( r
1
r
2
)
_
a
11
r
1
+
1
2
a
12
r
2
1
2
a
12
r
1
+a
22
r
2
_
= r
1
(a
11
r
1
+
1
2
a
12
r
2
) +r
2
(
1
2
a
12
r
1
+a
22
r
2
)
= a
11
r
2
1
+
1
2
a
12
r
1
r
2
+
1
2
a
12
r
1
r
2
+a
22
r
2
2
= a
11
r
2
1
+a
22
r
2
2
+a
12
r
1
r
2
In general, a quadratic form:
Q(x) =

ijn
a
ij
r
i
r
j
can be written as:
27
Q(x) = x
t
x
where is a unique symmetric matrix such that:
=
_
_
_
_
_
a
11
1
2
a
12

1
2
a
1n
1
2
a
12
a
22

1
2
a
2n
.
.
.
.
.
.
.
.
.
.
.
.
1
2
a
1n
1
2
a
2n
a
nn
_
_
_
_
_
We will discuss more on quadratic forms later, when we deal with linear algebra. We now move
on to the continuity and dierentiability of multivariate functions.
5-2. Continuity
We discussed continuity with specic reference to one-variable cases in Section 4. However, we
also discussed it more generally in metric spaces. The Euclidean space R
n
is a metric space with a
metric dened as:
d(x, y) = [[x y[[ =

_
n

i=1
(r
i
j
i
)
2
We have seen the following denition.
Denition 4-1 (Continuity): Let A and 1 be metric spaces and 1 A. Then, a function
) : 1 1 is continuous at r
0
if and only if, for every - 0, there exists c 0 such that,
d
x
(r, r
0
) < c = d
y
()(r), )(r
0
)) < -
Moreover, the function is continuous on A if and only if it is continuous at every point in A.
This denition can be modied to apply in R
n
. That is,
Denition 5-4 (Continuity): Let A R
1
. A function f : A R
m
is continuous at x
0
if and
only if, for every - 0, there exists c 0 such that,
[[x x
0
[[ < c =[[f (x) f (x
0
)[[ < -
Again, f is continuous on A if f is continuous at every point of A.
We have the analogue of Theorem 4-1 and other convenient theorems to determine continuity.
Theorem 5-3: Let A R
n
. A real-valued function f : A R
m
is continuous at x
0
if and only if,
for every sequence x
n
with lim
n!1
x
n
= x
0
, we have:
lim
n!1
f (x
n
) = f (x
0
)
28
Theorem 5-4: Let A R
n
. A real-valued function f : A R
m
is continuous at x
0
if and only if
each and every component function )
i
, i = 1, 2, ...: is continuous at x
0
.
Theorem 5-5: If f : A R
n
R
m
and g : A R
n
R
m
are continuous on X, then f +g, f g
are also continuous on A.
Question: Why not f ,g? Answer: f ,g is not well-dened, as g is a vector-valued function.
Moreover, notice that the continuity of composite functions is also guaranteed for Euclidean spaces,
because the Theorem 4-3 is suciently general and is true for any metric spaces. Try to write down
the modication of Theorem 4-3 that applies specically to Euclidean spaces.
Caution: In the denition of limit used in Theorem 5-5 or Theorem 4-1, it is important to note
that we are taking the limit of a sequence x
n
= (r
1n
, r
2n
, ..., r
kn
), but are not taking limit of
each component r
in
of the sequence x
n
one-by-one. For example, in R
2
consider the limit of a
sequence such that (r, j) (0, 0) and a function:
)(r, j) =
r
r +j
Then, the limit of this function when we let (r, j) (0, 0) does not exist, because its value varies
depending on how (r, j) approaches to zero. To see this, let r = 0 and let j 0,
lim
x=0
y!0
r
r +j
= lim
y!0
0
0 +j
= lim
y!0
0 = 0
But, let y=0 and let x0, then
lim
x!0
y=0
r
r +j
= lim
x!0
r
r
= lim
x!0
1 = 1
Because the limit does not exist, it is not continuous at (r, j) = (0, 0).
So, to determine the continuity of two variables at (a, /) R
2
, one needs to check three things:
(i) )(a, /) is well-dened;
(ii) lim
x!a;y!b
)(r, j) exists; and
(iii) lim
x!a;y!b
)(r, j) = )(a, /).
5-3. Dierential Calculus on R
n
When we analyze the eect of small changes in more than two variables on the value of a
function, we are often interested in the eect of a small change in one variable keeping the other
variables xed. This is the concept of partial derivative. Formally, we have:
Denition 5-5 (Partial Derivative): Let A R
n
. Then, for each variable r
i
, the partial
derivative of a function ) : A R
1
at a point x is given by:
0)
0r
i
(x) = )
x
i
(x) = lim
h!0
)(r
1
, ..., r
i
+/, ..., r
n
) )(r
1
, ..., r
i
, ..., r
n
)
/
29
As this denition tells us, when we take partial derivatives of a variable, we take the other
variables as constant. Thus, the derivative rules of one-variable functions apply without change.
Example 5. Lets compute the partials of the following functions:
(i) )(r, j) = 2r
3
+ 5rj + 5j
2
.
0)(r, j)
0r
= 6r
2
+ 5j + 0 = 6r
2
+ 5j
0)(r, j)
0j
= 0 + 5r + 10j = 5r + 10j
(ii) )(r, j) =
_
rj.
0)(r, j)
0r
=
0r
1
2
j
1
2
0r
=
1
2
r
1
2
1
j
1
2
=
1
2
r

1
2
j
1
2
0)(r, j)
0j
=
0r
1
2
j
1
2
0r
=
1
2
r
1
2
j

1
2
When the partial derivatives )
x
, )
y
exist, we can talk about the second-order partial deriv-
atives of )
x
, )
y
.
Denition 5-6 (Second-Order Partial Derivative): Let A R
n
. Suppose that the derivative
function )
x
i
: A R
1
is well-dened at a point x. Then, for each variable r
j
, the second-order
partial derivative at a point x is given by:
0
0r
j
_
0)
0r
i
_
(x) = )
x
i
x
j
(x) = lim
h!0
)
x
i
(r
1
, ..., r
i
+/, ..., r
n
) )
x
i
(r
1
, ..., r
i
, ..., r
n
)
/
Higher-order partial derivatives are dened similarly.
Example 6. Lets compute the second-order partials of the following functions: )(r, j) = 2r
3
+
5rj + 5j
2
. We know the rst-order partial derivatives already:
0)(r, j)
0r
= 6r
2
+ 5j
0)(r, j)
0j
= 5r + 10j
Thus, the second-order partials can be computed by applying the same rule again. But, this time,
we have four partial derivatives.
30
0
0r
_
0)
0r
_
=
0
_
6r
2
+ 5j
_
0r
= 12r
0
0j
_
0)
0r
_
=
0
_
6r
2
+ 5j
_
0j
= 5
0
0r
_
0)
0j
_
=
0 (5r + 10j)
0r
= 5
0
0r
_
0)
0j
_
=
0 (5r + 10j)
0j
= 10
In general, a function of : variables has :
2
second-order partial derivatives. These partial
derivatives can be arrayed into an (: :)-matrix. The matrix is called the Hessian matrix of )
and is written:
H = 1
2
)(x) =
_
_
_
_
_
_
_
@
2
f
@x
2
1
@
2
f
@x
2
@x
1

@
2
f
@xn@x
1
@
2
f
@x
1
@x
2
@
2
f
@x
2
2

@
2
f
@xn@x
2
.
.
.
.
.
.
.
.
.
.
.
.
@
2
f
@x
1
@xn
@
2
f
@x
2
@xn

@
2
f
@x
2
n
_
_
_
_
_
_
_
Notice that the (i, ,)-entry of Hessian is
@
2
f
@x
j
@x
i
!
Theorem 5-5 (Youngs Theorem): Suppose that ) : A R
n
is twice-dierentiable on an open
set l A. Then, for all x l, we have:
0
2
)
0r
i
0r
j
(x) =
0
2
)
0r
j
0r
i
(x) for each pair i, , = 1...:,
This implies that the Hessian of ) is symmetric.
Example 7 (Elasticity of Demand):
I have said that economists are interested in the analysis of marginal eects. But, how do we
use the concept of marginal eects in the real economic analysis? One way to do it is to analyze
elasticity of demand. Suppose that an aggregate demand for a good 1 is a function of its own price
j
1
, its (possible) substitute j
2
, and aggregate income 1 . Thus, we can write the demand function:
Q
1
= Q
1
(j
1
, j
2
, 1 )
Suppose that we are interested in the eect of its own price change on its demand. If the change
is small enough, we can approximate the change by its partial derivative:
Q
1
j
1
-
0Q
1
0j
1
31
But, economists do not like this as a measure of the price sensitivity, because this expression heavily
relies on the unit used. For example, suppose that Q
1
is measured in barrel, but j
1
is in dollars
per gallon. This measure would yield a totally dierent value if Q
1
were measured, say, in barrel,
litter, etc. To evaluate the eect in a more sensible manner, we need to normalize with respect its
own quantity. So, economists use a percentage change in Q
1
relative to a percentage change in j
1
.
Formally, the own price elasticity of demand is dened as:
-
11
=
% change in demand
% change in own price
=
Q
1
,Q
1
j
1
,j
1
=
j
1
Q
1

Q
1
j
1
-
j
1
Q
1

0Q
1
0j
1
As one expects, this value is usually negative, because
@Q
@p
1
is negative. If this value lies between
1 and 0, then the good is called inelastic. If it lies between and 1, then the good is called
elastic (that is, the eect of its own price change is large). Similarly, we can dene the cross price
elasticity of demand:
-
12
=
% change in demand
% change in the price of the other good
=
Q
1
,Q
1
j
2
,j
2
=
j
2
Q
1

Q
1
j
2
-
j
2
Q
1

0Q
1
0j
2
If -
12
and -
21
are both positive, goods 1 and 2 are called substitutes. If -
12
and -
21
are both
negative, goods 1 and 2 are called complements. Furthermore, we are interested in the eect of
a change in income on demand. It is called the income elasticity of demand:
-
1Y
=
% change in demand
% change in income
=
Q
1
,Q
1
1,1
=
1
Q
1

Q
1
1
-
1
Q
1

0Q
1
01
Question: Suppose that the demand for good 1 is given by:
Q
1
= j
a
1
j
1a
2
Lets nd the elasticity for arbitrary points. Answer: First, compute the partials:
0Q
1
0j
1
= aj
a1
1
j
1a
2
0Q
1
0j
2
= (1 a)j
a
1
j
a
2
Now, plug this into the formula:
-
11
=
j
1
Q
1

0Q
1
0j
1
=
j
1
j
a
1
j
1a
2
aj
a1
1
j
1a
2
= aj
1
j
1
1
= a
-
12
=
j
2
Q
1

0Q
1
0j
2
=
j
2
j
a
1
j
1a
2
(1 a)j
a
1
j
a
2
= (1 a)
j
1a
2
j
1a
2
= (1 a)
Thus, this form of demand is called a constant elasticity demand.
We have to note that the dierentiability of a function of several variables is not the same thing
as the existence of its partial derivatives.
32
Denition 5-7 (Dierentiability in R
n
): Let A R
n
. A function ) : A R
1
is dierentiable
at a point x if there exists a linear operator : R
n
R
1
such that:
lim
h!0
[)(x +h) )(x) h[
[ [h[ [
= 0
We write )
0
(x) = . Note that is a vector. We call )
0
(x) the total derivative or Jacobian
derivative of ) and write:
J = 1
1
)(x) =
_
@f
@x
1
@f
@x
2

@f
@xn
_
When we want to represent it as the column matrix and think of it as a vector, then we refer to it
as the gradient vector of ) and write:
_)(x) =
_
_
_
_
_
_
@f
@x
1
@f
@x
2
.
.
.
@f
@xn
_
_
_
_
_
_
When we have a function from R
n
to R
m
:
f (r
1
, ..., r
n
) =
_
_
_
_
_
)
1
(r
1
, ..., r
n
)
)
2
(r
1
, ..., r
n
)
.
.
.
)
m
(r
1
, ..., r
n
)
_
_
_
_
_
its Jacobian matrix is (be careful with the layout!):
J =
_
_
_
_
_
_
@f
1
@x
1
@f
1
@x
2

@f
1
@xn
@f
2
@x
1
@f
2
@x
2

@f
2
@xn
.
.
.
.
.
.
.
.
.
.
.
.
@fm
@x
1
@fm
@x
2

@fm
@xn
_
_
_
_
_
_
Example 8: Suppose that we have a function from R
2
to R
3
:
f (r, j) =
_
_
r
2
rj
j
2
+r
_
_
Then its Jacobian matrix is:
J =
_
_
2r 0
j r
1 2j
_
_
We have a following convenient theorem.
33
Theorem 5-6 (Dierentiability): Suppose a function ) : A R
n
R
1
is dierentiable at a
point x. Then, all of its partial derivatives 0),0r
i
exist at x, i = 1, 2, ...:.
Now, we have studied the marginal eect of a change in variables if the change occurs one-by-
one while other variables are being xed. What if all the variables change simultaneously? We
approximate the change in ). This is what we call the total dierential of ).
Denition 5-7 (Total Dierentials): Let ) : A R
n
R
1
. The following approximation of a
change in ) is called the total dierential of ):
d) =
0)
0r
1
dr
1
+
0)
0r
2
dr
2
+... +
0)
0r
n
dr
n
Question: What do partial derivatives, total derivatives and total dierentials look like geometri-
cally? Answer: See the handout.
Taylors Theorem can be extended to the case of vector-valued functions with more than two-
variables: ) : A R
n
R
m
. I will provide the theorem for the special case of twice-dierentiable
functions, as it is unlikely to use a Taylors approximation of more than the second-order (Note
that if we had more than second derivatives, we would have suciently accurate knowledge of the
form of that function and the Taylor approximation technique would be less valuable).
Theorem 5-7 (Taylors Theorem in R
n
): Suppose a function ) : A R
n
R
1
is twice
continuously dierentiable on an open set l A and its third total derivative exists on l. Then,
for any point a, / l, we have:
)(b) = )(a) +1
1
)(a)(b a) +
1
2!
(b a)
t
1
2
)(x)(b a) +O([[b a[[
2
)
where O() indicates that this term goes to zero faster than [[ba[[
2
(i.e. O([[ba[[
2
),[[ba[[
2
0
as b a).
Example 9: Sometimes, we would like to evaluate a dierential equation of the form:
_ r = 1(r, j) = r(/ r) j
where r is a stock of natural resources, say, sh, and j is a harvest or sh catch. Lets approximate
the RHS by the rst-order Taylor approximation around (r

, j

) = (0, 0):
1(r, j) - 1(r

, j

) +
_
1
x
(r

, j

) 1
y
(r

, j

)
_
_
r r

j j

_
= 1(r

, j

) +1
x
(r

, j

)(r r

) +1
y
(r

, j

) (j j

)
= r

(/ r

) j

+ (/ 2r

)(r r

) + (1) (j j

)
_ r = /r j
Thus, around (r

, j

) = (0, 0), the instantaneous change in r can be analyzed as a linear function

of (r, j).
34