Madras School of Economics

Microeconomic Theory -1
Semester 1, 2011-12
Preliminary Mathematical Notes
1 Necessary and Sucient Conditions
Take the two statements
/: The sky is cloudy
E: It is raining outside.
Clearly, if E is true, then / is true. The conditionality is represented in
the following form if E then / or / if E or E ==/ We say that E is
sucient for /.
Now consider
( : Ram has passed the Anna University entrance exam.
T: Ram is sitting in the Microeconomics lecture.
Clearly, if ( is not satised, then T does not hold. The logical relation
is if not ( then not T or T only if (, that is ~ ( == ~ T. We say that
( is necessary for T.
Notice that, if E is sucient for /, then / is necessary for E. Similarly,
if ( is necessary for T, then T is sucient for (.
Often two statements are both necessary and sucient for each other.
Take the following example
c: x is an even number:
T: x is divisible by 2.
Here, we write c =T or c = T (read as c is equivalent to T or c i
T).
Of course, two unrelated statements are neither necessary nor sucient
for each other.
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2 Proofs
Mathematical theorems usually have the form of an implication or an equiv-
alence, where one or more statements are alleged to be related in particular
ways. Suppose we have the theorem p =q. Here, p is the assumption and q
is the conclusion. To prove a theorem is to establish the validity of its con-
clusion given the truth of its assumption,and several methods can be used
to do that.
1. In a constructive proof, we assume that p is true, deduce various
consequences of that, and use them to show that q must also hold. This is
also sometimes called a direct proof, for obvious reasons.
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2. In a contrapositive proof, we assume that q does not hold, then show
that p cannot hold. This approach takes advantage of the logical equivalence
between the claims p = q and ~ q =~ p noted earlier, and essentially
involves a constructive proof of the contrapositive to the original statement.
3. In a proof by contradiction, the strategy is to assume that p is true,
assume that q is not true, and attempt to derive a logical contradiction.
This approach relies on the fact that either p =q or ~ q always is true and
if p = ~ q is false, then p =q must be true.
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4. In a proof by mathematical induction, we have a statement F(n) which
does depend upon a natural number n. What we want to show is that a
statement F(n) is true for each n = 1; 2; ::::. First, we show that F(1) is
true. Next, we show that F(n) =F(n+1), i.e., if F(n) is true, then F(n+1)
is also true. So, if it is true for n = 1, it must be true for n = 2; 3; 4::and so
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p : a and b are even.
q : c = a + b is even.
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For those with classical bent, the method is known as Reductio ad Absardum. Ancient
Greeks used the method most eectively to prove, for example, that the number of primes
are innite (Euclid) or that
p
2 is an irrational number (Pythagoras). For some unknown
reason, they also tried to suppress the latter theorem.
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on.
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3 Introductory Set Theory
A set is a well dened collection of objects; often the a set is described by
enumerating the objects. For example A = 1; 2; 3 is a set. There are three
elements in the set.
If the elements of the sets can be counted, (such as A) it is a nite set.
If not , then it is innite set. For example, the set S (x) = x : 0 < x < 1
is an innite set.
Suppose we have B = 2; 3; 4, then the union of A and B is dened as
C = A' B = 1; 2; 3; 4
The common elements of A and B are obtained by intersection of A
and B, i.e.
D = A B = 2; 3
Notice that, all elements of D are present in A, B and C. We say that
D is a subset of C (or A or B), say: D C. With respect to C, the
complement of D, denoted as D
0
consists of those elements that are not in
D. That is
D
0
= 1; 4
The set of all elements is known as the universal set, U. Complement of
U is the null set, O.
Take a set on real line, say S (x). If there is a point such that, the "
neighborhood (that is, the smallest interval around the point) of the point
contains elements of both the set as well as its complements, then that point
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Exercise: Show that 1 + 2 + 3 + :::n =
n(n+1)
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is known as boundary point of the set. For the set S (x), 0 and 1 are the
boundary points. For a nite set A = 1; 2; 3; 4, all elements are boundary
points.
A set is closed if it contains all its boundary points. For example, G(x) =
x : 0 _ x _ 1 is a closed set. We denote a closed set by square bracket,
e.g. x [0; 1]. A open set contains none of its boundary points, e.g. the
set S (x) : We denote a open set by parenthesis: x (0; 1). Of course, a set
can neither be open nor closed i.e. x (0; 1]: The following facts are worth
remembering:
A complement of open (closed) set is a closed (open) set.
The union or intersection of open (and closed) sets are open (closed).
A nite set is always closed.
Convex Set
Take two points within a set in R
2
, say X
1
= (x
1
; y
1
) and X
2
= (x
2
; y
2
).
Construct a line that joins the two points. The line can be represented as a
linear combination of these points, i.e. X
1
+(1 )X
2
, where [0; 1]. If
all points on this line belongs to the set, the set is convex.
Concavity of Functions:
A dierent (but related) notion is that of convex/concave functions. Take
any function in two dimensions, say y = f (x). Select two points on it.,
say X
1
= (x
1
; y
1
) and X
2
= (x
2
; y
2
). Remember that here, y
i
= f(x
i
).
Now join these points by a chord. y-values on this chord are dened by
f (x
1
) + (1 )f (x
2
) for a fraction . If the function lies above the chord
for all x
0
s , then f(x
1
+(1)x
2
) _ f (x
1
)+(1)f (x
2
) :We say that the
function is concave to the origin. If the inequality is reversed, it is convex
to the origin (chord is above the function). For strict inequality, we say
that the function is strictly concave (or convex). A function can neither be
concave nor convex, or both concave and convex.
Example 1: y = x
2
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Example 2: y = x + 1
Example 3: y = sinx
A function y = f (x) is quasi-concave if the following condition is satis-
ed: for any two points (x
1
; y
1
) and (x
2
; y
2
), we must have f (x
1
+ (1 )x
2
) _
min(f (x
1
) ; f (x
2
)) : Strict quasiconcavity requires that the inequality sign
is strict.
Notice that, a concave function is always quasiconcave, but the converse
is not true.
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