ECO 3145A: Mathematical Economics I

Part I: Sets and Spaces

Understanding set theory, a branch of Mathematics that studies sets, is es-
sential for the study of modern Economics. In this part, we will cover the basics
of set theory. We will review the three basic structures of sets: order, geomet-
ric and algebraic. When necessary, these notions will be illustrated through
examples and problems drawn from Economics.
1 Sets
A set is a collection of objects (e.g., N = 0; 1; 2; 3; 4::: is the set of integers; R
is the set of real numbers)
1.1 Basic notation and denitions
Let X and Y be two sets and x an object
x X (resp. x = X) means that x is an element of X (resp. x is not an
element of X)
The empty or null set, denoted ? or , is a set that has no element
X is a subset of Y , denoted X _ Y , if any element of X is also an element
of Y
X is a proper subset of Y , denoted X Y , if X _ Y and X ,= Y
? and X are the trivial subsets of X.
T(X) = S : S _ X is the set of all subsets of X
If X _ Y , X
c
= x Y : x = X is the complement of X with respect to
Y , denoted Y X
X ' Y = x : x X, or x Y , or both is the union of X and Y
X Y = x : x X and x Y is the intersection of X and Y
X Y = (x; y) : x X and x Y is the cartesian product of X and Y
The union, intersection and cartesian product generalize to collection of sets.
Let ( be a collection of sets.

[
S2C
S = x : x S for some S ( is the union of all the sets in (

\
S2C
S = x : x S for every S ( is the intersection of all the sets in (
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If ( = X
1
; :::; X
n
, then X
1
:::X
n
= (x
1
; :::; x
n
) : x
i
X
i
, 1 _ i _ n
is the n-ary cartesian product over the sets X
1
; :::; X
n
If X
1
= ::: = X
n
= X, then X
1
::: X
n
= X
n
A partition of X is a collection of disjoint subsets of X whose union is X
2 Binary relations and ordered sets
An ordered set is a set whose elements can be ranked by an order relation. Let
X and Y be two sets and X Y their cartesian product.
Any subset R _ X Y is called a binary relation. For any (x; y) R, we
say that x is related to y and we write xRy
The inverse relation of a relation R _ XY is the relation R
1
_ Y X
dened by R
1
= (y; x) Y X : (x; y) R.
For any relation R _ XY , the domain of R is the set domain R = x
X : (x; y) R
For any relation R _ X Y , the range of R is the set range R = y
Y : (x; y) R
Any relation R _ X X is said to be a relation on X
2.1 Properties of binary relations
Let R be a relation on X. R is said to be:
reexive if for any x X, xRx
symmetric if for any x; y X, xRy ==yRx
asymmetric if for any x; y X, xRy ==not(yRx)
antisymmetric if for any x; y X, xRy and yRx ==x = y
transitive if for any x; y; z X, xRy and yRz ==xRz
complete if for any x; y X, either xRy or yRx or both
preorder or quasi-order if it is reexive and transitive
A preorder is often denoted %
an equivalence relation if it is reexive, symmetric and transitive
an order relation if it is reexive, transitive and not symmetric
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2.2 Properties of sets
Let X be a set and a X.
X is said to preordered (resp. ordered) if a preorder (resp. order) is
dened on it
Given an equivalence relation R on X, the equivalence class of a is the set
R(a) = x X : xRa of elements that are related to a
3 Order relations
Let X be a set, x; y X and % a preorder on X. x % y is interpreted as x is
weakly better than y or x weakly dominates y. % can be decomposed into its
reexive component ~ and its nonreexive component ~ where:
x % y == x ~ y or x ~ y
x ~ y == x % y and y % x
x ~ y == x % y and y x
In the consumers preference relation, % is often called weak preference, ~
indierence and ~ strong preference
%is acyclical if for every list x
1
; x
2
; :::; x
k
X, x
1
~ x
2
; x
2
~ x
3
; :::; x
k1
~
x
k
== x
1
_ x
k
A natrural order on R is the relation > (or 6) its reexive and nonreexive
components being = and > (<), respectively.
4 Intervals
Let X be a set ordered by %. Dene _ by x _ y i y % x. Let a; b X.
Closed interval: [a; b] = x X : a _ x _ b
Open interval: (a; b) = x X : a - x - b
Hybrid intervals: [a; b) = x X : a _ x - b; (a; b] = x X : a - x _
b
The upper contour set of % at a is the set % (a) = x X : x % a of
elements that follow or dominate a
The strict upper contour set of % at a is the set ~ (a) = x X : x ~ a
of elements that strictly dominate a
The lower contour set of % at a is the set _ (a) = x X : x _ a of
elements that precede a
The strict lower contour set of % at a is the set - (a) = x X : x - a
of elements that strictly precede a
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5 Maximal and Best elements
Let X be a set ordered by % and x X.
x is a maximal element if there is no y X such that y ~ x
x is the best element of X if x _ y for all y X
Some sets have no maximal or best elements: e.g. (0,1). To delinate
such sets, we often identify lower and upper bounds
Let A be a nonempty subset of X. x is an upper bound for A if x _ a for
all a A
x is called a least upper bound for A if it precedes every upper bound
for A
Let A be a nonempty subset of X. x is a lower bound for A if x _ a for
all a A
x is called a greatest lower bound for A if it dominates every lower
bound for A
6 Product orders
Let X = X
1
::: X
n
be a product of a collection of sets X
i
ordered by _
i
A natural order induced on X is the relation _ dened by: x _ y ==
x
i
_
i
y
i
for all i = 1; 2; :::; n for x; y X
We dene the strict component of _ by x ~ y == x
i
~
i
y
i
for all
i = 1; 2; :::; n for x; y X
x y == x
i
_ y
i
for all i = 1; 2; :::; n and x ,= y; is often used to
indicate the possibility that x
i
= y
i
for some i
_ is not a complete order on X even if _
i
are complete
The lexicographic order _
L
on X is dened by: x ~
L
y == x
k
~
k
y
k
and x
i
=
i
y
i
for all i = 1; 2; :::; k 1 and x ~
L
y if x
i
=
i
y
i
for all
i = 1; 2; :::; n
7 Partially ordered sets and lattices
A partial order is a relation that is reexive, transitive and antisymmetric
A partial order that is complete is called a total or linear ordering
A partially ordered set is one on which a partial order is dened
4
A chain is a set on which a linear ordering is dened
e.g., Equipped with > or _, R is a partially ordered set
Let X be a partially ordered set and A be a nonempty subset of X.
If they exist, the least upper bound and greatest lower bound of A are
unique and are called respectively the supremum and inmum of A and
denoted sup A and inf A
The best element in a set belongs to the set whereas the supremum of a
set doesnt necessarily belong to the set
When the supremum of a partially ordered set belongs to the set, it
is necessarily the best element of the set
When the supremum and the inmum of A belong to A, they are called
the maximum and minimum of A
Zorns lemma: Let X be a partially ordered set in which every chain has
an upper bound, then X has a maximal element.
8 Lattices
A lattice L is a partially ordered set in which every pair of elements x; y has a
least upper bound (denoted x
W
y) and a greatest lower bound (denoted x
V
y)
in L
x
W
y is called the join of x and y and x
V
y is called the meet of x and y.
A lattice L is complete if every nonempty subset S _ L has a least upper
bound and a greatest lower bound in L. A sublattice is a subset S _ L that is
a lattice
9 Strong set order
Let (X; _) be a lattice. The strong set order is the relation _
S
dened on
T(X) by: S
1
; S
2
X; S
1
_
S
S
2
== x
1
V
x
2
S
1
and x
1
W
x
2
S
2
for every
x
1
S
1
and x
2
S
2
10 Weakly ordered sets
A weak order or an ordering is a relation that is complete and transitive
A weakly ordered set is one on which a weak order is dened
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11 Pareto order
Let X and (_
1
; :::; _
n
) a prole of distinct orderings on X.
The Pareto order is the relation _
P
dened by: x _
P
y == x _
i
y and
x ~
P
y == x ~
i
y for all x; y X and i = 1; 2; :::; n
x is said to Pareto dominate y if x ~
P
y
x is said to Pareto optimal if it is maximal in the strong Pareto order
The Pareto optimal set is the set x X : there is no y X such that
y ~
P
x of elements of X that are maximal in the Pareto ordering
The strong Pareto order is the relation ~
SP
dened by: x ~
SP
y ==
x _
i
y for all x; y X and i = 1; 2; :::; n and x ~
j
y for some j
x is said to strongly Pareto dominate y if x ~
SP
y
x is said to strongly Pareto optimal if it is maximal in the strong Pareto
order
The strong Pareto optimal set is the set x X : there is no y X such
that y ~
SP
x of elements of X that are maximal in the strong Pareto or-
dering
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