Lecture 3 Section 11.3 from Fundamental methods of Mathematical Economics, McGraw Hill 2005, 4th Edition. by A. C.

Chiang & Kevin Wainwright is covered. Please read theory from book. Summary of this section and some examples are presented here for better understanding. Determinantal test for sign definiteness: Two-variable case: For the quadratic form ( ) [ ][ ][ ]

the necessary and sufficient condition for positive definiteness is | | | | | | | |

For negative definiteness, on the other hand, the necessary and sufficient condition becomes: | | | | ,| | | |

Example 1: Check the following quadratic forms are either positive or negative definite or indefinite? (a) (b) (c) Solution: (a) The quadratic form ( where [ ) [ in matrix notation is ][ ][ ]

] is the symmetric matrix. The leading principal minors of D are | | | | | | | |

Therefore q is positive definite. (b) The quadratic form ( Where [ ) [ in matrix notation is ][ ][ ]

] is the symmetric matrix. The leading principal minors of matrix D are | | | | | | | |

Therefore q is negative definite. (c) The quadratic form ( With [ ) [ in matrix notation is ][ ][ ]

] as the symmetric matrix. The leading principal minors of D are | | | | | | | |

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Therefore q is indefinite. Three-variable case: For the three variable quadratic form ( ) [ ][ ][ ]

the necessary and sufficient condition for positive definiteness is | | | | | | | | ,| | | |

In other words, the three leading principal minors must all be positive. For negative definiteness, on the other hand, the necessary and sufficient condition becomes: | | | | ,| | | | ,| | | |

Example 2: Check the following quadratic forms are either positive or negative definite or indefinite? (a) (b) Solution: (a) The quadratic form ( ) [ ][ in matrix notation is

][ ]

with

] The leading principal minors of D are

| |

| |

Therefore the quadratic form is positive definite. (b) The quadratic form

in matrix notation is

][

][ ]

with

] The leading principal minors of D are

This violates the condition for both positive and negative definiteness, thus q indefinite.

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Mathematical Economics II

These results can be generalized for n-variable-case as follows: n-variable case: Theorem 1: Necessary and sufficient condition for positive and negative definiteness (To check a quadratic form is positive definite, negative definite or indefinite) For the n variable quadratic form ( ) [ ][ ][ ]

(a)

is positive definite if and only if all its leading prinicipal minors are positive i.e. | | | | ,| | ,| | (b) is negative definite if and only if all its leading prinicipal minors alternate in sign as follows: | | ,| | ,| | So that all the odd numbered ones are negative and all even numbered ones are positive. The th leading principal minor, | |, should be positive if is even, but negative if is odd. (c) Indefinite if any of nonzero leading principal minor does not fit in above two sign patterns.

Example 3: Check the quadratic form is either positive definite or negative definite definite or indefinite? Solution: The discriminant of quadratic form is

The leading principal minors of D are | | | | | | | | | |

this violates sign pattern so quadratic form q is indefinite. Caution: One way that the leading principal minor test of theorem 1can fail for a quadratic form is that some of leading principal minors of D are zero while the nonzero ones fit the sign pattern in either (a) or (b) of theorem 1. When this occurs, the quadratic form is not definite and it may or it may not be semidefinite. Theorem 2: Necessary and sufficient condition for positive and negative semidefiniteness (To check a quadratic form is positive semidefinite, negative semidefinite or indefinite) For the n variable quadratic form ( ) [ ][ ][ ]

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(a) (b)

is positive semidefinite if and only if all its prinicipal minors are nonnegative. is negative semidefinite if and only every principal minor of odd order is and every principal minor of even order is (c) Indefinite if any of nonzero principal minor does not fit in above two sign patterns. Or Let us refer to the 1 principal minors collectively as | |, 2 principal minors collectively as | | , 3 principal minors collectively as | | etc. Then the above test of semidefiniteness can be rewritten as follows : (a) (b) is positive semidefinite if and only if | | is negative semidefinite if and only if | | | | | | | | | | | | | |

Example 4: Check the following quadratic forms are either positive definite or negative definite or positive semidefinite or negative semidefinite or indefinite? (a) (b) (c) Solution: (a) The quadratic form ( With [ ) can be expressed as [ ][ ][ ]

]. The leading principal minors of D are | | | | ,| | | |

As | D.

, thus the test for leading principal minors fails. We need calculate all principal minors of matrix

There are two first order principal minors of D | | and | | | . Therefore is positive semi-deifinite.

And one second-order principal minor of A is | (b) The quadratic form ( with [

can be expressed as ) [ ][ ][ ]

]. The leading principal minors of A are | | | | ,| | | |

As | D.

, thus the test for leading principal minors fails. We need calculate all principal minors of matrix

There are two first order principal minors of D | | and | |

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And one second-order principal minor of A is | (c) The discriminant of quadratic form

. Therefore q is negative semi-deifinite. is [ ]

The leading principal minors of D are | | | | ,| | | |

We know that the leading principal minor test of theorem 1can fail for a quadratic form if some of leading principal minors of D are zero while the nonzero ones fit the sign pattern in either (a) or (b) of theorem 1. As only non-zero principal minor is | | , so the quadratic form q may or may not be positive semidefinite.

Now the leading principal minors test fails and we need to calculate all principal minors of D. The third-order principal minor is | All second order principal minors of D are | | | | | | | | |

All first order principal minors of D are | | As | | ,| | ,| |

this violates sign pattern of both (a) and (b) of theorem 2. Therefore q is indefinite.

Example 5: Check the quadratic form is either positive definite or negative definite or positive semidefinite or negative semidefinite or indefinite? Solution: The discriminant of quadratic form is [ The leading principal minors of D are | | | | ,| | | | ]

We know that the leading principal minor test of theorem 1can fail for a quadratic form if some of leading principal minors of D are zero while the nonzero ones fit the sign pattern in either (a) or (b) of theorem 1.

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As in this case |

but since the signs of |

and |

do not fit

sign pattern in either (a) or (b) of theorem 1 so we can decide from here q is indefinite. Example 6: Check the quadratic form is either positive definite or negative definite or positive semidefinite or negative semidefinite or indefinite? Solution: The discriminate of quadratic form [ The leading principal minors of D are | | | | ,| | | | ] is

Leading principal minors test fails here we need to calculate all principal minors. The third-order principal minor is | All second order principal minors are | All first order principal minors are | | | | | | | | | | | |

From the sign pattern of principal minors we conclude that the quadratic form q is negative semidefinite. Example 7: Check the quadratic form is either positive definite or negative definite definite or positive semidefinite or negative semidefinite or indefinite? Solution: The discriminate of quadratic form [ The leading principal minors of D are | | | | ,| | | | ] is

The sign pattern of leading principal minors do not fit in sign pattern of positive or negative definite there quadratic form q is indefinite.

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Mathematical Economics II

Total differential: For the function ( The total differential is defined as )

The second-order total differential is ( ) ( ) ( )

[ This is actually quadratic form q in variables and . To see this let us denote

The expression for

takes following form

Hessian matrix: In general, the discriminant of In particular case of the quadratic form

is the symmetric determinant |

|.

The discriminant is a determinant with the second-order partial derivatives as its elements. Such a determinant is called a Hessian determinant (or simply Hessian). In two variable case the Hessian is | Which, in view of youngs theorem |

is symmetric- as a discriminant should be.

Example 8: Check is positive definite or negative definite or positive semidefinite or negative semidefinite or indefinite for following functions? ( ) ( ( Solution: (a) ( ) (a) (b) (c)

) )

| | | (b) is positive definite . ( ) | |

| |

| | |

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Mathematical Economics II

| |

| is positive definite. (c) The Hessian matrix for (

| |

is

| | | | | is negative definite. | | | | | |

| | | | |

| |

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Mathematical Economics II