ECC 201: Handout 1 Saree Worawisutsarakul

ECC 201
Intermediate Microeconomics
Handout 1

Mathematical Review

1. (Functions)

function)

:
y f (x)

y x f
x independent variable) y dependent variable)

y f ( x1 , x2 , ...)

x1 , x2 , ... y

2. (Graphs)

graph) independent
variable dependent variable)

y y
y 2x y x2

5 5
4 4
3 3
2 2
1 1
x x
1 2 3 4 5 1 2 3 4 5

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ECC 201: Handout 1 Saree Worawisutsarakul

3. (Monotonic Functions)

monotonic function)
increasing or nondecreasing decreasing or nonincreasing)
monotonic first derivative

positive monotonic function)

y x
(positive or nonnegative slope)

negative monotonic function)

y x
(negative or nonpositive slope)

4. (Inverse Functions)

y x:

y f (x)

y x (inverse
function) y f (x)

x f ( y)

x y

y
Function: y 2x Inverse function: x
2

Function: y x2 inverse function

x y x y x2 y
x y

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ECC 201: Handout 1 Saree Worawisutsarakul

5. (Equations and Identities)

(equation)

2x 8
x2 9
f ( x) 0

(identity)

( x y ) 2 x 2 2 xy y2
2( x 1) 2 x 2

6. (Linear Functions)

(linear function)

a x by c

x, y a, b, c y
x

c a
y x
b b

(constant slope)
ab

dy
y 2x 3 Slope 2
dx
dy
y x 99 Slope 1
dx
2 dy 2
2 x 5 y 10 y 2 x Slope
5 dx 5

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ECC 201: Handout 1 Saree Worawisutsarakul

7. (Changes and Rates of Changes)

(change) x x x x1
x2 x

x x2 x1

(rate of change)
y x y x

General Function: y f (x)

y f (x x) f ( x)
Rate of change:
x x

Linear function: y a bx

y a b( x x) a bx b x
Rate of change: b
x x x

Nonlinear function: y x2

y (x x) 2 x2 x 2 2 x x ( x) 2 x2
Rate of change: 2x x
x x x

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ECC 201: Handout 1 Saree Worawisutsarakul

8. (Slopes and Intercepts)

slope) intercept

Linear function:
y

5
4
3
2 y 2x 4 Slope 2
1
x
1 2 3 4 5
: x 0 y 4
: y 0 x 2
y
: Slope 2
x

Nonlinear function:

y
y x 2 Tangent line
5
4
3
2
1 Slope 2 (at x 1 )
x
1 2 3 4 5
dy
: Slope 2x x
dx
:
y
y x Slope 0
x
y
y x Slope 0
x

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ECC 201: Handout 1 Saree Worawisutsarakul

9. (Absolute Values and Logarithms)

(absolute value) x x

x if x 0
x
x if x 0

(nonnegative value)

(logarithm or log) x natural log)

y ln x

ln xy ln x ln y , ln e 1 , ln x y y ln x

10. (Derivatives)

(derivative) y f (x)

df ( x) f (x x) f ( x)
f ( x) lim
dx x 0 x

derivative limit y x
x
derivative y x x

derivative slope)
derivative downward sloping)
derivative upward sloping)
derivative (horizontal line)

:
dy
Linear function: y ax b a
dx
dy
Nonlinear function: y x2 2x
dx
dy 1
Log function: y ln x
dx x

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ECC 201: Handout 1 Saree Worawisutsarakul

11. (Second Derivatives)

(second derivative) derivative derivative

second derivative y f (x) x

d 2 f ( x)
f ( x)
dx 2

:
dy d2y
Linear function: y ax b a 0
dx dx 2
dy d2y
Nonlinear function: y x2 2x 2
dx dx 2
dy 1 d2y 1
Log function: y ln x
dx x dx 2 x2

second derivative curvature)

second derivative (concave)

second derivative (convex)

second derivative (flat)

12. (The Product Rule and the Chain Rule)

f (x) g (x) h(x)

f ( x) g ( x ) h( x )

derivative f (x) x (product rule)

df ( x) dh( x) dg ( x)
g ( x) h( x )
dx dx dx

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ECC 201: Handout 1 Saree Worawisutsarakul

f (x) composite function y g (x) z h( y )

f ( x) h ( g ( x))

derivative f (x) x (chain rule)

df ( x) dh( y ) dg ( x)
dx dy dx

13. (Partial Derivatives)

x1 x2

y f ( x1 , x2 )

(partial derivative) f ( x1 , x2 ) x1 derivative

x1 x2 :

f ( x1 , x2 ) f ( x1 x1 , x2 ) f ( x1 , x2 )
lim
x1 x1 0 x1

(partial derivative) f ( x1 , x2 ) x2 derivative

x2 x1 :

f ( x1 , x2 ) f ( x1 , x2 x2 ) f ( x1 , x2 )
lim
x2 x2 0 x2

x1 x2 t

g (t ) f ( x1 (t ), x2 (t ))

derivative g (t ) t

dg (t ) f ( x1 , x2 ) dx1 (t ) f ( x1 , x2 ) dx2 (t )
dt x1 dt x2 dt

t x1 (t ) x2 (t ) derivative g (t ) t

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ECC 201: Handout 1 Saree Worawisutsarakul

(1) f x1 t :

f ( x1 , x2 ) dx1 (t )
x1 dt

(2) f x2 t :

f ( x1 , x2 ) dx2 (t )
x2 dt

derivative g (t ) t partial derivative f ( x1 , x2 )

x1 x2

14. (Optimization)

y f (x)

f (x) maximum) x f (x ) f ( x) x
f (x) minimum) x f (x ) f ( x) x

f (x) continuous function x x

First-order condition) :

df ( x )
0 (flat) x
dx

Second-order condition) :

d 2 f (x )
0 concave x f (x ) maximum
dx 2

d 2 f (x )
0 convex x f (x ) minimum
dx 2

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ECC 201: Handout 1 Saree Worawisutsarakul

x1 x2

y f ( x1 , x2 )

f ( x1 , x2 ) continuous function ( x1 , x2 )
( x1 , x2 )

First-order condition) :

f ( x1 , x2 )
0
x1
f ( x1 , x2 )
0
x2

Second-order condition) :

H negative definite f ( x1 , x2 ) maximum

H positive definite f ( x1 , x2 ) minimum

H Hessian matrix
2 2
f f
f11 f12 x12 x1 x2
H
f 21 f 22 2
f 2
f
x2 x1 x22

15. (Constrained Optimization)

max f ( x1 , x2 ) objective function

x1 , x2
subject to g ( x1 , x2 ) c constraint

:
x1 x2 f ( x1 , x2 ) f ( x1 , x2 ) x1 x2
g ( x1 , x2 ) c

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ECC 201: Handout 1 Saree Worawisutsarakul

Lagrange multiplier :

Lagrangian function:

L f ( x1 , x2 ) g ( x1 , x2 ) c

First-order conditions ( x1 , x2 )

L f ( x1 , x2 ) g ( x1 , x2 )
0
x1 x1 x1

L f ( x1 , x2 ) g ( x1 , x2 )
0
x2 x2 x2

L
c g ( x1 , x2 ) 0

first-order conditions x1 x2 c:

x1 x1 (c) , x2 x2 ( c )

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