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Lecture Notes for Mathematical Methods for Economics I......................................................................................1


Chapter 1: Numbers (Calculus)...................................................................................................................................1
1.1 Real Numbers........................................................................................................................................................1
1.1.1 The Representation of Real Numbers as Decimals........................................................................................2
1.2 Inequalities............................................................................................................................................................2
1.3 Absolute Value of Real Numbers..........................................................................................................................3
1.4 Exponents and Roots.............................................................................................................................................3
1.5 Logarithms............................................................................................................................................................5
1.6 Properties of Numbers..........................................................................................................................................7
1.7 Complex Numbers................................................................................................................................................7
1.8 Point Sets and Intervals.........................................................................................................................................8
1.9 Algebraic and Transcendental Numbers...............................................................................................................9

Lecture Notes for Mathematical Methods for Economics I


Prepared by M. Franklin and R. Hosein1
Chapter 1: Numbers (Calculus)
1.1 Real Numbers
From EC14E, the following types of numbers should have already been introduced:
a. Natural numbers: These are the non-negative whole numbers 1, 2, 3, 4 also called counting
numbers or positive integers. The sum, or product, of any two natural numbers x and y, i.e.
x + y and xy, are also natural numbers. The set of natural numbers is closed for operations
involving addition and multiplication.
b. Negative integers: This refers to the numbers -1, -2, -3, -4.
c. All integers: Natural numbers together with negative integers and zero constitute the set of
integers.
d. Rational numbers: This comprises fractions of the form

where and are integers.

Rational numbers ensure solutions to equations such as:


x = , x = / , 0
The set of integers is a subset of the set of rational numbers as it corresponds to =1.
e. Irrational numbers: Some numbers, e.g.2, cannot be expressed in the form
where and are integers. Irrational numbers represent this group of numbers.
f. Real Numbers: Each real number is either a rational number or irrational number.
1

We would like to acknowledge the research assistance of M. Maharaj.

( 0),

1.1.1 The Representation of Real Numbers as Decimals


Some Real numbers (in particular the rational numbers) can be represented as decimals, e.g.
3

6 0.5 and

10 0.9 .

With rational numbers, the decimal expansion either comes to an end or a

group of numbers may repeat itself indefinitely. With irrational numbers no such repetition
occurs, e.g. = 3.14159
The decimal system utilizes the digits 0 to 9 although an alternative, the binary system, using the
numbers 0 and 1, can be constructed.
-

-e

0
-

The diagram above shows the geometric representation of the real number system. Each real
number corresponds to exactly one point on the real number axis. Note that between any two
rational numbers (or irrational numbers) on the line, there are infinitely many rational (and
irrational) numbers. This leads us to refer to the set of rational (or irrational) numbers as an
everywhere dense set.
1.2 Inequalities
If x y is a non-negative number, then we can say that:
xy
or alternatively

yx

If we write x > y (or y < x), then this means that x does not have the property of being equal to y.
Geometrically for x > y, x lies to the right of y on the number line.
If x and y are real numbers, then
(1) Either x < y, x = y or x > y. This is called the law of trichotomy.
(2) If x > y and y > z, then the law of transitivity suggests that x > z.
(3) If x > y then x + z > y + z
(4) If x > y and z > 0, then xz > yz
(5) If x > y and z < 0, then xz < yz.
1.3 Absolute Value of Real Numbers
a

denotes the absolute value of a real number a.

= a

if a>0

-a

if a<0

if a=0

For example:
3 3,

3 3,

3,

0 0

Here are some simple rules for working with absolute numbers. Let x, y, z, a, b, c, d, e be real
numbers. Then:
1.

x y x

2.

a bcde a

3.

xy

4.

xy x

y
be

x y

and

x yz x y z

1.4 Exponents and Roots


If a number x is multiplied by itself n times (n is a positive integer) i.e.
xxxxxxxxxxxxx
n times

then we can write the result as xn, where the number n is called an exponent. It is also possible to
show that
Xn Xm = Xn + m
Xn/Xm = Xn - m
XnYn = (XY)n
Note that
X0 = 1
X1 = X
and

X-n =

1
Xn

Note also that if


Xn = b
X=

b = b1/n

and b-n bn = b0 = 1
In addition,
(xn)m = xnm and (xy)n = xn yn
Example 1.1
Let the demand function for crabs be represented by p = 20e
crab when q crabs are sold.
(a) At what price will demand equal 6 units?
(b) How many units will be demanded if p is $18.00?
Solution
If
q = 6, then for p = 20e
p = 20e
p = 20e

, where p is the price of one

p = 20e
p = 4.46
(b)

If p = 18, then for p = 20e


18 = 20e

18
20

=e

q
4

= loge

4
18
20

q = 0.42
Example 1.2
Let the demand function for doubles be determined by p = 100e
doubles when q doubles are sold.
(a) Find the total revenue (TR) function for doubles.
(b) Determine the TR if 20 doubles are sold.
Solution
(a) TR = Q. P = Quantity Sold * Price
= q(100 e q/5)
= 100 q e-q/5
(b)

TR = 100 q e q/5
When 20 doubles are sold:
TR = 100 (20) e 20/5
TR = 2000 e 4
= $ 36.63

1.5 Logarithms
Consider the expression,
loga b = c

, where

p is the price of one

For loga b = c, we say that c is the logarithm of b to base a. Alternatively, this equation may be
expressed as:
ac = b, (a, b > 0)
Thus the logarithm of b to base a is the exponent to which the base a must be raised so as to
produce the number b.
The logarithm of 1 to any base, x, will always be equal to 0 because any number, x, to the power
0 is equal to 1:
logx 1 = 0
For any two numbers, x and y, such that:
xn = y
then
loga xn = loga y
n loga x = loga y
y = an loga x
Example 1.3
The population of Mayaro/Guayaguayare (M/G) was 10,000 in 1990 and 13,500 by 2000, no
doubt influenced in part by the oil boom. Let the population of the M/G area (y) be represented
by
y = P0eht, where P0 is the size of the population in the last period. Determine the population of
M/G in 2005.
Solution
The first logistical step involves calculating the value of h. In the base year (1990), P 0 = 10,000
and the time differential between 1990 and 2000 is t = 10.
13500 = 10000e10h
1.35 = e10h.
In logarithmic form this gives:
1oge 1.35 = 10h

0.3001 = 10h
h = 0.03
Given the value of h, we can forecast the population in 2005 by using t = 5 and P0 = 13,500
y = 13500e0.03(5)
= 13500e0.15
= 13500 (1.162)
= 15686
Alternatively, y = 10000e 0.03(15) = 10000e 0.45 = 10000(1.5686) = 15686
1.6 Properties of Numbers
For any two numbers x and y, where x and y belong to the set of real numbers (R), then:
(1) x + y and xy also belong to R

(closure law)

(2) x + y = y + x

(commutative law of addition)

(3) x + (y + z) = (x + y) + z

(associative law of addition)

(4) xy = yx

(commutative law of multiplication)

(5) x(yz) = (xy)z

(associative law of multiplication)

(6) x(y + z) = xy + xz
(7) xn xm = xn + m

(distributive law)
(index number)

(8) x + 0 = x, x 0 = 0, x 1 = x
0 and 1 form the identity when we are performing operations with respect to addition and
multiplication respectively.
(9) For x + a = 0, x is the inverse of a with respect to addition, i.e. x = -a.
(10) For any a 0 we can find a number x in R such that a x = 1. The number x is called the
inverse of a with respect to multiplication and is denoted by 1/a or a-1, i.e. x = 1/a or a-1.
Any set of numbers that satisfy these operators (1 to 10) is called a number field.
1.7 Complex Numbers

Complex numbers were introduced in mathematics to cater for solutions to problems of the form
x2 + 1 = 0, as these types of solutions are otherwise uncatered for. The general form of a complex
number is
a + bi
where a and b are real numbers and i is an imaginary number (i =

1 ). Two complex numbers,

a + bi, c + di
are equal if and only if their corresponding real parts are equal, i.e. if a = c and b = d. Real
numbers are a subset of complex numbers (this is readily seen if we set b = 0). The complex
number 0 + 0i = 0 corresponds to the real number 0.
The modulus (or absolute) value of a complex can be represented by:
a bi

where

a bi

a 2 b2

The complex number a bi is called the complex conjugate of a + bi. Complex numbers follow
the laws of operations with numbers.
1.8 Point Sets and Intervals
A set of points that are located on the real axis is referred to as a one-dimensional set.
The set of points x, such that m x n, is called a closed interval and is represented by m, n].
An open interval is of the form m x n and is denoted by (m, n). The set mxn can be
represented by (m, n] and is called half-opened (or half-closed). Another half-closed (or halfopened) set is m x < n, which is represented by [m, n). Note the use of the square and the
smooth brackets when the less than or equal to and the less than signs are used respectively.
If a symbol y can adopt any value within the range of values of a set, then y is a variable. If y
were to adopt a specific value, then it is called a constant.

Example 1.4
Suppose we define y as y > 6, then we can represent this by 6 < y < . This set has an upper
infinite boundary and is represented by (6, ]. The set - < x < has both upper and lower
infinite bound values and all numbers in the range are real numbers.
1.9 Algebraic and Transcendental Numbers
Consider the polynomial expression
a0xn + a1xn-1 + a2xn-2 + + an-1xn-1 + anxn-n
where a0 0, and a1, , an are integers.
For n being positive, any number x that is obtained as a solution to the polynomial equation
a0xn + a1xn-1 + a2xn-2 + + an-1xn-1 + anxn-n = 0
is called an algebraic number.
A transcendental number is one that cannot be expressed as the solution of any polynomial
equation with integer coefficients.
Example 1.5
For 5x 4 = 0, the solution is

. For x2 3 = 0, a solution is

. Both

and

are

algebraic numbers. However and e are transcendental numbers. (It is still unresolved
whether e and + e are algebraic numbers or transcendental numbers.)

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