14.

102, Math for Economists

Fall 2005
Lecture Notes, 9/8/2005

These notes are primarily based on those written by Andrei Bremzen for
14.102 in 2002/3, and by Marek Pycia for the MIT Math Camp in 2003/4. I
have made only minor changes to the order of presentation, and added a few
short examples, mostly from Rudin. The usual disclaimer applies; questions
and comments are welcome.

Nathan Barczi
[email protected]

1 Real Analysis I - Basic Set Theory

We begin from the fundamental notion of a set, which is simply a collection of...
well, anything (but for us it’s usually numbers, functions, spaces, metrics, etc.).
We use standard notation A ∩ B for the intersection of two (or more) sets,
A ∪ B for union, Ac for complement (i.e., for the set of all elements not in A).
More precisely, if A and B are subsets of a set X (denoted A ⊂ X and B ⊂ X)
with typical element x:

A∩B = {x : x ∈ A and x ∈ B}
A∪B = {x : x ∈ A or x ∈ B}
Ac = {x : x ∈ X, x ∈
/ A}

If A ⊂ B and B ⊂ A, we say A = B (indeed, it is often easiest to prove that

two sets are equal by proving these two steps).

1.1 Relations and Equivalences

For two sets A and B, a relation between two points is a function R : A × B →

{0, 1}.We write xRy if points x and y are in relation R (i.e., R(x, y) = 1).

Example 1 xRy if x1 > y1

Example 2 xRy if x1 = y2

Example 3 xRy if kxk = kyk

As it turns out, there is one fundamental class of relations that is important

in microeconomic theory. These are called equivalence relations or equivalences.

1
Definition 4 A relation is called equivalence (usually denoted by ∼) if it sat-
isfies the following three properties:

• x ∼ x (reflexive)
• x ∼ y =⇒ y ∼ x (symmetric)
• x ∼ y & y ∼ z =⇒ x ∼ z (transitive)

Exercise 5 For each of the three examples of relations above, find out whether
it is reflexive, symmetric and transitive.

Exercise 6 Give an example of R that is symmetric but not transitive.

Equivalence relations are essential for an axiomatic development of the util-

ity function: for a utility function to exist, it is a necessary condition that
relation “xRy if the consumer is indifferent between bundles x and y” be an
equivalence (why?). Although it seems obvious that this relation is indeed an
equivalence, and economic models usually assume that it is, it might not be a
great description of reality. For instance, I am pretty much indifferent between
my welfare now and if I give away a nickel; however, such indifference is surely
not transitive: if I give away a million nickels, I will be significantly worse off.

Definition 7 Let S be a set. An order on S is a relation, denoted by <, with

the following two properties:

1. If x ∈ S and y ∈ S then one and only one of the statements x < y, x = y,

y < x is true.
2. If x, y, z ∈ S, if x < y and y < z, then x < z.

Note that the relation < is transitive, but neither reflexive nor symmetric
(indeed, it is antisymmetric: x < y =⇒ y ≮ x).
It is often convenient to write x > y in place of y < x.
The notation x ≤ y indicates that x < y or x = y, without specifying which
of the two holds. In other words, x ≤ y is the negation of x > y.

1.2 Ordered Sets

Definition 8 An ordered set is a set S for which an order is defined.

Definition 9 Suppose S is an ordered set, and E ⊂ S. If there exists a β ∈ S

such that x ≤ β for every x ∈ E, we say that E is bounded above, and call β
an upper bound of E.
Lower bounds are defined in the same way, with ≥ in place of ≤ .

Definition 10 Suppose S is an ordered set, E ⊂ S, and E is bounded above.

Suppose there exists an α ∈ S with the following properties:

2
 1. α is an upper bound of E.
2. If γ < α then γ is not an upper bound of E.

Then α is called the least upper bound of E or the supremum of E,

and we write α = sup E.
The greatest lower bound, or infimum, of a set E which is bounded below
is defined in the same manner: The statement α = inf E means that α is a
lower bound of E and that no β > α is a lower bound of E.

Definition 11 An ordered set S is said to have the least-upper-bound prop-

erty if the following is true:
If E ⊂ S, E is not empty, and E is bounded above, then sup E exists in S.

Exercise 12 Show that Q does not have the least-upper-bound property.

Theorem 13 Suppose S is an ordered set with the least-upper-bound property,

B ⊂ S, B is not empty, and B is bounded below. Let L be the set of all lower
bounds of B. Then α = sup L exists in S, and α = inf B. In particular, inf B
exists in S.
Proof. Since B is bounded below, L is not empty. By the definition of L, we
see that every x ∈ B is an upper bound of L. Thus L is bounded above. Thus,
sup L exists in S; call it α.
If γ < α, then γ is not an upper bound of L, so γ ∈
/ B. It follows that α ≤ x
for every x ∈ B. Thus α ∈ L.
Finally, note that any β > α is not in L, because α is an upper bound for L.
Thus, we have shown that α ∈ L, but that any β > α is not in L. But L is
the set of all lower bounds for B, so α is the greatest lower bound for B. This
means precisely that α = inf B.

1.3 Finite, Countable, and Uncountable Sets

Definition 14 For any positive integer n, let Jn be the set whose elements are
the integers 1, 2, ..., n; let J be the set consisting of all positive integers. For
any set A, we say:

1. A is finite if A ∼ Jn for some n (the empty set is also considered to be

finite).
2. A is infinite if A is not finite.
3. A is countable if A ∼ J.
4. A is uncountable if A is neither finite nor countable.
5. A is at most countable if A is finite or countable.

3
 Note that by convention, countable implies infinite (so, strictly speaking, we
do not say ’countably infinite’, although you will hear this phrase from time to
time).
For two finite sets, we have A ∼ B iff A and B ’have the same number of
elements’. But for infinite sets this notion becomes vague, while the idea of 1-1
correspondence (under which, given a mapping from A to B, the image in B of
x1 ∈ A is distinct from the image in B of x2 ∈ A whenever x1 is distinct from
x2 ) retains its clarity.
Example 15 Let A be the set of all integers. Then A is countable. For
consider the following arrangement of the sets A and J:
A : 0, 1, −1, 2, −2, 3, −3, ...
J : 1, 2, 3, 4, 5, 6, 7, ...
We can, in this example, even give an explicit formula for a function f from
J to A which sets up a 1-1 correspondence:
½ n
2 (n even)
f (n) =
− n−1
2 (n odd)
Theorem 16 Every infinite subset of a countable set A is countable.
Proof. Suppose E ⊂ A, and E is infinite. Arrange the elements x of A in a
sequence {xn } of distinct elements. Construct a sequence {nk } as follows:
Let n1 be the smallest postive integer such that xnk ∈ E. Having chosen
n1 , ..., nk−1 (k = 2, 3, 4, ...), let nk be the smallest integer greater than nk−1 such
that xnk ∈ E.
Then, letting f (k) = xnk (k = 1, 2, 3, ...), we obtain a 1-1 correspondence
between E and J.
One interpretation of the theorem is that countability represents the ’small-
est’ kind of infinity, in that no uncountable set can be a subset of a countable
set.
Theorem 17 Let {En } be a sequence of countable sets, and put
∞
[
S= En
n=1

Then S is countable.
Proof. Let every set En be arranged in a sequence {xnk }, k = 1, 2, 3, ... and
consider the infinite array
x11 x12 x13 ...
x21 x22 x23 ...
x31 x32 x33 ...
... ... ... ...
in which the elements of En form the nth row. The array contains all
elements of S. We can arrange these elements in a sequence as follows:
x11 ; x21 , x12 ; x31 , x22 , x13 ; x41 , x32 , x23 , x14 , ...

4
 If any of the sets En have elements in common, these will appear more than
once in the above sequence. Hence there is a subset T of the set of all positive
integers such that S ∼ T , which shows that S is at most countable. Since
E1 ⊂ S, and E1 is infinite, S is also infinite, and thus countable.

Theorem 18 Let A be a countable set, and let Bn be the set of all n-tuples
(a1 , ..., an ) where ak ∈ A(k = 1, 2, ..., n) and the elements a1 , ..., an need not be
distinct. Then Bn is countable.
Proof. That B1 is countable is evident, since B1 = A. Suppose Bn−1 is
countable (n = 2, 3, 4, ...). The elements of Bn are of the form

(b, a) (b ∈ Bn−1 , a ∈ A)

For ever fixed b, the set of pairs (b, a) is equivalent to A, and thus countable.
Thus Bn is the union of a countable set of countable sets; thus, Bn is countable,
and the proof follows by induction on n.

Corollary 19 The set of all rational numbers is countable.

Proof. We apply the previous theorem with n = 2, noting that every rational
number can be written as b/a, where b and a are integers. Since the set of pairs
(b, a) is countable, the set of quotients b/a, and thus the set of rational numbers,
is countable.

Theorem 20 The set of all real numbers is uncountable.

Proof. Every real number can be represented as a (possibly infinite) sequence
of integers (indeed, as a sequence of 0’s and 1’s in a binary representation). It
suffices, then, to show that the set of all sequences whose elements are integers
in uncountable. Let this set be called A.
Now, let E be a countable subset of A, and let it contain the sequences
s1 , s2 , s3 ... Construct the sequence s as follows: if the nth digit of sequence sn
is a zero, make it a one; if it is nonzero, make it a zero. Then the sequence s
differs in at least one digit from every member of E; s ∈ / E. But clearly s ∈ A,
so E is a proper subset of A.
This shows that every countable subset of A is a proper subset of A (since
E was arbitrary) - but this in turn means that A itself is uncountable, since if
it is not we have shown that A is a proper subset of itself, which is absurd.

1.4 Metrics and Norms

Whenever we are talking about a set of objects in mathematics, it is very com-
mon that we have a feeling about whether two particular objects are ”close” to
each other. What we mean is usually that the distance between them is small.
Although it may be intuitive what the distance between two points is, it is not
always that intuitive in a more general setup: for instance, how would you think
about the distance between two continuous functions on the unit interval? Be-
tween two optimal control problems? Between two economies? Between two
preference relations? Here is how we formalize what a distance means:

5
Definition 21 A metric space is a set X, whose elements are called points,
such that with every two points x and y belonging to X, there is a real number
d(x, y) associated with these two points, and called the distance from x to y,
which satisfies:
• d(x, y) ≥ 0 (we do not want negative distance),
• d(x, y) = 0 ⇐⇒ x = y (moreover, we want strictly positive distance be-
tween distinct points),
• d(x, y) = d(y, x) (symmetry),
• d(x, y) + d(y, z) ≥ d(x, z) (triangle inequality).
Example 22 d1 (x, y) = |x1 − y1 | + ... + |xn − yn |
p
Example 23 d2 (x, y) = (x1 − y1 )2 + ... + (xn − yn )2 (this is called Euclid-
ean distance - and that is the default in Rn )
Another related concept is that of a norm. Norm is only defined for a linear
space; note that we never employed linear structure in defining a metric.
Here we provide a few necessary definitions:
Definition 24 A triple (V, +, ·) consisting of a set V , addition +:
V ×V → V
(x, y) → x + y
and multiplication ·:
R×V → V
(λ, x) → λ · x
is called a real vector space if the following 8 conditions hold:
1. (x + y) + z = x + (y + z) for all x, y, z in V.
2. x + y = y + x for all x, y in V.
3. There is an element 0 ∈ V (called the zero vector) such that x + 0 = x
for any x.
4. For each element x ∈ V , there is an element −x ∈ V such that x+(−x) =
0.
5. λ · (µx) = (λµ) · x for all λ, µ ∈ R, x ∈ V.
6. 1 · x = x for all x ∈ V.
7. λ · (x + y) = λ · x + λ · y for all λ ∈ R, x, y ∈ V.
8. (λ + µ) · x = λ · x + µ · x for all λ, µ ∈ R, x ∈ V.
Definition 25 A mapping A of a vector space X into a vector space Y is called
a linear transformation if
A(x1 + x2 ) = Ax1 + Ax2 and A(cx) = cAx
for all x, x1 , x2 ∈ X and all scalars c.

6
Definition 26 A linear space L(X, Y ) is the set of all linear transformations
from a vector space X into a vector space Y .

Our definition of the norm will be given for the linear space L(Rn , R).

Definition 27 A norm of a vector is a function k·k : Rn → R such that

∀x, y ∈ Rn , λ ∈ R :

1. kxk ≥ 0,
2. kxk = 0 iff x = 0,
3. kλxk = |λ| kxk,
4. kx + yk ≤ kxk + kyk.
√
Example 28 kxk = x · x, where x · x is an inner product, is a normP (why?)
Note that the inner product of an n-dimensional vector x is simply ni=1 x2i .

Exercise 29 Show that if kxk is a norm, then d(x, y) defined as d(x, y) =

kx − yk is a metric (it is called the metric, generated by a norm).

Exercise 30 For all four examples of metrics above, determine if there is a

norm that generates it.