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This book is intended as a textbook for a first-year Ph. D. course in mathematics for economists and as a reference for graduate students in economics. It provides a self-contained, rigorous treatment of most of the concepts and techniques required to follow the standard first-year theory

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http://ebooks.cambridge.org/

Mathematical Methods and Models for Economists

Angel de la Fuente

Book DOI: http://dx.doi.org/10.1017/CBO9780511810756

Online ISBN: 9780511810756

Hardback ISBN: 9780521585125

Paperback ISBN: 9780521585293

Chapter

4 - Differential Calculus pp. 156-192

Chapter DOI: http://dx.doi.org/10.1017/CBO9780511810756.005

Cambridge University Press

4

Differential Calculus

**This chapter introduces the concept of differentiability and discusses some
**

of its implications. After dealing briefly with the familiar case of univariate

real functions, we extend the concept of differentiability to functions of R e

into R m . The key to the extension lies in the interpretation of differentia-

bility in terms of the existence of a "good" linear approximation to a func-

tion at a point. We also show that important aspects of the local behavior

of "sufficiently differentiable" functions are captured accurately by linear

or quadratic approximations. This material has important applications to

comparative statics and optimization.

**1. Differentiable Univariate Real Functions
**

Let g be a univariate function, g:R —> R. We want to make precise the

notion of the slope of the function at a given point x. Given a second point

y in the domain of g, the difference quotient (g(y) - g(x))/(y - x) gives the

slope of the secant to the function through the points (x, g(x)) and (y, g()>)).

As we take points y closer and closer to x, the secant becomes a better

approximation to the tangent to the graph of g at the point (x, g(x)), and in

the limit the two coincide. Thus, we can define the derivative of g at x as the

limit

**g\x) = \ im g{y)g{x) = hiimg(* + /*)g(*){h e
**

v g

y-*x y-=x hi~*° n

**whenever it exists, and we can interpret it as the slope of the function at this
**

point.

**Definition 1.1. Derivative of a univariate function. Let g : R — > R be
**

defined on an open interval /. We say that g is differentiable at a point x in

/ if the following limit exists:

156

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**

http://dx.doi.org/10.1017/CBO9780511810756.005

Cambridge Books Online © Cambridge University Press, 2013

Differentiable Univariate Real Functions 157

X Y3 Y2 Yi

Figure 4.1. The derivative as the limit of the secant.

[img(x + h)-g(x) {heR)

**When it does, we say that the value of the limit is the derivative of g at x,
**

written g'(x). If g is differentiable at each point in its domain, we say that

the function is differentiable (on / ) .

**Problem 1.2. Let / and g be functions R —> R, and assume that they are
**

both differentiable at some point x°. Using the elementary properties of

limits and the continuity of / and g at x, show that the product function /?,

defined by p(x) =/(x)g(x), is differentiable at x° and that

Hint:f(x)g(x) -f(x°)g(x°) =f(x)g(x) -f(x°)g(x) +f(x°)g(x) -f(x°)g(x°).

**Problem 1.3. Let /(x) = x". Show by induction that f(x) = nx""1. (First, prove
**

it directly for n = 2.)

**We will now establish some important properties of differentiable
**

functions.

**Theorem 1.4. Let f be a function f:R D I —> R (I open). Iff is differen-
**

tiable at a point x e I, then it is continuous at x.

Proof. Given two points x and x + h in /, we can write

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**

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^ < 0=> f'(x°) = 0 D Downloaded from Cambridge Books Online by IP 130./ ( * ° 1 A . 2013 .f(x) = (lim f ( x + h ) ~ f W ) o = /'(x)0 = 0 and therefore \im f(x+h) = f(x) which establishes the continuity of/at x.42.1017/CBO9780511810756.005 Cambridge Books Online © Cambridge University Press. 0) Taking limits as h approaches zero from above and from below. < and hm h-*<r n h Now. b) —> R. • A point x° is a local maximizer of / if there exists some 8 > 0 such that f(x°) >f(x) for all x e Bg(x0). we have lim/(jc + h). Let f be a differentiable function fa. that/has a local maximum at x°. Necessary condition for an interior maximum. Hence. Suppose. 0 < //(x°) = lim f(X°+ ^ ~ . Then we have f(x° + h ) ~ f(x°)< 0 V h w i t h \h\ < 8 and therefore h >0 forhe(-8. / 0 0 and hm 0 lim — h '-———. The following result tells us that a zero deriv- ative is a necessary condition for an interior maximum (minimum) of a dif- ferentiable function.5. for concreteness. http://dx. and applying earlier results on the algebra of limits. to avoid the possibility of corner maxima.102. and x° a local maximizer (minimizer) oft Thenf(x°) = 0.doi. (Notice that we exclude the end points of the interval.org/10. because the function is differentiable.) Theorem 1.158 Differential Calculus f(x) h h Taking limits as h -» 0. the limit of the difference quo- tient as h -> 0 exists and is given by the common value of the two one-sided limits. we have r /(JC° + * ) .98 on Thu Jun 27 09:32:26 WEST 2013. Proof.

there exists some point 9 in (a. then there is some number 6 e fa. or both. b) such that (jf(0) = 0. Mean-value theorem. Rolle's theorem. we have Downloaded from Cambridge Books Online by IP 130.1017/CBO9780511810756. Figure 4. b] —> R be continuous and differentiable on fa. then the function is constant on the interval. Let f: R —> R be a differentiable function on an interval /. Letf:R —> R be a differentiable func- tion. b). b) such that f(%) = fffbj .a). b]9 it attains both a maximum M and a minimum m on this interval. If a and b are two points in R. Let f. Theorem 1. be two arbitrary points in /. with x < y. b) and f(xM) = 0 (by Theorem 1. http://dx. b) such that f(Q) = 0. then there is some number 9 G fa. it is easy to prove the following important result.org/10. b). and rearranging terms. Problem 1. with a < b. that is.2 gives a geometrical interpretation of the mean-value theorem. either f(xm) < 0 for xm e (a.doi. That is. Iff(xm) =f(xM) = 0./a. then/is strictly increasing on (a. Otherwise. b) and/'(*m) = 0 (because xm is a local minimizer) or f(xM) > 0 for xM e (a.8. Q Using Rolle's theorem. m = m _ 1HM = o => ne) = m~f{a) • b—a b—a The mean-value theorem gives us a way to relate the properties of a function to those of its derivative.102. The following problem provides an example of how this can be useful. there exist points xm and xM in [a. and f(x) = 0 for all x in /. b). Proof Because / i s continuous on the compact set / = [a. 2013 . Assume ffa) = f(b) = 0. Differentiable Univariate Real Functions 159 Theorem 1. (ii) if /'(x) > 0 on (a. Hint: Let x and y.7. then / is constant on the interval. Show that (i) if f(x) = 0 for each x e /.i(a))l(b .5).98 on Thu Jun 27 09:32:26 WEST 2013. Use the mean-value theorem to show that/(*)=/(>>).42. Proof Define the function (/>( ) by 0W / W / ( f l ) ( x f l ) b—a Because (j>( ) satisfies the assumptions of Rolle's theorem.6. Putting b = a + h in the formula given in the statement of the theorem.005 Cambridge Books Online © Cambridge University Press. b] with/(*m) = m andf(xM) = M.

http://dx. The following theorem may be seen as an extension of this result. for some Ae (0. For all x and x + h e I we have (1) where tw(x) is the kth derivative of f evaluated at x.1).160 Differential Calculus a e b Figure 4.102.x) between x and y.1017/CBO9780511810756. Proof. That is. Theorem 1. and the remainder or error term E is of the form n/ for some A e (0.doi. 2013 . Letf: R —> R be n times differentiate on an open interval I. Put y = x + h and define the function F(z) for z between x and y by Then the theorem says that for some point x + My .42. The mean-value theorem.org/10. except that the nth derivative is evaluated at some point between x and x + h. the remainder has the same form as the other terms. F(x) = (y -x) n! Downloaded from Cambridge Books Online by IP 130.005 Cambridge Books Online © Cambridge University Press.98 on Thu Jun 27 09:32:26 WEST 2013.9.2. Taylor's formula for univariate functions.1).

doi. y).005 Cambridge Books Online © Cambridge University Press. leaving us with: t ) (4) Next.F(x) = G(x) and (6) y-xJ y-x By Rolle's theorem. observe that F(y) = 0 and that most terms in f(n-i)( -. 2013 .n-2 ) cancel.102.org/10.1017/CBO9780511810756.1) such that Expanding that expression using (4) and (6).98 on Thu Jun 27 09:32:26 WEST 2013.42. . -x-A(y-xy l = G'(x + A(y-x F\x+ F(x) "I y-x -X y-x rJ y 1 -X F(x) f^Ky.. there exists some X e (0.0 = 0 = F(x) . http://dx. Differentiable Univariate Real Functions 161 First. with G(y) = F(y) . %V i A n —1 . n -1 1 j-. (n-l)! A> y-x / ( '°(x+A(y- -x) == Kx) n\ Downloaded from Cambridge Books Online by IP 130. define the function (5) and observe that G is a continuous function on (x.

1017/CBO9780511810756. and omitting the remainder./"(*°) < 0. A sufficient condition for a local maximum. and f(x) . Higher-order approximations that use several derivatives will be even better. Problem 1. //(X°) = f"(xo) = /(3)(JC0) = .12. (ii) if m is even and fm\x°) > 0. b) such that f(b)-f(a) = f'(z) g(b)-g(a) g'{z) Hint: How do you have to modify the function 0( ) in the proof of Theorem 1. b] —* R be differentiable on (a.98 on Thu Jun 27 09:32:26 WEST 2013.doi. Cauchy's mean-value theorem.7? Problem 1. Then there is a point z in (a. Prove the following result: Let / and g: [a. (iii) if m is odd. that is.. we get f(x + h) s f(x) + f'(x)h (1) The differentiability of/implies that the error term E2 will be small. • Taylor's theorem gives us a formula for constructing a polynomial approx- imation to a differentiable function.org/10. then/has a local minimum at x°. Problem 1. L e t / : R —> R be twice differentiable on some interval containing JC°. Let / : R —> R be m + 1 times differentiable on an interval around the point JC°. Use Problem 1.11. 2013 . 6).. b).102. Show that iif{x)lg\x) tends to a limit as x —» a. Assume that for some m > l.8 to show that x° is a local maximizer of/. http://dx.162 Differential Calculus which is the desired result. that/ O . U HopitaPs rule.. then /has a local maximum at x°. Suppose / a n d g are continuous real-valued functions defined and differentiable on some open interval containing the point a and such that /(a) = g(a) = 0.10. so does /(x)/g(x). Hence the linear function in the right-hand side of (1) is guaranteed to be a decent approximation to /( ) near x.42. Assume. then /has neither a local maximum nor a local minimum at x°. and suppose that g'(x) & 0 for all x in (a. Problem 1. f'(x) a =(*) *-* g (x) Downloaded from Cambridge Books Online by IP 130.005 Cambridge Books Online © Cambridge University Press./ (w) (x°) is the first nonzero derivative o f / a t x°.13.°) = 0. a n d / ' is continuous at x°. With n = 2. moreover. = flm-1)(xo) = 0 and / W) ( (*°)*° Use Taylor's theorem to show that (i) if m is even and fm\x°) < 0.

We define L(x°. The set of points L(x°.doi. http://dx.12). which we now define. We will interpret x° as a "point" in space.org/10.u) = {x(a)eRa. Partial and Directional Derivatives We now want to extend the concept of differentiability at a point x from univariate functions to real-valued functions of n variables. In R n . 2013 .98 on Thu Jun 27 09:32:26 WEST 2013. the parameter a measures the distance between a point x(a) in the line and x°. as illustrated in Figure 4.3.3. Partial and Directional Derivatives 163 Hint: Use Cauchy's mean-value theorem (Problem 1. and the derivative of the univariate function g( ) at x is defined as the common value of both one-sided limits whenever they coincide. One com- plication we immediately run into is that we now have to specify the direc- tion along which we are approaching x. We will define the directional derivative of/at x° in the direction of u with the help of an auxiliary univariate function g whose derivative at zero gives us the slope of / as we move away from x° in the direction of u. Let / be a function R n —> R.x(a) = x°+au. aeR} corresponds to the straight line through x° with direction u. we can approach a point from an infinite number of directions. andfixtwo vectors x° and u in R e with ||w|| = 1.u) X +OCU Figure 4.102. and u as a vector (an "arrow") describing a direction of movement in n-space. 2. however. and therefore we have to specify which one we are considering.005 Cambridge Books Online © Cambridge University Press. The problem does not arise in the real line because there we can approach x only from the left or from the right. This observation leads us to the concept of directional derivative.1017/CBO9780511810756. Downloaded from Cambridge Books Online by IP 130. Because u has norm 1.42.

102. where a e R and ||K|| = 1 whenever this limit exists. Problem 2. and verify that the result is the same if you use the formula (The definition of the gradient Vf(x°) follows after Problem 2. and its graph is the curve obtained by cutting this surface with a vertical plane through x° and "parallel" to w.1.3. where el is a vector whose components are all zero except for the fth one. u). and write Df(x°.We say that g'(0) is the directional derivative of / a t the point x° in the direction of u. http://dx.org/10. u) directly by taking the appropriate limits. we can assume that its norm is 1. the slope of the surface {(xu x2. Downloaded from Cambridge Books Online by IP 130. The partial derivative of / with respect to its ith argument. el). Let / be a multivariate function R n —> R. The directional derivative of / : R n —> R in the direction of u at the point x° is defined by Df(x°. More formally. u).164 Differential Calculus g(a) = f(x°+au) When n = 2. Definition 2.5. u) = lim M ' Jy '. equivalently. Let f(xu x2) = x1x2y u = (3/5. Because the only function of the vector u is that of indicating the direc- tion of motion. Directional derivative. Then g'(0) gives the slope of this curve at x° or. 4/5).) Directional derivatives in the direction of the coordinate axes are of special interest. The partial derivative of / with respect to its zth argument is defined as Df(x.2.005 Cambridge Books Online © Cambridge University Press. The function g is the restriction of / to the line L(x°. Partial derivative. we have the following: Definition 2.1017/CBO9780511810756. but it is a convenient way to normalize directional derivatives. xh at a point x = (xh jc_j). 2013 . the geometric interpretation is straightforward: The graph of / is a three-dimensional surface that we suppose to be oriented in such a way that the value of the function is measured vertically. y)\ y =f(xu x2)} at the point (xl9 x2jf(xu x2)) when we move in the direction of u. which is 1. This is not necessary for the definition per se.98 on Thu Jun 27 09:32:26 WEST 2013.doi.42.2). is the limit1 = 1. and *° = (1. Compute Df(x°. whenever it exists.

or fi(x). xt.x°n + aun) If the partial derivatives o f / a r e continuous.org/10.4 and 3. Find the points where all the partial derivatives of the function are zero.. 2013 .005 Cambridge Books Online © Cambridge University Press. y = f ( x u x 2 ) = x\x 2 + x\ xi y = f(x u x2) = ln(x2 + e x2) calculate. If all the partial derivatives of / exist and are continuous in some neighborhood of a point x°. To see this. or dfidxh Conceptually there is no difference between a partial derivative and the ordinary derivative of a univariate function.5 in Section 3).-. '(x°h (1) Downloaded from Cambridge Books Online by IP 130. Problem 2. f(xh x_.).4. y) = 6xy. Problem 2. In each case. http://dx. Another possibility is to write df(x)ldxi. let g(a) = /(x° + aM) = /(x? + auu. Hence the standard rules of differentiation for "normal" derivatives apply.) is a function of a single variable. we explicitly indi- cate the argument vector x to emphasize that the partial derivative is also a function of x.. Given the functions x 2 ). without change. . the partial derivatives dyidxx and dyldx2. As it is not normally necessary to insist on this.42.. Fixing x_t at a constant value x_?.102. thenfx(x.. and fy(x. Partial and Directional Derivatives 165 There are several standard ways to write the partial derivative of / with respect to xt. For given values of the other arguments AL.98 on Thu Jun 27 09:32:26 WEST 2013. if /(x. and we write Dx.doi. treating the other variables as constants. Hence. and defining a new function g by g(xi) =f(xh %_. for each of them.f(x). fJXi. the arguments are often omitted. /*/*).+fn (x° + au)un = = / (x° (see Theorems 3. y) = 3x2y + Ay3.5. One of the most common notations uses subindices to indicate the variable with respect to which we are differentiating: Dx. we have g'(xt) =fi(xhX-i). then / i s differentiable at x°9 and the chain rule yields g'(a) = /i (x° + au)w! + .1017/CBO9780511810756. then the directional derivative at x° exists for all directions u and can be written as a linear combination of the partial derivatives. For example. y) = 3x2 + 1 2 / . to partial derivatives.

and the partials of / ( ) can be defined exactly as for /( ).166 Differential Calculus If we define the gradient vector of / at x by then (1) can be written as the scalar product of the gradient and the direc- tion vector: Df(x°. Proof. 2013 . gives sufficient conditions for this property to hold. We Downloaded from Cambridge Books Online by IP 130. the absolute value of the directional derivative cannot exceed the norm of the gradient.102.98 on Thu Jun 27 09:32:26 WEST 2013. y).005 Cambridge Books Online © Cambridge University Press. then each one of its partial derivatives /(x) is also a real-valued function of n variables. Because we will consider only two partials at a time.doi. Assume that the partial derivatives fifx). we can assume. Theorem 2. The partials of the / ( )'s are the second partial derivatives of/ and we write /*(*) or d2f{x)l dxidxk for dfi(x)ldxk. therefore. the Cauchy-Schwarz inequality implies (using the convention that IN! = 1) \Df(x. Then fik(x°) = fk[(x°). fki(x). say f(x. The following result. fkfx). we see that the gradient is the vector that points in the direction of steepest ascent or descent along the graph of the function.6. the gradient of / a t x points in the direction in which the slope of / a t x is largest in absolute value. http://dx. given by the normalized vector g = V/(X)/||V/(X)||.42. Moreover. and its norm is the absolute value of this slope.1017/CBO9780511810756. the weak inequality in (3) holds as an equality. so the order of differentiation does not matter. In many cases of interest. and fikfxj are also defined in this neighborhood and that fki(x) and f&(x) are continuous at x°. u)\ = \Vf(x)u\ < ||V/(*)|| |M| = ||V/(x)|| (3) Hence.org/10. Thus. a weak version of Schwarz's theorem. that / i s a function of two variables. if we consider the direction of the gradient. Let f: Rn —> R be a function defined in an open neighbor- hood of a point x°. we have In this particular direction. with no loss of generality. symmetric cross-partials coincide.u) = Vf(x)u (2) Using expression (2). that is fik(x) =fkt(x). Higher-Order Partials n Let / b e a function R —> R. Given (2).

for some h e (0.f +h)-fx(x° + hKf)] (2) Next.y)-f(x°. A4 e (0.y) we have D = y(y° + h) . we will use the mean-value theorem for univariate functions to derive two equivalent expressions for D in terms of symmetric cross-partials and conclude from their equality that fxy(x°y y°) =fyx(x°. put with derivative g'(y) = U(x°+Aih.1017/CBO9780511810756. with and applying the mean-value theorem for univariate functions.005 Cambridge Books Online © Cambridge University Press.doi. there is some Xi e (0. Partial and Directional Derivatives 167 will work on a square of side h contained in the neighborhood of (x°.y) and write (2) in the form D = %(/ + /i)-g(/)] (3) By the mean-value theorem.102. 2013 . y°) mentioned in the statement of the theorem. y°). • If we define the function we can write D in the form D = 0(JCO + H)-(L)(X°) (1) By assumption. / + A2h) (4) • In a similar manner. x(x° + Xxh.~y(y°).42. y° + X4h) (5) Downloaded from Cambridge Books Online by IP 130. and by the same procedure used earlier we see that there exist A3. http://dx.1).1) such that D = h2fyx (x° + A3h.1) for which we have D = hW + X2h) = h2fxy (x° + llh. we have.98 on Thu Jun 27 09:32:26 WEST 2013. if we define y( ) by = f{x°+h. Consider the expression To prove the theorem.org/10. 0 is differentiable in the region in which we are working.

where it is zero. h2fxy(x° +AiA.doi. it can be shown. the existence of all partial derivatives. 0) is given by lim .0).yQ+X4h) • Finally.) +{au2) ] = « 2 2 / ut i + a u2 =0 ifut=0 Hence.42. as shown by the following example. u) exists for all u. / is not continuous at (0.005 Cambridge Books Online © Cambridge University Press. D Directional Derivatives and Continuity We began this section emphasizing the conceptual similarity between the directional derivatives of a multivariate function and the "normal" deriv- atives of univariate functions. that Downloaded from Cambridge Books Online by IP 130. / has value j at all points on the curve x = y2 except at the origin.7.168 Differential Calculus Hence. using an argument similar to that in the proof of Theorem 2. The similarities end. D It is possible to guarantee the continuity of/at a point by imposing addi- tional conditions on the directional derivatives. Then the points at which we are evaluating the partials both approach (JC°. or even the existence of all directional derivatives at a point.org/10.1017/CBO9780511810756. http://dx. D/(0. Consider the function x +y =0 for x = 0 For any u = (uu u2) in R2. and because fxy{) and fyx( ) are continuous by assumption.102. /+X2h) = D = :h2fyx(x°+X3h. For example. the directional derivative of / at (0. y°). °y°)y°). we take limits for the preceding expression as h -» 0. however. Example 2. when it comes to the connection between the existence of a derivative and continuity. We know that a function from R to R that is differentiable at a point x° is also con- tinuous at x°. is not sufficient to guarantee continuity.. symmetric cross-partials coincide at (x°. however.6. we have Thus. For a function R n —> R.98 on Thu Jun 27 09:32:26 WEST 2013. On the other hand. 0.— a-»o a »*o«irm. 2013 . Hence.

Differentiability 169 a sufficient condition for the continuity of / at x° is that all its partial deriv- atives exist and be bounded on a neighborhood of x. This will be done in the following section. This condition may be rephrased as follows: g is differentiable at x if there exists a real number a such that Downloaded from Cambridge Books Online by IP 130.. 3..42. We will then relate the resulting concept of derivative to the partial derivatives of the components of/ Let us return for a moment to the definition of the derivative for a function g:R —> R and see if we can reinterpret it in a way that can be naturally extended to the multivariate case. Soon we will prove a stronger result. where f : R n — .. The foregoing discussion suggests that it might be interesting to define a stronger concept of differentiability for multivariate functions./m)r. each of which is a real-valued function of n variables: f = (/*.m We would like to define a concept of differentiability for functions R n —> R m that can be seen as a natural generalization of the derivative of a univariate function and that will preserve the implication of continuity without additional assumptions. the key lies in defining differentiability in terms of the possibility of approximating the local behavior of / through a "linear"2 function. if it is equal to some real number a.102.. It follows easily from this result that the continuity of the partial derivatives of / on some neigh- borhood of x° is sufficient f o r / t o be continuous at x°.. For the moment. We can think of the mapping / as a vector of component functions /'. 2013 .98 on Thu Jun 27 09:32:26 WEST 2013. we observe that the existence of partial derivatives at a point JC°. Differentiability We now turn to the general case where /: R n —> R m is a ' .005 Cambridge Books Online © Cambridge University Press. A univariate real-valued function g is differentiable at a point x in its domain if the limit 8(x) h~>0 exists. that is.. is not sufficient for us to say that the function is differentiable at*°.org/10.1017/CBO9780511810756. http://dx.doi.> R for/ = l. n variables whose value is an m-vector... As we will see. or even of directional derivatives in all directions.

In summary. One possibility is to use g(x) + ah = g(x) + g'(x)h to approximate g(x + /i). if the difference g(x + h) — g(x) can be approximated by a linear function ah with an error that is of a smaller order of magnitude than h as h —> 0. The assumption that the behavioral functions in the model are differentiable means that the approximation error is small. Before giving a formal definition.170 Differential Calculus Figure 4.1017/CBO9780511810756. equivalently. Because differentiable functions admit good linear approximations. and suppose that we want to approximate the value of g(x + h) by an affine function. This gives us a tractable way to analyze them: When we use the calculus to study a nonlinear model. 2013 . fix some x.102. Eg(h) goes to zero "faster" than h itself.doi.4.98 on Thu Jun 27 09:32:26 WEST 2013. g( ) admits a "good" approximation by an affine function or.005 Cambridge Books Online © Cambridge University Press.org/10. The obvious limitation of the Downloaded from Cambridge Books Online by IP 130. There is no difficulty in extending this notion of differentiability to map- pings from R n to Rm. as shown in Figure 4. The derivative as a linear approximation.42. Expression (1) guarantees that the approximation will be good whenever h is small. we are in fact constructing a linear approximation to it in some neighborhood of an equilibrium. a function g is differentiable at x if for points close to x. To interpret this expression. http://dx. Indeed.4. we want to empha- size the importance of the concept of differentiability for our purposes. If we denote the approximation error by then (1) can be written : lim ' =0 (2) which tells us that the approximation error goes to zero with h. a fact we sometimes indicate by writing Eg(h) = o(h) (which reads "Eg(h) is little-oh of h"). so do differentiable models.

Df(x) = Ax. therefore. A function/: R n a X — > Rm. every matrix defines a linear transformation. with df(h) = Df(x)h = Ah and its value at a point is a vector in Rm. Differentiability 171 method is that it generally yields only local results. Definition3J. whereXis an open set.1017/CBO9780511810756. we say that/is differentiable (onX). In this interpretation. the derivative Df is a mapping from X to the space L(R n . |JC|| /is differentiable at every point in its domain. if we denote the approximation error by -f(x)-dfx(h) we can rewrite (3) in the form Downloaded from Cambridge Books Online by IP 130. is differentiable at a point x e Xii there exists a matrix Ax such that V |AI>0 \\h\\ ' where h e R n and ||-|| is the Euclidean norm of a vector. the differential of / at x is the function df:Rn—>Rm.102. As before. we can define its derivative as the function n .1. interpret the differ- ential as a linear approximation to the difference f(x + h) -f(x). R m ) of linear functions from R n into Rm. represented by the matrix Df(x). Expression (3) then guarantees that the approximation is good for "small" h. Perhaps the most natural one is as a function whose value at each point is a matrix. Thus. Hence.f • J"O n 3—\ AV UJ >^ JK > TCP : R m xn such that for each x e X. valid only in some small neighborhood of the initial solution. 2013 .98 on Thu Jun 27 09:32:26 WEST 2013.doi. and Df is a function X —> RmXn- As we know. with x —> dfx We can. where Ax is the matrix that satisfies (3) in Definition 3.org/10. There are two slightly different ways to think about the derivative of a mapping.42. written dfx. http://dx. If / is differentiable on X. we can also think of the deriv- ative as a mapping that to each x in X assigns the linear transformation dfx. We refer to the linear mapping defined by the derivative of / at x as the differential of / at x. as in the case of a univariate real function. the derivative of a func- tion at a point is a matrix. In this interpretation. Differentiability.005 Cambridge Books Online © Cambridge University Press.

and the derivative ofiatx is the matrix of first partial derivatives of the component functions evaluated at x. then. . It is now easy to check that differentiability implies continuity.102. / " . Then f is continuous at x. Hence. .3. the components of this vector are the partial derivatives of/7'. and therefore the functions Dfand dfx are well defined.005 Cambridge Books Online © Cambridge University Press. Each row of the matrix Df(x) is the vector Df(x). Differentiability implies continuity.. thought of as a 1 x n matrix. 2013 . then the partial derivatives of the component functions exist at x. An immediate implication of the theorem is that the matrix Ax that appears in the definition of differentiability is unique. with com- ponent functions f1.172 Differential Calculus That is. Let i:Rn 3 X —> Rm. is the derivative of the function f : R" —> BL Moreover..org/10. (X open) be a mapping.1017/CBO9780511810756. the following theorem.doi. We have Taking the limit of this expression as h —» 0. The following theorem relates the derivative of the mapping / to the partial derivatives of its component functions /a. Moreover..2. if f is differentiable at x.98 on Thu Jun 27 09:32:26 WEST 2013.42. We have. Lett: R° 3 X -> Rm (X open) be differentiable at a point x e X. and / i s continuous at x. http://dx. and dfx(h) -» 0 by the continuity of the linear mapping dfx and the fact that dfx(0) = 0. Then f is differentiable at a point x e X if and only if each of these component functions is differentiable at x. we have that E0) -» 0 by the differentiability of/. P. Theorem 3. The matrix of first partial derivatives of the component functions of / is known as the Jacobian of /4 The following symbols are sometimes used to refer to this matrix: Downloaded from Cambridge Books Online by IP 130. that is. . . . This vector. Theorem 3. the (norm of the) error vector approaches zero faster than (the norm of)/*. Note carefully what this expression says.

2013 . we will use subindices to indicate the variables with respect to which we are differentiating. m. .Df(x)h is given by Observe that the absolute value of a component of a vector cannot exceed the Euclidean norm of the vector. http://dx. Hence. fm with respect to the components of z will be written D((y9 z) or J{(y. Then we have Df(x)h = and the rth component of the vector f(x + h) -f(x) . Then there exists a matrix Df(x) such that \\f(x + hyf(x)Df(x)h\\_0 0 \\h\\ Denote the entries of Df(x) by aik (i = 1 . (2) holds.. Assume that/is differentiable at x. . with ais =fi(x)...org/10. Proof. If all the component functions are differentiable. differentiability at a point implies the existence of all partial derivatives at that point.'(*) (3) hs To establish sufficiency. . z).98 on Thu Jun 27 09:32:26 WEST 2013.doi. put hk = 0 for all k * s). Then (2) implies / ( + W.102.(*) ' * ** )/<( *"^'W.. . (1) implies =0 (2) which is precisely the definition of differentiability for the function / ' : R e —> R. if we partition x = (y. To show that the coefficients aik of the matrix Df(x) are the correspond- ing partial derivatives. the matrix of partial derivatives o f / \ . As we have seen.1017/CBO9780511810756. the converse statement is not true. . the component functions of/are differentiable. Differentiability 173 When we are interested in a submatrix of Df(x). For example. note that the same logic will work in reverse.42. . . we let h approach 0 along the sth coordinate axis (i. hn). . . . n). Downloaded from Cambridge Books Online by IP 130. and let h = (/*!. the continuity of the partial derivatives is sufficient to guarantee differentiability. then (1) follows from (2) and from the observation that the Euclidean norm of a vector cannot be larger than the sum of the absolute values of its components. However. k = 1 . z).. as shown in the following theorem.e.5 • By Theorem 3.3. Therefore.005 Cambridge Books Online © Cambridge University Press. .

Proof By the preceding theorem. Let f:RB 3 X —> Rm. (X open) be a mapping with com- ponent functions f1. 2013 .1) such that f(x + vt) . (4). . there exists some 6t e (0. // the partial derivatives of the component func- tions exist and are continuous on X. we can find some r such that the open ball Br{x) is contained in X and (1) for all x + h e Br(x) (or.005 Cambridge Books Online © Cambridge University Press.4. what we want to prove is that M-v/(x W = 0 We will work with the expression in the numerator. equivalently. . where e' is the ith-unit coordinate vector in R e (a vector with all zeros except for a 1 in the fth coordinate).. More- over. we have. define the n-vectors v 0 .) (4) Using (3).. . Fix some arbitrary x in X and some e > 0. if/is differentiable. for all h such that \\h\\ < r).1017/CBO9780511810756. / : RD D I —> JR. . oQ = ZSiOi-c1'..98 on Thu Jun 27 09:32:26 WEST 2013. . Now.doi. n.. we can write6 Because ||vt|| < |I/i|| < r for all r and Br(x) is a convex set. we can use the one-dimensional mean-value theorem to conclude that for each i = 1 . then f is differentiate on X. . and therefore each partial / ( ) of / exists and is continuous on the line segment connecting x + vt and x + v w .. Hence. 0..42._! + dflcv.... Downloaded from Cambridge Books Online by IP 130.. Let h . its derivative at x will be the gradient vector Hence. http://dx.0) = Then. it is sufficient to prove the theorem for the case of a real-valued function of n variables. . the segments with end points x + vk all lie in Br(x). .(au . vn by v0 = 0 and vk =(a u .f(x + v w ) = atfi{x + v. Next. Because X is open and the par- tials of/are continuous. and assume \\h\\ < r.174 Differential Calculus Theorem 3.. P. and (1) in the numerator of (2).. .org/10. 9 a k . for \\h\\ < r. because along this segment of length Ot only the fth argument of / changes.102. a vector-valued function is differentiable at a point x° if and only if all its component functions are differentiable at x°.

R m ~ /(C/). R m )). — -— J -±Y }x ' ' < e for ||ft|| < r which is what we wanted to show. Critical and Regular Points and Values of a Function As we will see later. or. If x is not a regular point of / (i. and the set of regular values is its com- plement. Recall that dfx is surjective (and therefore x is a regular point of / ) if and only if the derivative Df(x) has rank m. is surjective (onto). the linear mapping dfx e L(R n . the definition we have just given is equivalent to the condition that the gradi- ent V/(JC) be the zero vector. Note that if y is not the image of any point in X. the condition Downloaded from Cambridge Books Online by IP 130.. |/(x + /z)-/(x)-V/(x)/i| . then y is by definition a regular value of/ because a regular value is any point that is not a critical value.98 on Thu Jun 27 09:32:26 WEST 2013. A vector x e X is a regular point of/if the differential of / a t x (i. it can be shown that if a function/: R n —> R m is differentiable at a point x and has a derivative matrix Df(x) of rank m.. Differentiability 175 iV') ~ Hence.005 Cambridge Books Online © Cambridge University Press.. A point y e R m is a critical value of /if it is the image of a critical point. . Hence the set of critical points of / : R n 2 X —> Rm is given by Cf = {x e X\ rank Df(x) < m} The set of critical values of /is/(C/). if/is a univariate function.42. that of its differ- ential. If / is a multivariate real-valued function. because this is the only case in which the com- ponents of V/(x) do not generate R. then x is a critical point off.102. This definition generalizes the standard concept of critical point used in the elementary calculus.doi. We now introduce some terms that will be useful later. which is impossible if /-1(y) is the empty set.. • We conclude this section with some terminology and a few results for dif- ferentiable functions. if dfx is not onto). 2013 . and a regular value otherwise. some important results require assumptions concern- ing the rank of the Jacobian of a function.. then its local behavior is (loosely speaking) fully determined by that of its differential.e.org/10. equivalently. and y is a critical value of /if and only iff~l(y) contains at least one critical point.e.1017/CBO9780511810756.. Let/: R D D I —> m R (X open) be a differentiable function. In particular. http://dx.

f(x°) . and Y 3 f (X). http://dx. and its derivative is given by Proof. with f:Rn=>X—> Rm and g : « f f l D Y — > Rp where X and Y are open sets. The following result says that the composition of differentiable functions is differentiable. and define the composite function F = g°f by F(x) = g[i(x)] for each x e X Iff is differentiable at x°. put y° = f(x°).5.Df(x°)h (1) k (2) The vectors Ef(h) and Eg(h) are the errors committed when we approximate / and g by their respective differentials. Because / and g are by assumption differentiable at x° and y°. then F = g ° f is differentiable at x°. The Chain Rule In many cases we are interested in the derivatives of composite functions. For arbitrary he R n and k e Rm. We want to show that lim l|£f(/t)l1 . and its derivative is the product of the derivatives of the original functions. respectively. in particular.1017/CBO9780511810756. and its derivative is Dg(y°)Df(x°). define Ef(h) = f{x° + h).98 on Thu Jun 27 09:32:26 WEST 2013. we know that these terms are small for h and k close to zero. which are small by assumption.176 Differential Calculus reduces tof'(x) . then Df(x) is a square matrix. Let f and g be two functions.005 Cambridge Books Online © Cambridge University Press. 2013 . as Downloaded from Cambridge Books Online by IP 130.42. Theorem 3. Let x° be a point in X.and g at y°.org/10. The basic idea is to show that the error EF(h) is "small" by relating it to the analogous terms for / and g.0. Note also that if/is a function from R n into itself. F is differentiable at JC°.doi. and x is a critical point if \Df(x)\ = 0.102.lim \\n^ + h)F(x)Dg(f)Df(x)h\\^o K Who \\h\\ \W\^ \\h\\ ' for if this expression holds.

so will be EF(h). http://dx. by (6). which establishes the desired result.102. Hence.org/10.Dg(yo)Df(x°)h (by (5)) k)-g(y°)-Dg(yf>)Df(x°)h (by (2)) Dg(y0)k-Dg{y0)Df(x°)h g ) Df(x°)h} (by (5)) from which EF(h) = Eg(k) + Dg(y°)Ef(h) (7) This expression relates the approximation error for F to the analogous terms for/and g.005 Cambridge Books Online © Cambridge University Press. Downloaded from Cambridge Books Online by IP 130. More formally. Then e(h) -4 0. suppose \\h\\ -> 0. 2013 . Dg(y°)Df{x°)h = g[f(x° + h)] -g[f(xo)]. We can write EF (h) = F(x° + h) . we have \\Ef(h)\\jEg(k) + Dg(y°)Ef(h)\\ (by(3)and(4)) (by (6)) = n(k){e(h)+\\Df(x°)l}+e(h)\\Dg(y°)\\ Finally. implying r\(k) —> 0.42.F(x°). so does \\k\\. and.1017/CBO9780511810756. returning to (0) and using (7). Differentiability 177 () M^ 0 as||*||->0 (4) Fll Fix h and let k = f(x° + h)-f(x°) = f(x° + h)-y° (5) Then = \\Ef (h)+Df(x° )h\\ (by the triangle inequality) <\\Ef(h)\\ M \Df(x°)h\\ (by(3))? <e(h)\\h\\ + \\Df(x°)\\\\h\\ = (e(h) + \\Df(x°)\\) (6) Consider now the expression in the numerator of (0). Because each of the latter is small.98 on Thu Jun 27 09:32:26 WEST 2013.doi.

y) for all x. Compute its derivative.t(x)] = a[Di(z)(y . then X 3 Lfx. Then for each vector a in Rm there exists a vector z in L(x.102. and dwldt. The Mean-Value Theorem Given a function g : R — > R differentiable on an open interval /. • Problem 3.doi. there exists some <5>0 such that x + Ahe X for A G (-S. A€[0. z = Ax + (l-A)y. y). Fix an arbitrary vector a e R m . y G R n . y) is contained in X.98 on Thu Jun 27 09:32:26 WEST 2013.8.178 Differential Calculus which is what we wanted to show. The following result tells us how (1) has to be modified in this case. Let f: Rn —> Rm be a differentiable function on an open subset X of Rn. then L(x.x)] (2) Of course. and let x and y be two points in X such that L(x. y.42.005 Cambridge Books Online © Cambridge University Press. and apply the mean-value theorem for univariate functions to conclude that there exists some vector z=x+ 6h for which (2) holds.1]} Theorem 3. 2013 . y) such that Downloaded from Cambridge Books Online by IP 130.7. Then there exists a vector z in L(x. • Theorem 3. the mean-value theorem says that for any x and y 'm l there exists some number z between x and y such that f(y) -f(x) =f'(z)(y-x) (1) This formula continues to be valid for real functions of several variables.9. and let x and y be two points in X such that L(x. Put h =y -x. but it may not hold for mappings from R n into R m . We will use the notation L(x. y) to refer to the straight line segment that joins points x and y. y in X.1 + 5). Mean-value theorem. As X is open and contains L(JC. That is.6. http://dx. dwids.1 + S) by & (A)=«/(*+^)=£>/< (*+a/>) By construction.7.1017/CBO9780511810756.org/10. ifX is a convex set.j) = {zeRD. z) = xy2z. Let f:Rn —> Rm be differentiable on an open subset Xof Rn.1 + S). and define a real-valued function </)a on the interval (-5. 0fl( ) is differentiable on (-5. Let w =/(x. Complete the following proof of Theorem 3. with Use the chain rule to calculate dw/dr. Problem 3. if x. y) is con- tained in X. y) such that a[f(y) .

Otherwise.org/10. we assume that the derivative Df(x) exists at all points in X We then say that / is continuously differentiable on X if its derivative is a continuous function.98 on Thu Jun 27 09:32:26 WEST 2013. which are similar. Downloaded from Cambridge Books Online by IP 130. ||Ax.1017/CBO9780511810756. R m ) of linear transformations from Rn to R m equipped with the norm defined in Chapter 3.42. the definition of continuity is the usual one: / is continuously differentiable if it is differentiable and any two nearby points.|| < ||A||||x|| (see Chapter 3). Let / be differentiable on an open region X .8 With this in mind. D 4 Continuous Differentiability We now introduce a stronger concept of differentiability that will be useful later. in its domain have as differentials linear transformations dfx and dfy. In this statement.f (x)|| < ||Df (z)(y .x)|| < ||Df (z)|| ||y .x)\\ (4) Now. the mean-value theorem guarantees that for each vector a e Rm there exists some vector z e L(x.x where we have made use of the fact that for any linear transformation A and any vector JC. we think of the derivative of/as a function Df from X to the set L(R n ./Wll = K/OO .x)|| < \\Df(z)\\ \\y . let a be the unit vector Jf(y)-f(*))T aJ \\f{y)-f(x)\ and observe that in this case Hf(y) .f(x)f(f(y) .doi. If f(x)=f(y).102.x|| (3) Proof. the result holds trivially.*))| < \\a\\ \\Df(z)(y . 11/00 . y) such that Taking the absolute value of each side of this expression and using the Cauchy-Schwarz inequality./(*))l Jl/(y)-/(*)llf = \\f(y)-f{x)\\ Using (4) and the preceding expression. http://dx. x and y.f(x))\ = | | / ( ^ / ( x ) | | i(/(y) . Continuous Differentiability 179 ||f (y) .f(x))\ < 1 \\Df(z)(y .005 Cambridge Books Online © Cambridge University Press. we have Hf(y) ~ f(x))\ = \a(Df(z)(y .that is. 2013 .

although this term is sometimes reserved for functions of class C°°. Proof.42. we say that/is a smooth function.1017/CBO9780511810756. because it is difficult to visualize what we mean by continuity for a function whose value at each point is a linear mapping. where aik(h) = fl(x + h)-ft(x) (1) Fix x and define Downloaded from Cambridge Books Online by IP 130. http://dx.98 on Thu Jun 27 09:32:26 WEST 2013. this equivalence should not be surprising: A function is continuously differentiable if two nearby points. Under our assumptions. Intuitively. 2013 . Because the coefficients of these matrices are the partial derivatives of the components of/and. Theorem 4. R m ) with matrix representation [aik] = Df(x + h). and by Theorem 3. and their difference dfx+h . This definition may appear a little strange.1.005 Cambridge Books Online © Cambridge University Press.3. if the first k partial derivatives of the component functions of/exist and are continuous on X. a continuous function is of class C°. written fe Ck(X). The function / : R n D —> R m (X open) is continuously differentiable on Xif it is differentiable on Xand the derivative Df is a continuous function from X to L(R n . small changes in x will result in small changes in each of these coefficients and will there- fore yield similar differentials. Definition 4. / is dif- ferentiable in both parts of the theorem (by assumption for the necessity part.Df(x). represented by similar matrices Df{x) and Df(y).doi.4 for the sufficiency implication). there exists some 8 > 0 such that \\dfx-dfy\\<eVyeBs(x) where the symbol ||-|| denotes the norm of a linear transformation. where k>l.org/10.> R m (Zopen) is (of class) C* in X. Iffe Ck. The following result tells us that the continuity of the first partial deriva- tives of the components of/is a necessary and sufficient condition for/to be continuously differentiable. Let x and x + h be two points in X.dfx is a linear transformation in L(R n . The function/: R n a X . provided/is C1.102. Function of class Ck. Continuously differentiable function.2. By convention. The next definition and the theorem that follows it will give us a characterization of continuous differentiability in more familiar terms.180 Differential Calculus Definition 4." that is. the partials are continuous functions. given any x in X and an arbitrary e > 0. The function f:Rn 3 X —> Rm (X open) is continuously differentiable in X if and only if it is of class C1 in X. have as differentials linear functions dfx and dfy that are "close.That is. Rm). x and y in X. so dfx+h and dfx exist.

005 Cambridge Books Online © Cambridge University Press. //x.dfx\\ -» 0. and hence the continuity of the derivative mapping. so the partial derivatives are indeed continuous. then f(x+h) = f(x) + Dffxjh + (l/2)hTD2f(x + Mijh (1) for some X e (0. The Inverse-Function Theorem Let/be a function from R n to itself. It follows that K(H) = mdLXik\aik{h)\ also goes to zero. Let i:Rn —> R be a C2 function defined on an open and convex set X. Hint: Apply the univariate version of Taylor's formula to the function g(a) =f(x + ah). and we need only the simplest case.org/10. Problem 4. that is.98 on Thu Jun 27 09:32:26 WEST 2013. implying \\dfx+h . This result will be useful later in connection with the characterization of concavity for smooth functions and the derivation of necessary and sufficient conditions for local maxima. we have 0< K(h) < \\dfx+h -dfx\\ < K(h)^nn (2) from which we obtain the equivalence [jc(/!) -» O as h -* O] if and only if [\\dfx+h -dfx\\->0 as/*->()]. • Taylor's Theorem Taylor's formula can be generalized for the case of a real-valued function of n variables.4. Because the notation gets rather messy. Prove Theorem 4. we have aik(h) —> 0 for all i and A:. x + h e X.dfx\\ -» 0. aik{h) -» 0 as h -> 0 (see (1)).102. Continuous Differentiability 181 K(K) = maxik\aik{h)\ = maxik\fk(x + h).1). 2013 .fk(x)\ By Theorem 4.doi. Theorem 4. Taylor's formula for multivariate functions with second-order remainder.9 in Chapter 3. then K(K) —> 0. and because 0 < \aik(h)\ < K{K) for all aik.1017/CBO9780511810756. http://dx. the continuity of the partials implies that for each / and k.42. Each vector x e R n is mapped by/into another vector y in R n . Conversely. (3) If fe C1. we shall state the following theorem for the case of a first- order approximation with a quadratic-form remainder. that is f(*) = y (i) Downloaded from Cambridge Books Online by IP 130.5. the continuity of Df implies \\dfx+h .4.

If / is not monotonic.182 Differential Calculus We can also turn this expression around: Given a vector y. Given any y in /(/).42. If / is continuously dif- ferentiable on some interval / and f(x) * 0 for all x e /. equation (1) can be solved for a value of x that is. provided all the equations in the system are linearly independent. and therefore equation (2) has a unique solution x* = A~ly for each given y whenever \A\ * 0 . If/is not linear. as suggested in Figure 4. the question of its invertibility is more complicated. Then A is invertible if and only if its determi- nant is not zero. the equation f(x) = y will have a unique solution. On the other hand.org/10. at least locally. then the function is monotonic and therefore one-to-one.1017/CBO9780511810756. the inverse relation f~l is not a function. 2013 .102. these solutions will be locally unique provided/is strictly monotonic in some neighborhood of the solution.98 on Thu Jun 27 09:32:26 WEST 2013. We would like to know under what conditions it is true that given a vector y. Hence. If we restrict ourselves to a sufficiently small neighborhood of JC*. http://dx. If/is a linear operator.005 Cambridge Books Online © Cambridge University Press. (1) is equivalent to a system of the form Ax = y (2) where A is a square matrix. x* =f~x(y). /'(**) * 0 a n d / e C1 in some open neighborhood of a solution x* are sufficient con- ditions for the local invertibility of/close to x*. and there could be several solutions to the equation f(x) = y. unique. f'1 is a well-defined function under these assumptions. Consider first the case of a function from R to R.doi. but in many cases it is possible to determine whether or not a function is locally invertible simply by calculating the determinant of its derivative matrix.5.that is. It follows that the inverse relation f~l is a well-defined function on /(/). Downloaded from Cambridge Books Online by IP 130. (1) is a system of n equations in n unknowns (the components of x).

Proof. Theorem 4.5 shows that this is not true: The function g is strictly monotonic and therefore globally invertible.org/10.005 Cambridge Books Online © Cambridge University Press. The inverse-function theorem says that a sufficient condi- tion for/to be locally a diffeomorphism near a point x°is that x°be a regular point of/. defined for each vector y in R n by <t>y(x) = x + [Df(x0)Y1[y-f(x)] Observe that by construction. Given a point x in U. we can rephrase our earlier conclusion by saying that a sufficient condition for a continuously differentiable function to be locally invertible in a neighborhood of a point x is that its differential at x be invert- ible. and therefore its differential is not invertible. A diffeomorphism is an invertible smooth function (Ck with k > 1) with a smooth inverse. We may even suspect that the invertibility of its differential is necessary. (What we mean by this will become clear later. 2013 . Assume that the determinant of the Jacobian off is not zero at x° (i. Before getting into the details. it seems reasonable to conjecture that the result is true in general. which are rather complicated. Hence. Inverse-function theorem.6. let us sketch the logic of the proof. y=f(x) if and only if x is a fixed point of 0y( ). and x° a point on its domain. with derivative Dt 2 (y°) = [ D f f x 0 )] ' (iv) iff is C \ with k>l. |Df (x°)\ ^ 0).doi. we make use of an aux- iliary function (/>y(x). http://dx. Then it can be shown that <f)y( ) is a contraction that maps a closed ball B with center at x into itself. Let i: 1 ° D X —> Rn (X open) be a continuously differentiable function. (Hi) the inverse function f'1 is of class C1.so is t>. such that (i) f is one-to-one in U. but the second panel of Figure 4.98 on Thu Jun 27 09:32:26 WEST 2013. rather than the monotonicity of the function.102. For this purpose it will be convenient to reinterpret the preceding dis- cussion in terms of the invertibility of the differential of /. then dfx(h) = ah is an invertible linear function.) To establish the local invertibility of/. U. Continuous Differentiability 183 We now ask if it is possible to extend this result for functions of R n into itself. By the contraction mapping theorem.. </>y( ) has a unique Downloaded from Cambridge Books Online by IP 130.42. We begin by defining U as an open ball with center at x° and sufficiently small radius. let y be its image. hence the inverse relation f~]is a well-defined function from (ii) V = f(U) is an open set containing y° = f(x°). for each y e /(£/).9 Because the differential of a function is the best linear approximation to it.e. but its derivative at the inflection point x* is zero. as well as sufficient. Iff'(x) = a * 0. and the following theorem confirms that this is indeed the case. for the local invertibility of a function. Then there exists an open neighborhood ofx°.1017/CBO9780511810756.

2013 . thus establishing that for x = / This expression shows also that Df1 is the composition of three continuous functions and is therefore continuous. there exists at most one x in U such that /(x) = y . The second step is to establish the differentiability of /"1. that [Dftx)]'1 exists for all xe U. Downloaded from Cambridge Books Online by IP 130. therefore.1017/CBO9780511810756. (i) / is one-to-one in U. (/)y( ) has at most one fixed point in U. By assumption./" 1 is C1. in particular. and the restric- tion of the inverse relation f~ho f(U) is a well-defined function. To show that / is one-to-one in £/. that for each y. Inserting this matrix into the expression that defines the derivative of the inverse function. This is possible because the set Q(R n ) of invertible linear operators on R n is open. we have to prove that given a vector y. Now for the details.14). there is some S > 0 such that Bs(x°) (2) With each y e R n we associate a function 0 y () defined for x in X by x)] (3) and observe that y =f(x) if and only if x is a fixed point of Qy( ) . that is.The radius of U has been chosen small enough that dfx is invertible for all x in U.10 We know. The derivative of <j)y{) is Expressions (1) and (2) and the properties of the norm in L(R n ) imply that for any x e U. as we now show.98 on Thu Jun 27 09:32:26 WEST 2013. the differential of/at x° is an invertible linear operator in L(R n ). This will be true if <f)y() is a contrac- tion in [7.102.or.184 Differential Calculus fixed point in U that lies inside B. by the continuous differentiability of/. This implies that there is a unique point in U with image y (x itself).42. we verify that it works. to avoid complicating the notation further. \\A\\ is the norm of the linear operator associated with the matrix A. Put Df(x°) = A (which is an invertible matrix by assump- tion) and define A by where. D/ is a con- tinuous function from X to L(R n ). Further. and because/is continuously differentiate.doi. so we can choose 8 in such a way that for every xe U the derivative Df(x) is not very different from A.005 Cambridge Books Online © Cambridge University Press.org/10. as we saw in Chapter 3 (Theorem 4. equivalently. there exists some 8 > 0 such that the open ball U = B^x°) is contained in X. http://dx. Because X is open./is therefore one-to-one in £/.

and therefore (j)y(x) e B for x e B and y close to /./is one-to-one in U. |^(*')-x1l = ||A-l(y-3'')l|^||A-l«|b-/||<||A-l||^ = r/2 (6) For x e B we have.1017/CBO9780511810756. Put V=f(U) and take an arbitrary y' in V.4-i*|| < \\h . 0y may not have a fixed point in it. is complete. because U is open.1 ||||A. V is open.J D/(*)l|<^-A = | (4) from which we have (by Theorem 3. we have 0Z (x + h).||.y'\\ < Xr and observe that by (1).A~lk Because x. Let B = Br[x'] be a closed ball contained in £/. Take some y such that \\y . Moreover. (X) = h + A-'tfix) .98 on Thu Jun 27 09:32:26 WEST 2013. For this x* e B=Br[x'] c U. by (5). (ii) f(U) is an open set and contains y°=f(x°).) To show that V is open. implying \\h\\ . <py( ) has a fixed point x* in B. Continuous Differentiability 185 | y x ) | | = ||A. then y' =/(x') for some x' e U. http://dx.9) that for any x' and x" in £/.\ Take two points y and y + k in V=f(U). there is at most one x in U withf(x) = y. 2013 .102./ | | < Xr implies y e V. given an arbitrary point y' in V. B. As U is not com- plete. In words.org/10.1 [A-Z)/Wl|S||A.doi. Hence.(x")l|<|||x'-x"|| (5) establishing that the restriction of <j)y to U is a contraction. given y. (iii) The inverse function f~l is differentiable. we have. <j>y( ) is a contraction that maps B into itself.42. fix*) = yy implying y e f(B) cf(U) = V whenever \\y . (Observe that it is always possible to con- struct such a ball. by the triangle inequality and using (5) and (6).f{x + h)] = h. we can construct an open ball around it that is still contained in V.005 Cambridge Books Online © Cambridge University Press. with center at x' and radius r. Then there exist vectors x and x + h in U such that y = f(x) and y + k = f{x + h) With <j>z( ) defined as in (3). x + h e U.0. that is. being a closed subset of R n ./ | | < Xr. we will prove that \\y . ||0. By the contrac- tion mapping theorem (see Chapter 3). It follows that for an appropriate y.(x')-0.^ 1 1 < (1/2) \\h\\ => H^/cfl > (1/2) ||4| Downloaded from Cambridge Books Online by IP 130. with Df~\y°) = [DF(X ° )] . 2X \\A~l\\ = 1. but it is still true that there can be no more than one such point.

Df(x)h\ which.42. together with (7). and its derivative is given by (9) (iv) It remains to show that f~l is continuously differentiable. and therefore so does the middle term as p|| (and hence \\k\\) goes to zero. http://dx. and Downloaded from Cambridge Books Online by IP 130. 2013 . a continuous function (by assumption) from U to L(Rn).tl{y) . that its derivative is a continuous function. We have f~1(y + k)-f-1(y)-Tk = (x + h)-x-Tk = hI-Tk = hTDf(x)-T[(y + k)-y] = -T[f(x + h)-f(x)-Df(x)h] from which ll/"1 iy+k).fix) . if y and y + k are close in Vy then the distance between their preimages x and x + h is also small. implies \\f(x + )-f(x)-Df(x)h\\ ||r|1 (8) Now.14 in Chapter 4.1017/CBO9780511810756. that is.005 Cambridge Books Online © Cambridge University Press. This expression directly implies the continuity of the inverse function f~\ but we want to establish the stronger result that f'1 is differentiate. 1 . we see that Df 1 is the composition of the fol- lowing three continuous functions: • /~\ which is a differentiable and therefore continuous function from Vto U. (7) implies that \\h\\ -» 0 as ||&|| H> 0. Because / i s differentiable at x and (1/A)||71| is a constant.98 on Thu Jun 27 09:32:26 WEST 2013. Df(x) is also invertible for every x in (7. In con- clusion. Observe that (1) and (2) imply that for every x in U we have 1 \\Df(x)-A\\< where A = Df(x°) is by assumption invertible.Tk\\ < \T\\ \\f(x + h).102. denote its inverse [Dflx)]'1 by T. and in par- ticular to the subset Q(R n ) of invertible operators in L(R n ) (because U is defined in such a way that Df(x) is invertible for all x in £/).org/10. the right-hand side of the inequality goes to zero. By Theorem 4. as we have just shown./is differentiable. using (1). we insert T in the expression that defines the derivative of/"1 and verify that it holds. To show that f"1 is differentiable.186 Differential Calculus and therefore.doi. • Df( ).(l/X) \\k\\ (7) Hence. By (9).

org/10. the production function will be linearly homo- geneous (i.. Let i: Rn a X —> R be a function with con- tinuous partial derivatives defined on an open cone X. Eulefs theorem. the demand function x(p.doi. where X is a cone. Homogeneous Functions 187 • the inversion operator. Theorem 5. (y 1 : Q(R n ) —> Q(R n ). Homogeneous Functions A set X in R n is called a cone if given any x e X the point he belongs to X for any A > 0. The following theorem provides a useful characterization of homoge- neous functions with continuous partial derivatives. Homogeneous functions. the value of the function increases in the proportion A*. A function defined on a cone is said to be homogeneous of degree k if.e. known as con- stant returns to scale. A function / : R N D L — > R.e. consumption choices should not be affected.42.2.7. y) that gives the optimal consumption bundle as a function of the vector of prices p and income y will be homogeneous of degree zero. 2013 . the composite function Df'1: U —> Q(R n ) is continuous.98 on Thu Jun 27 09:32:26 WEST 2013.1017/CBO9780511810756.15 in Chapter 3. consider the response of a consumer to an equiproportional increase in income and the prices of all goods in the market. http://dx. Because this change would not change the budget set (i.102. the set of consumption bundles the agent can afford). which assigns to each invert- ible operator in L(R n ) its inverse. For example.. and fix an arbitrary x in X. Then we have Downloaded from Cambridge Books Online by IP 130. Then f is homogeneous of degree k in X if and only if (1) Proof Assume that / i s homogeneous of degree k. Let /:R D D I —> R n be a continuously differentiable func- tion on the open set X. homogeneous of degree 1). is homogeneous of degree k in X if Homogeneous functions often arise naturally in economics. (See Section 6 in Chapter 2.1. (This function is continuous by Theorem 4.) Hence. If this assumption. Hence. Definition 5. • Problem 4. Show that/is locally Lipschitz on X.005 Cambridge Books Online © Cambridge University Press.) 5. it often makes sense to assume that a doubling of all inputs will lead to a doubling in output. holds. when we multiply all its arguments by a positive real number A. In production theory.

F is a constant function. • Conversely. we have as was to be shown. we obtain (1). and define the function <j> for all X > 0 by Then and multiplying both sides of this expression by X. we can differentiate this expression with respect to X. we have F(l) = 0(1).3. we have Putting X= 1.98 on Thu Jun 27 09:32:26 WEST 2013.005 Cambridge Books Online © Cambridge University Press. define the function F for X > 0 by and observe that. Show that if / is homogeneous of degree k and "sufficiently differentiate. 2013 . • Problem 5.org/10.42. suppose that (1) holds for all x. Using the chain rule. Af W) = X"=1 ji itytei = kf(Ax) = ^ W (2) where the second equality follows by applying (1) to the point Xx. using (2).doi. Next.102. Hence. Putting A= 1 in (3). The continuity of the partial derivatives of / guarantees the differ- entiability of the function. recalling that 0(A) =/(AJC).188 Differential Calculus for all X > 0.4 (i) Show that the Cobb-Douglas function Downloaded from Cambridge Books Online by IP 130.1017/CBO9780511810756." then its first partial derivatives are homogeneous of degree A:-1. Hence. Fix an arbitrary x in X. and therefore Finally. Problem 5. http://dx.

1017/CBO9780511810756. and L(a) = {xeX. http://dx. v > 0. let x0 and x\ = Xx0 be two points lying on the same ray through the origin. we have. Using Problem 5. and let / b e C1 and homogeneous of degree k. with/: X —> R a homogeneous function of degree k.005 Cambridge Books Online © Cambridge University Press. n f(x) = AY\x°. The tangent planes to the different level sets of a C1 homogeneous func- tion.42. Hence. as illustrated in Figure 4. p > -1 and p * 0. Xxa e L(Xka) ii xa e L(a).doi. and X*=1 ft = 1 is homogeneous of degree v. we have Hence. for any i and g. <5. Homogeneous functions have some interesting geometric properties. / g(x) = Ayji^. To see this._ 8iXi > where A > 0.6. then (VX)y lies in L(a). 2013 .3.f(x) = a} the a-level set of /. Let xa be a point in L(a).' is homogeneous of degree X!Li a.org/10. the level sets of homogeneous func- tions are radial expansions and contractions of each other. have constant slope along each ray from the origin.102. if y e L(Xka).6.98 on Thu Jun 27 09:32:26 WEST 2013. by the same argument. Conversely. 1=1 (ii) Show that the constant-elasticity-of-substitution (CES) function. Then f(xa) = a and by the homogeneity of/( ). Homogeneous Functions 189 Figure 4. moreover. Downloaded from Cambridge Books Online by IP 130. > 0 for all i. and consider the point Xxa (with X > 0) obtained by moving along the ray going through the origin and xa. Level sets of a homogeneous function. Let Xbe a cone in R n .

org/10. this expression says that the marginal rate of substitution between any two goods. A function is affine if it is the sum of a linear function and a constant. 3 In fact. Orlando.) = fi(teo) = Xk-lfi(x0) = fi(x0) /. . Taylor. i and q. Reading. Barcelona: Editorial Reverte.(*i) f{*xo) V-'Mxo) f(x) If / is a utility function. S. Cambridge University Press. Reading. Topics in Mathematical Analysis for Economists. A Straightforward Approach. and Mann. for example.. Undergraduate Analysis. because the family of level sets of g( ) is the same as that of /( ). 2nd ed. where / is homogeneous of some degree and h: R -> R is an increasing function. 2nd ed. New York: McGraw- Hill. D. . Bibliography Apostol. That is. 1982. Mathematics of Economists. Weintraub. Belmont. Principles of Mathematical Analysis. C. Mathematical Analysis. Let xt be an arbitrary component of the vector x.42. and the slope of their level sets is the same along each ray from the origin. Rudin. 1989. A.1017/CBO9780511810756. 1983. X n ) which contains all the components of x except for xt. Calculus. W. New York: Wiley. Notice that. homothetic functions inherit the geometric properties of homogeneous functions. we should say an affine function. http://dx. Xi-1. 2 As a matter of fact. their level sets are radial expansions or contractions of each other. .190 Differential Calculus fjx. Mathematical Analysis. In particular. 1974. Berlin: Springer-Verlag. 1978. g( ) is homothetic if it can be written in the form g( ) = h\f{ )]. 3rd ed. 1973. X i + u . R.102. A function is said to be homothetic if it is an increasing transformation of a homogeneous function. Advanced Calculus. E. MA: Addison-Wesley. Clark. Cambridge University Press. 1976. 2nd ed. 3rd ed. Buck. K. CA: Wadsworth.005 Cambridge Books Online © Cambridge University Press. is constant along each ray from the origin.•). Luenberger. MA: Addison-Wesley. 1982. T.doi. Elementary Mathematical Analysis. 1981. we will use the following notation. we could define differentiability directly in terms of the existence of a linear mapping TV such that Downloaded from Cambridge Books Online by IP 130. 1989. Apostol. FL: Academic Press. Notes 1 To avoid writing out all the components of a vector when we are interested in just one of them. Introduction to Linear and Non-linear Programming. Lang. T. W. New York: McGraw-Hill. K. and define the vector X-i =(x l 9 . 1982. . Advanced Calculus. 2013 . 3rd ed. Binmore. .98 on Thu Jun 27 09:32:26 WEST 2013. We can then write x = (xh #_. An Integrated Approach. Sydsaeter. .

R m ).x2)-f(xl.x2)] + [f{x1 +ai. Therefore. then \\Ax\\ < ||A|| ||x||.102. however.x2)] We decompose the change in /from xtox + h into the sum of n changes. for all practical purposes. but we will occasionally ask the reader to think of the derivative of/as a function X —> L(R n . If the equations of the linearized system are all linearly independent.1017/CBO9780511810756.x°) = y. there exists a bijective linear function between L(R n . it makes little difference which definition we use.org/10. We take U to be a subset of this ball Downloaded from Cambridge Books Online by IP 130. and x a vector. 4 The term "Jacobian" is sometimes used to refer to the determinant of a matrix of partial derivatives. 5 This is easily verified by induction. its norm is defined by ||71| = } 9 Another intuitive way to interpret this result is as follows. and given a point in this set there is an open ball around it that is still contained in the set. each between two points that differ only in one coordinate. R m ) and Rmxn.98 on Thu Jun 27 09:32:26 WEST 2013. Notes 191 We know.x2 + a2)-f(xx. http://dx. (£)/)~1(Q(Rn)) is open. so that. This is done so that we can use the one- dimensional mean-value theorem.doi. +alL. The one we give in the text is probably easier to visualize.005 Cambridge Books Online © Cambridge University Press. 7 Here. we have f(x + h)~f(x) = / ( * ! + ax. ||D/(JC°)|| is the norm of the linear transformation associated with the matrix Df(x°). 6 Notice what we are doing. 10 The inverse image of an open set under a continuous function is open. For n = 2.42. Recall from Chapter 3 that if A is a linear transformation. 8 Let T be a continuous linear transformation defined between two normed vector spaces X and Y.x2) = [/(*. then f(x) = y has a locally unique solution for any y sufficiently close to y°. 2013 . rather than to the matrix itself. The meaning should be clear from the context. Suppose x° solves the system f(x) = y for some value y° of y.x2 + a2)-f{x1 +al. As discussed in Section 4(b) of Chapter 3. and linearize the system around x° to get f(x) =/(x°) + Df(x°)(x . that given bases for R n and Rm.

doi.Downloaded from Cambridge Books Online by IP 130.102.98 on Thu Jun 27 09:32:26 WEST 2013.005 Cambridge Books Online © Cambridge University Press.1017/CBO9780511810756.org/10. 2013 .42. http://dx.

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