Formula sheet Mathematics 1 for Economics

Equations
Equation Solution Condition(s)
2
-b ± b - 4ac
ax 2 +bx + c = 0 x= b 2 - 4ac ³ 0, a ¹ 0
2a
Powers and Logarithms
Rule Condition(s)
log b (m)
log a (m)= a > 0,a ¹ 1,m > 0,b > 0,b ¹ 1
log b (a)
log a (mn)= log a (m)+log a (n) a > 0,a ¹ 1,m > 0,n > 0
æmö
log a çç ÷÷÷ = log a (m) - log a (n) a > 0,a ¹ 1,m > 0,n > 0
çè n ø
log a (m r )= r ( log a (m) a > 0,a ¹ 1,m > 0
Functions of 1 variable
Function Derivative
Quotient Rule f(x) f '(x)g(x) - f(x)g'(x)
y= y= 2
g(x) ( g(x))
Chain Rule dy dy du
y = f(u), u = g(x) = ×
dx du dx
Exponential functions f(x)= a x f '(x)= a x × ln(a) , a > 0
Logarithmic functions 1
f(x)= log a (x) f '(x)=
x × ln(a)
Explanation
Differential dy = f '(x)dx y = f(x)
f(x) concave up f '' (x) > 0 (Strictly) Convex
f(x) concave down f '' (x) < 0 (Strictly) Concave
x
x-Elasticity Ex f(x)= × f ¢(x)
f(x)
Linear approximation f ( x) ≈ f (a ) + f '(a )( x − a ) approximation of f(x) about x = a
Quadratic approximation f ( x) ≈ f (a ) + f '(a )( x − a ) + 12 f ''(a )( x − a ) 2
approximation of f(x) about x = a
 Formula sheet Mathematics 1 for Economics
Integration
1 1
∫x dx = x p +1 + C , p ≠ −1, a constant ∫ x dx = ln x + C
p

p +1
ax
∫ e dx = e +C ∫ a dx = +C , a > 0, a constant
x x x

ln a
∞ r b b

∫ f ( x ) dx = lim ∫ f ( x ) dx ,
r→∞
a a constant ∫ f ( x ) dx = lim
r→−∞
∫ f ( x)dx , b a constant
a a −∞ r
∞ 0 ∞

∫ f ( x) dx = ∫ f ( x ) dx + ∫ f ( x) dx
−∞ −∞ 0

q0 q0

Consumer Surplus CS = ∫ [ f (q) − p *] dq Producer Surplus PS = ∫ [ p * − g (q)] dq

0 0

Functions of 2 variables
dz ¶z dx ¶z dy z = f(x, y)
Chain Rule = × + ×
dt ¶x dt ¶y dt x = x(t), y = y(t)
¶z ¶z ¶x ¶z ¶y ¶z ¶ z ¶ x ¶ z ¶ y
Chain Rule = × + × ; = × + × z = f(x, y) ; x = x(r,s) ; y = y(r,s)
¶r ¶x ¶r ¶y ¶r ¶s ¶x ¶s ¶y ¶s
Homogeneity z = f ( x, y ) homogeneous of degree n ⇔ f (tx,ty ) = t n × f ( x, y ) , t > 0.
dy f ¢(x, y) z = f(x, y)
Implicit differentiation =- x
dx f y¢(x, y) y = y(x) with c = f ( x, y(x)) , c constant
Total differential dz = f x¢(a,b)× dx + f y¢(a,b)× dy z = f ( x, y )

f x ¢ (a,b) = 0, f y¢ (a,b) = 0 Þ (a,b) stationary point of f

ì
ï f xx¢¢ (a,b) > 0 f in (a,b) a (local) minimum
Extreme D (a,b) > 0 ï
í
î f xx (a,b) < 0
ï
ï ¢¢ f in (a,b) a (local) maximum
values
D(x, y)= f xx¢¢(x, y)× f yy¢¢(x, y) - [f xy¢¢ (x, y)] 2 D (a,b) < 0 f in (a,b) a saddle point
D (a,b) = 0 no conclusion
Elasticities x ¶z y ¶z
Ex z = × , w .r.t. x Ey z = × , w .r.t. y z= f(x,y)
z ¶x z ¶y
Linear approximation f ( x, y ) ≈ f (a, b) + f x′(a, b)( x − a ) + f y′(a, b)( y − b) approximation of f(x,y) in (a,b)
 Formula sheet Mathematics 1 for Economics

Matrices
Aq + f = q Leontief Input Output model
Extreme values and saddle point f ( x) f ( x) = f ( x1 ,..., xn ) a function, a = (a1 ,..., an ) a stationary point
(1) Di (a ) > 0 for all i : local minimum of f , Di (a ), the i × i principal minor of the Hessian matrix
(2) D1 (a ) < 0, D2 (a ) > 0, D3 (a ) < 0, D4 (a ) > 0, etc.: local maximum H (a ) = ( fij'' ( x)), (i, j = 1,...n)
(3) Di (a ) ≠ 0 for all i but NOT (1) or (2) : saddle point
(4) NOT (1) or (2) or (3): further investigation necessary

Mathematics of Finance
Effective rates r n
R = 1+ −1 Effective yearly rate at a nominal yearly interest rate r
(compounded n (n periods per year)
interest, discrete)
Effective rates
Effective yearly rate at a nominal yearly interest rate r
(compounded R = er − 1 (continuous compounding of interest)
interest, continuous)
Annuity A for n 1 − (1 + r ) − n Total present value of an amount A deposited for n equal periods at the
TPV = Pn = A ⋅ , r>0
periods r end of each period (r is the interest rate per period).
Annuity A for n (1 + r ) − 1
n
Total future value of an amount A deposited for n equal periods at the end
periods TFV = Fn = A ⋅ = Pn (1 + r ) n , r > 0
r of each period (r is the interest rate per period).