Mathematics

For Economics And Finance

ESSEC BBA Program

1
 Topic 1: Review of Algebra
• Recap
▪ Properties of Real Numbers
▪ Exponent
▪ Radicals
• Functions and Graphs
▪ Linear Function
▪ Quadratic Function
✓ Finding roots in a quadratic equation
▪ Polynomial Function
▪ Exponential Function
▪ Logarithm Function
• System of Equations
• Linear and Quadratic Inequalities

2
Some Basic Properties of Real Numbers
1. The Transitive Property of Equality
If a = b and b = c, then a = c.
2. The Commutative Properties of Addition and Multiplication
a + b = b + a and ab = ba
3. The Associative Properties of Addition and Multiplication
a + (b + c ) = (a + b ) + c and a(bc ) = (ab )c
4. The Inverse Properties
𝑎 + −𝑎 = 0, 𝑎 ≠ 0 ⇒ 𝑎 ∙ 𝑎−1 = 1
5. The Distributive Properties
a(b + c ) = ab + ac and (b + c )a = ba + ca
3
Some Basic Calculations
1. 𝒂+𝒃 𝟐 =

2. 𝒂−𝒃 𝟐 =

3. 𝒂+𝒃 𝒂−𝒃 =

4
Types of Numbers
• An integer is a whole number (not a fraction) that can be positive, negative, or zero.
• The natural numbers are the positive integers (whole numbers) 1, 2, 3, etc., and sometimes
zero as well
• a rational number is a number that can be expressed as the quotient or fraction 𝑝/𝑞 of two
integers (𝑞 ≠ 0).
• Since q may be equal to 1, every integer is a rational number.
• Numbers like 2, 𝑥 (where 𝑥 is a positive rational number but not the square of a rational
number) or 𝜋 etc. cannot be expressed as ratio of two integers but can be represented on
real number line. These numbers are called irrational numbers.
• All rational numbers are real numbers, but not vice versa.

• A real number is a value of a continuous quantity that can represent a distance along a line
5
Recap of key concepts: Exponentiation
n exponent ”X raised to the nth power", “X raised to the power of
base x n", "the nth power of X", “X to the nth power", or “X to
the n".

Properties: Examples
4
𝑛
1. 𝑥 = 𝑥 ∙ 𝑥 ∙ ... ∙ 𝑥, 𝑛 ∈ 𝑁, 𝑥 ∈ ℝ  1  1  1  1  1   1 
a.   =      =  
𝑛 𝑓𝑎𝑐𝑡𝑜𝑟𝑠 2  2  2  2  2   16 
1 1
−𝑛 1 b. 3 = 5 =
-5
2. 𝑥 = 𝑛 , 𝑛 ∈ 𝑁 3 243
𝑥
1
3. 𝑥 0 = 1 c. -5 = 35 = 243
3
d. 20 = 1, π 0 = 1, ( −5)0 = 1
Notation: e. x 1 = x
Natural numbers (N), Integer numbers (Z), Real numbers (R) 6
Recap of key concepts: Radicals
• If 𝑟 𝑛 = 𝑥, then r = 𝑛 𝑥
• 𝑛
𝑥 is called a radical, or 𝑛𝑡ℎ root of 𝑥, 𝑛 ∈ 𝑁.
2 3 4
• E.g., 25, 125, 625

• 𝑥 could be negative if 𝑛 is odd, otherwise 𝑥 ≥ 0.

3
• E.g., −125
• Roots can also be defined as special cases of exponentiation, where
exponent is a fraction:
𝒏
𝒙 = 𝒙𝟏/𝒏
7
Recap of key concepts: Rational exponent

These properties can be

summarized as:

𝑎0 = 1

𝑎𝑏 ∙ 𝑎𝑐 = 𝑎𝑏+𝑐

𝑏 𝑐
𝑎 = 𝑎𝑏∙𝑐

𝑎∙𝑏 𝑐 = 𝑎𝑐 ∙ 𝑏 𝑐

𝑎, 𝑏, 𝑐 ∈ 𝑅
8
Example – Rationalizing Denominators
25 25
1 1
2 2 2 2
2 5
a. = 1 = 1 = =
5 5
1 1
5 5 2 2 2
5 5

b.
2
=
2 2
= 1 5 =
23 x ( )
5
1
6

=
26 3 5 x
6
3x 5 6 3  6 x 5 3 6 x 6 3x 3x

Example – Exponents
−2 −2
 1 1 y −x
−1 1 1 y+x
x +y = + = −1 (x −1
− y −1 )
−2
=  −  =  
x y xy x y  xy 
2
x 3/2
−x 1/ 2
=x 1/ 2
(x − 1)  xy 
=   =
x 2y 2
 y − x  (y − x )2

+ (7 x )
−2 7 1 7 1
( )= x
−2
7x = 2+ = 2+
(7 x ) x 49 x 2 x y + 2x y + 2x
2 2 1 6 2 1 8
x 5 2 5 5 2 5

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Khan Academy Exercises: 10 minutes
• Multiply & divide powers (integer exponents)
• Powers of products & quotients (integer exponents)
• Properties of exponents challenge (integer exponents)

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Khan Academy Exercises: 15 Minutes
• Unit-fraction exponents
• Fractional exponents
• Rational exponents challenge
• Properties of exponents intro (rational exponents)
• Properties of exponents (rational exponents)
• Evaluate radical expressions challenge

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 Functions
• A function is a rule that takes an element from the input set and
transforms it to an element of the output set. For us both sets will be
real numbers (R)

y = f (x) “y equals f of x” or “y is a function of x”

• The set of all input numbers is the domain of the function.

• The set of all output values is the range of the function.
• A function is also called a mapping or a transformation
• It shows how the value of y depends on the value of x.
• Note that for any x that this function is defined, there should be only
one value for y.
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 Functions
• Example: Let f :R→R
f ( x) = 3x 2 − x + 5

Find 𝑓(10), 𝑓(𝑧), 𝑓(𝑟2), 𝑓(𝑥 + ℎ)

13
Examples of functions in economics
• Simple Demand Function:

𝑄 = 𝑓(𝑃) = 200 − 2𝑃

• Production Function

Q = 𝑓(𝐾, 𝐿, 𝑀, 𝑃, 𝐶, 𝑅, … ), e.g. Cobb-Douglas Q = 𝐴𝐿𝛼 𝐾𝛽

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Khan Academy Exercises: 15 Minutes
• Evaluate functions
• Evaluate functions from their graph
• Evaluate function expressions
• Function inputs & outputs: equation
• Function inputs & outputs: graph
• Function rules from equations
• Recognize functions from graphs

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Linear function
𝒚 = 𝒇 𝒙 = 𝒂 + 𝒃𝒙 E.g., 𝒚 = 𝟏 + 𝟐𝒙

• Any two points define the line.

• 𝑎 is the vertical intercept.
• 𝑏 is the Slope of a Line – “steepness”
𝑣𝑒𝑟𝑡𝑖𝑐𝑎𝑙 𝑐ℎ𝑎𝑛𝑔𝑒
• 𝑇ℎ𝑒 𝑠𝑙𝑜𝑝𝑒 =
ℎ𝑜𝑟𝑖𝑧𝑜𝑛𝑡𝑎𝑙 𝑐ℎ𝑎𝑛𝑔𝑒
• Property of linear function:
✓when x increases by 1, y increases by b.
✓when x increases by 2, y increases by 2b
✓…
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Linear function
𝒚 = 𝒇 𝒙 = 𝒂 + 𝒃𝒙

• 𝑏 > 0 positive slope. E.g., a supply function

• 𝑏 < 0 negative slope E.g., a demand function
• 𝑏 = 0 horizontal line

• How to write a function for a vertical line?

• What is the slope?

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Linear function
𝒚 = 𝒇 𝒙 = 𝒂 + 𝒃𝒙
• It can be written as 𝒂 + 𝒃𝒙 − 𝒚 = 𝟎
• This is an implicit function.
• It “implicitly” shows the relationship between 𝑦 and 𝑥
𝒚−𝒂
• It can also be written as 𝒙 =
𝒃
• This is an inverse function of 𝑓 𝑥 .
• It shows 𝑥 as a function of 𝑦.
−𝟏 𝒚−𝒂
• It can be written as 𝒙 = 𝒇 𝒚 =
𝒃

−𝒂
• The horizontal intercept of f(x) is
𝒃
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Khan Academy Exercises: 15 Minutes
• Complete solutions to 2-variable equations
• Slope from two points
• Horizontal & vertical lines
• Intercepts from an equation
• Linear equations word problems
• Slope-intercept from two points
• Slope from equation

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Polynomial functions
• A polynomial function is a function that involves only non-negative
integer powers of 𝑥.

𝑓 𝑥 = 𝑐𝑛 𝑥 𝑛 + 𝑐𝑛−1 𝑥 𝑛−1 + ⋯ + 𝑐1 𝑥 + 𝑐0

• Depending on the value of n, several subclasses of the polynomial

function are:
f ( x) = c0
Constant function (n=0) :
Linear function (n=1): f ( x) = c1 x + c0
Quadratic function (n=2): f ( x) = c2 x 2 + c1 x + c0
……
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Sketching a quadratic function
• Sketch the graph of y = 2x2 – 7x – 9

• Steps:
▪ calculate point of intersection with the y-axis
when x=0
▪ calculate points of intersection with the x-axis
when y=0
−(−7)± 49+72 7±11
𝑥1 , 𝑥2 = = , 𝑥1 = −1, 𝑥2 = 9Τ2
4 4
▪ Minimum point is at
𝑥1 +𝑥2 −𝑏
𝑥= = = 7Τ4 = 1.75,
2 2𝑎
−𝑏
𝑦= 𝑓 = 𝑓 7Τ4 = − 121Τ8 = −15.125
2𝑎 1.75, −15.125
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Quadratic Function
• 𝒚 = 𝒇 𝒙 = 𝒂𝒙𝟐 + 𝒃𝒙 + 𝒄
• Are continuous curves (no breaks) called parabolas.
• Have only one extreme point, called vertex of the parabola.
• If a is positive, the extreme point is a minimum
• If a is negative, the extreme point is a maximum. The vertex is at the point
−𝑏 −𝑏
,𝑓 .
2𝑎 2𝑎

• Are symmetrical about the vertical line through the extreme point.
• 𝑦-intercept = 𝑐
• The roots (𝑥-intercepts) are the solutions of 𝑎𝑥 2 + 𝑏𝑥 + 𝑐 = 0. They
are symmetrical about the vertical line through the vertex.
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Two more examples

23
Quadratic Equation
• 𝒂𝒙𝟐 + 𝒃𝒙 + 𝒄 = 𝟎, 𝒂 ≠ 𝟎
• E.g. 𝑥 2 − 2𝑥 − 3 = 0

• 𝑎𝑥 2 + 𝑏𝑥 + 𝑐 = 𝑎(𝑥 − 𝑥1 ) ∙ (𝑥 − 𝑥2 )
−𝑏± 𝑏 2 −4𝑎𝑐
𝑥1 , 𝑥2 =
2𝑎

• Vieta's formula
𝑥1 + 𝑥2 = − 𝑏Τ𝑎
𝑥1 ∙ 𝑥2 = 𝑐Τ𝑎
24
Quadratic Equation
• The discriminant is the part of the quadratic formula under the
square root: ∆= 𝑏 2 − 4𝑎𝑐
• The discriminant can be positive, zero, or negative, and this
determines how many solutions there are to the given quadratic
equation.
▪ A positive discriminant indicates that the quadratic has two distinct real
number solutions.
▪ A discriminant of zero indicates that the quadratic has a repeated real
number solution.
▪ A negative discriminant indicates that neither of the solutions are real
numbers.

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Plots of quadratic functions

26
Khan Academy Exercises: 20 Minutes
• Add & subtract polynomials
• Parabolas intro
• Warmup: graphing quadratics in factored form
• Graph quadratics in factored form
• Graph quadratics in standard form
• Features of quadratic functions
• Quadratic formula
• Number of solutions of quadratic equations

27
Polynomials in one variable in general:
• Polynomial function:
𝑓 𝑥 = 𝑐𝑛 𝑥 𝑛 + 𝑐𝑛−1 𝑥 𝑛−1 + ⋯ + 𝑐1 𝑥 + 𝑐0

• Features of Polynomial functions:

1) Sum of a finite number of terms
2) Each term: a coefficient times a variable being raised to a nonnegative
integer power

• Example: Are the following functions polynomials?

▪ 9𝑥 −2 + 8𝑥 2
▪ 6𝑎0.5 + 5
▪ 3𝑎𝑎 + 8
▪ 10𝑥 7 + 8𝑥 5 + 2𝑥 2
▪5 28
Polynomials Terms
• Number of terms in a polynomial:
➢If there is only one term in the polynomial, it’s called monomial.
➢If there are two terms, it’s called binomial.
➢If there are three terms, it’s called trinomial.

• What is the degree of a given term of a polynomial?

➢The degree is the power that we are raising the variable to.

• The highest degree of all terms is the degree of the entire polynomial

29
E.g.: 3rd degree Polynomials (Cubic Polynomials)
• Plot the graphs of (a) y = 0.5x3 – 5x2 + 8.5x + 27
(b) y = –0.5x3 – 5x2 + 8.5x + 27

30
Intercepts of the Polynomials
• Polynomial function:
𝑓 𝑥 = 𝑐𝑛 𝑥 𝑛 + 𝑐𝑛−1 𝑥 𝑛−1 + ⋯ + 𝑐1 𝑥 + 𝑐0

• Vertical Intercept:
When x=0, y=c0 , the constant term.

• Horizontal Intercept:
When y=0, 𝑐𝑛 𝑥 𝑛 + 𝑐𝑛−1 𝑥 𝑛−1 + ⋯ + 𝑐1 𝑥 + 𝑐0 =0

31
The fundamental Theorem of Algebra
• Cubic functions: ax3 + bx2 + cx + d = 0
• The fundamental Theorem of Algebra: A polynomial of degree n can
have at most n distinct real roots.
• If we count distinct roots (as we usually do), then:
➢A polynomial of even degree can have any number from 0 to n distinct real
roots. E.g.: quadratic equations
➢A polynomial of odd degree can have any number from 1 to n distinct real
roots. E.g.:
✓ 𝑋3 − 1 = 0
✓ Previous a) and b)

32
Turning Points
• A turning point is a point of the graph where the graph changes from
increasing to decreasing (rising to falling) or decreasing to increasing
(falling to rising).
• A polynomial of degree n will have at most n – 1 turning points.

33
End Behavior
• The end behavior of a function describes the behavior of the graph of the
function at the "ends" (left and right) of the x-axis.
• In general, the end behavior of a polynomial function is the same as the
end behavior of its leading term, or the term with the largest exponent
(n).
➢When n is even, the behavior of the function at both "ends" is the same. The sign
of the leading coefficient determines whether they both approach positive
infinity or whether they both approach negative infinity.
➢When n is odd, the behavior of the function at both "ends" is opposite. The sign of
the leading coefficient determines which one is positive infinity and which one
is negative infinity.

34
Dividing polynomials:
• Rational functions

x−2
y= 2
x + 6x + 9

• Notice that the function is not

defined everywhere. Why?
x2 + 6x + 9 = 0

35
Polynomials in Two Variables
• Each term can be expressed in the form 𝑎𝑥 𝑚 𝑦 𝑛 , where m and n are
nonnegative integers.
• The polynomial is the sum of a finite number of terms
• The degree of each term in a polynomial in two variables is the sum
of the exponents in each term.
• The degree of the polynomial is the largest such sum.
• Example:
➢3𝑥 2 𝑦 − 8𝑥 12 𝑦 6 + 10𝑥 3 + 7𝑦 + 3 𝑑𝑒𝑔𝑟𝑒𝑒:
➢6𝑥 12 − 2𝑦 6 + 5𝑥 3 𝑦 𝑑𝑒𝑔𝑟𝑒𝑒:

• Polynomials in more variables… 36

Power Function
• Each item in the polynomials can be seen as a special form of the
power function with non-negative integer power.
• A power function is a function that can be represented in the form
𝑓(𝑥) = 𝑘𝑥 𝑝
where 𝑘 and 𝑝 are real numbers, and 𝑘 is known as the coefficient.

37
Khan Academy Exercises: 10 Minutes
• Polynomials intro
• Add polynomials (intro)
• Add & subtract polynomials: two variables (intro)
• Multiply binomials by polynomials
• End behavior of polynomials
• Evaluate expressions using structure

38
Exponential function
𝑥 x y Graph:
• 𝑦=𝑏 ,
where b > 0 and b ≠ 1 -4
-3
• 𝐸. 𝑔. , 𝑦 = 3𝑥 -2
-1
0
1
2
3
4 39
Exponential growth versus linear growth
x y Graph:
• 𝑦 = 𝑎 + 𝑏𝑥,
-4
• 𝐸. 𝑔. , 𝑦 = 3𝑥 + 1 -3
-2
-1
0
1
2
3
4 40
Exponential Growth and Decay
𝑦 = 𝑏𝑥, 𝑦 = 𝑏 −𝑥 , e.g., 𝑏 = 2
Exponential Growth Exponential Decay

b> 1

𝑥
1 1
𝑏 > 1 → 𝑏 −1 = < 1; 𝑏 −𝑥 = 41
𝑏 𝑏
Other Properties of Exponential function
𝑦 = 𝑒 𝑥 (the natural exponential function) What is the vertical
𝑒 = 2.71828 … (𝐸𝑢𝑙𝑒𝑟 ′ 𝑠 𝑛𝑢𝑚𝑏𝑒𝑟) intercept of 𝑎𝑏 𝑥 ?
𝑒 𝑥 can found on your calculator

42
Khan Academy Exercises: 10 Minutes
• Exponential vs. linear growth
• Exponential expressions word problems (numerical)
• Exponential expressions word problems (algebraic)
• Exponential growth vs. decay
• Graphing exponential growth & decay
• Equivalent forms of exponential expressions
• Solve exponential equations using exponent properties
• Solve exponential equations using exponent properties (advanced)

43
Logarithmic function
• Exponential function: 𝑥 = 𝑏 𝑦
• This is equivalent to 𝑦 = log 𝑏 𝑥
✓𝑏 is the base: 𝑏 > 0, 𝑏 ≠ 1
✓𝑦 is the exponent, and
✓x is called the argument: 𝑥 > 0.
• Logarithmic function is the inverse of exponential function.
𝑏 log𝑏 𝑥 = 𝑥 = log 𝑏 𝑏 𝑥

• If 𝑏 = 𝑒, we can write 𝑦 = log 𝑒 𝑥 = ln 𝑥 : natural logarithm

• If 𝑏 = 10, we can write 𝑦 = log10 𝑥 = log 𝑥 ∶ common logarithm
ln 𝑥 and log 𝑥 can found on your calculator
44
Plotting logarithmic functions
𝑦

45
Important properties of Logarithmic function
• Important properties
1. log 𝑏 (𝑚𝑛) = log 𝑏 𝑚 + log 𝑏 𝑛 5. log 𝑏 1 = 0
𝑚
2. log 𝑏 = log 𝑏 𝑚 − log 𝑏 𝑛 6. log 𝑏 𝑏 = 1
𝑛
𝑟 𝑟 log𝑎 𝑚
3. log 𝑏 𝑚 = log 𝑏 𝑚 = 𝑟 ∙ log 𝑏 𝑚 7. log 𝑏 𝑚 =
log𝑎 𝑏
1
4. log 𝑏 = − log 𝑏 𝑚
𝑚

46
Practice
1. ln e3x

2. ln ex − eln x

3. log 4 e log e 64
9
4. log 7 78

5. log 2 50

6. Solve the equation: 35𝑥 = 28

47
Khan Academy Exercises: 10 Minutes
• Evaluate logarithms
• Evaluate logarithms (advanced)
• Use the properties of logarithms
• Evaluate logarithms: change of base rule
• Use the logarithm change of base rule
• Solve exponential equations using logarithms: base-2 and other bases

48
Refresher in solving simultaneous equations
3 13
3𝑥 − 4 𝑦 = 13 𝑖 𝑦= 𝑥− 𝑖
E.g. ቊ ֞ 4 4
3𝑦 + 2𝑥 = 3 (𝑖𝑖)
2
𝑦 = − 𝑥 + 1 (𝑖𝑖)
3
Graphically:

49
Applications of systems of equations:
• Equilibrium analysis in Economics
• Equilibrium in the goods market occurs when

50
Number of Solutions to System of equations
• One Solution: A system of linear equations has one solution when the
graphs intersect at a point.
• No solution: A system of linear equations has no solution when the
graphs are parallel.
• Infinite solutions: A system of linear equations has infinite solutions
when the graphs are the exact same line.

51
Solving simultaneous equations (1)
3𝑥 − 4 𝑦 = 13 𝑖
• Use elimination method to solve the system ቊ
3𝑦 + 2𝑥 = 3 (𝑖𝑖)

• Solution:
➢ Choose one unknown in one equation as pivot, e.g. 𝑦 in eq. (𝑖).

➢ Make 𝑦-coefficients in equations up to the sign equal

9𝑥 − 12 𝑦 = 39
ቊ
8𝑥 + 12𝑦 = 12

➢ Adding (or subtracting if signs were equal) equations we get 𝑥 = 3.

➢ Substitute 𝑥 = 3 back in eq. (𝑖) to find 𝑦 = −1.

52
 Solving simultaneous equations (2)
3𝑥 − 4 𝑦 = 13 𝑖
• Use Substitution method to solve the system ቊ
3𝑦 + 2𝑥 = 3 (𝑖𝑖)

• Solution:
➢ Choose one unknown in one equation as pivot, e.g. 𝑦 in eq. (𝑖).

3𝑥−13
➢ Calculate 𝑦 (in terms of 𝑥) in (𝑖) and get: 𝑦 = (𝑖𝑖𝑖) .
4

➢ Substitute (𝑖𝑖𝑖) in (𝑖𝑖) to get 𝑥 = 3, then 𝑥 = 3 back into (𝑖𝑖𝑖) to get 𝑦 = −1.

53
More examples

𝑥 + 2𝑦 + 𝑧 = 4
1 . ቐ 2𝑥 + 4𝑦 + 2𝑧 = 8
3𝑥 + 9𝑦 + 𝑧 = 4

2𝑥 + 𝑦 + 𝑧 = 3
2. ቐ−𝑥 + 2𝑦 + 2𝑧 = 1
𝑥 − 𝑦 − 3𝑧 = −6

𝑥 2 − 2𝑥 + 𝑦 − 7 = 0
3. ቊ
3𝑥 − 𝑦 + 1 = 0

54
Khan Academy Exercises: 15 Minutes
• Number of solutions to a system of equations algebraically
• Manipulate expressions using structure
• Systems of equations with elimination challenge
• Systems of equations with substitution

55
Refresher on Linear Inequalities
𝑐−𝑎
𝑥> 𝑖𝑓 𝑏 > 0
𝑏
• 𝑎 + 𝑏𝑥 > 𝑐⇒ ቐ 𝑐−𝑎 E.g.
𝑥< 𝑖𝑓 𝑏 < 0
𝑏

𝑐−𝑎
𝑥< 𝑖𝑓 𝑏 > 0
𝑏
• 𝑎 + 𝑏𝑥 < 𝑐⇒ ቐ 𝑐−𝑎 E.g.
𝑥> 𝑖𝑓 𝑏 < 0
𝑏

56
Khan Academy Exercises: 5 Minutes
• Constraint solutions of systems of inequalities

57
Refresher on quadratic Inequalities
• 𝑥2 − 𝑥 − 6 > 0

• −𝑥 2 + 𝑥 + 6 > 0

58