Lesson 6

* Functions of one and more variables

Definition. The set of all ordered collections of real numbers , represents

the real -dimensional space . Any ordered collection is called the point of the
space , and the numbers are called coordinates of that point. We denote the points of
by , or by , or, simply, by .
The point of (we write ) can be regarded as a vector in the space ,
having in this space the coordinates , and the following operations can be defined.

The sum of the vectors, and in is the vector , such

that . We write . The scalar multiple of the
vector by a real number , is the vector , such that
. We write .

The inner product of two vectors, and , denoted by ( ), is defined as

follows:

( ) .

Now we can define the distance between two arbitrary points and
in using the inner product of the vectors and :

√ √ .

Definition. Let be a point of the space ( ). The set of all points

satisfying the inequality , where is a certain positive number,
is called -neighborhood of the point .

Let us denote by a set of points in the space . This is written as follows: . The point of
the set is called the interior point of if it is included in together with a certain -neighbourhood of
the point .

Definition. The set is called the open domain or, simply, domain, if two conditions are satisfied:

1.All points of the set are interior points of .

2.Any two points of the set can be connected with a continuous line which entirely is included
in .

The point is called the boundary point of if any -neighbourhood of the point contains both
points of the set and points that do not belong to .

Definition. A domain together with all its boundary points form a closed domain.

For example, the set of points of the interval (0,1) is an open domain in the space , the points 0 and 1
are boundary points of this domain, and the segment [0,1] is a closed domain in .
Definition. The relationship between the variables , ,…, and a variable , such that to each point
there corresponds exactly one real value of , is called function. We say
that is the function of the variables , ,…, , and write , ,…, ) for , ,…, ) or
), where . The set is the domain of definition of the function . The set of
corresponding values of is called the range of the function .

Limit and Continuity of the Function

The continuous functions of several variables possess properties similar to those of the continuous
functions of one variable. For example, if the arithmetic operations are performed with continuous
functions, then the resulting functions are also continuous. Let us consider more detailed the continuity
of the composite function.

Assume that the function is defined at the points D , and

the variables in their turn are some functions:

, ,

defined at the points .

Then the function

is called the composite function of the variables defined in the set .

For the composite functions we have the following statement.

Theorem. If the functions , ,…, are continuous at the point ,

and the function is continuous at the point , where ,
,…, , then the composite function is
continuous at the point .

* Examples of Functions Used in Economy

Demand –Income Dependence. The demand ( ) for a certain group of products and services at a given
level of income ( ), can be characterized by the Tornquist functions as follows.

1. For the strictly necessary goods, , ;

2. For the everyday consumer goods, , ;

3. For the luxury goods, , ;

4. For the goods that are out of use at a certain level of income, .

Here , , and are positive econometric parameters.

Income Distribution. To represent the income distribution between different households in a given
country, the Lorenz function is used. Its graph, called Lorenz curve, and denoted by , shows for the
bottom % of the people what percentage % ( ) of the total country income they possess. For
instance, the bottom 40% of all people have 20%of the total income (see Figure 2). The line is
called the line of perfect equality.

The bigger the deviation of the Lorenz curve from the line , the more unequal the income
distribution. Thus, the observed Lorenz curve can serve as a measure of social inequality. The degree of
this inequality is expressed by the Gini index (G.I.):

∫ .

Production Functions. A production function expresses dependence between the output and a set of
inputs. The production function theory was developed beginning with 1928, when Cobb-Douglas
production function was introduced to determine the production level that results from capital and
labor :

, where and are parameters and , . Using statistic data for

the years 1899-1922 in USA, Cobb and Douglas obtained the following production function:
.

*Level Curves and Level Surfaces

The graph of the function of two variables, , usually represents geometrically a surface in the
Cartesian space . For instance, the linear function is defined everywhere in the
plane , and its graph in the space , is a plane that intersects the axes , , and at the
points 2, 1, and 4, respectively (see Figure 3.) The function √ has the domain of
definition , and geometrically represents an upper hemisphere (see
Figure 3.) The function is defined in the whole plane and has a graph called the
paraboloid of revolution, as shown in Figure 3. Note that the range of this function is described by
the relation .

To facilitate the investigation of a function and sketching its graph, often level curves.

To represent geometrically a level curve of the function , we proceed as follows. Fix a value
of , that is put , where is a value from the range of the function. Then draw the graph of the
equation in the -plane.

Note. In economic theory, the level curves of utility function are called the levels of indifference, the
level curves of production function are called the isoquants, and the level curves of cost function are
called the isocosts.