DEFINITION AI.1 Convex Sets in 2" SCR" isa convex set iffor allx! < S andx? ¢ S, we have al +o eS for all tin the interval < t <1. DEFINITION A1.4 Open and Closed e-Balls 1. The open e-ball with centre x° and radius e > 0 (a real number) Is the subset of points in R®: BG@d)=(ceR"| dadx) 0 is the subset of points in R": Bex?) xER"| dix) s ee less than or equal to } DEFINITION A1.5 Open Sets in" SCR! isan open sei forallx € S, there exists some s > 0 such that B(x) cS. DEFINITION A1.6 Closed Sets in R” Sis a closed set if its complement, S*, is an open set. DEFINITION A1.7. Bounded Sets A set S in 8” is called bounded i tis entirely contained within some e-ball (ether open or closed). That is, S is bounded if there exists some ¢ > 0 such that SC B,(x) for some xeR", We have discussed closed sets and bounded sets. Subsesof Re" (hatlareNboth ‘losed and boundedaretealled compactisets| and these are very common in economic applications. We will note the following for future reference =A function £: R + B is continuous at a point x° if, for all « > 0, there exists a6 > 0 such that d(x, x) <5 implies that d(f(), £(®)) < ©. A function is called a continuous function if itis continuous at every point in its domain. Joe Ja) Ja%~e ob x? xO t@ DEFINITION A1.9 (Cauchy) Continuity EeDiatomy tn sss exe THEOREM A1.10 (Weierstrass) Existence of Exireme Values Let f: S—> ® be a continuous real-valued mapping where S is a non-empty compact subset of". Then there exists a vectorx’ c Sand a vector © S such that M8) < fx) < foe) for all xe S. ‘1.4.2. CONCAVE FUNCTIONS For the remainder of this section, we will restrict our attention to real-valued functions ‘Whosedomains'are GomVeRSeIS"This will virtually always be the case in subsequent work and will generally be understood to be the case even if not explicitly stated. For now, though, we should ry to be careful and state our assumptions and notation clearly.DEFINITION 1.22 Concave Functions f: D> Risa concave function i forallx! x © D, fix!) > thx!) + (1 nfee) ¥ te 10.11 Figure A1.27. A concave function. DEFINITION A1.23 Strictly Concave Functions f: D> Risa strictly concave function iff, for allx' 4 x° in D, fax!) > fx!) + 1 = of") forall te 0,1). ‘1.4.3 QUASICONCAVE FUNCTIONS Concavity, whether strict or not, is a relatively strong restriction to place on a function. Often, one of the objectives in theoretical work is to identify and impose only the weakest possible restrictions needed to guarantee the result sought. Quasiconcavity is a related but ‘weaker property that is often all that is required to get us where we want to go. DEFINITION A1.24 Quasiconcave Functions’ f: D— Ris quasiconcave iff for allx! and? nD, fax!) = min{ fia), 02)) for all (0, 1)@ ©) Figure AL. 30. Level sets for quasiconcave functions. (a) The function is quasiconcave and increasing. (b) The function is quasiconcave and decreasing, When f(x) is an increasing function, it will be quasiconcave whenever the level set relative to any convex combination of two points, C(x’), is always on or above the lowest of the level sets £(x!) and C(x’). This case is illustrated in Fig. A1.30(a). When f(x) is a decreasing function, it will be quasiconcave whenever the level set relative to any convex combination of two points is always on or below the highest of the two level sets. This case is illustrated in Fig. A1.30(b). DEFINITION A1.25 Strictly Quasiconcave Functions A function £; D> R is strictly quasiconcave iff, for all x! x2 in D, fix!) > min{f(x!), foe)] for all ¢€ (0, 1). THEOREM A1.15 Concavity Implies Quasiconcavity A concave function fs always quastconcave. A strictly concave function Is always strictly ‘auasiconcave.