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A function is called concave if:

fx
+ 1 - z

f x + 1 - f z

A function is called quasiconcave if:

for all a, theset

f x a isconvex
f x 1 , x 2 x1 = y

x2

'
f
x'2 = - 1'
f2

z
x

y
x1

f x1 , x 2 x1 = y
x'2 = -

'
2

f 1' x1 , x2 x1
f 2' x1 , x2 x1

dx
=dx1
- f

' 2
1

f 2' f 11'' f 12'' x'2 f 1' f 21'' f 22'' x'2

' 2
2

f - f
''
22

' 2
2

>0

f 11'' + f 1' f 2' f 12'' + f 1' f 2' f 21'' > 0

This is the determinant of the Bordered Hessian

0
f 1'

f 1'
f 11''

f 2'
f 12'' > 0

f 2'

f 21''

f 22''

Otto Hesse
1811-1874

Concavity implies quasiconcavity but,


quasiconcavity does not imply concavity

f(x1,x2) = x1x2
Is quasiconcave but not concave,
since:
0 = 0,0 , 1 = 1,1 , 2 = 2,2
f 0.5 0 + 0.5 2 = f 1 < 0.5 f 0 + 0.5 f 2

Mathematical methods for


economic theory
Martin J. Osborne
http://mjo.osborne.economics.utoronto.ca/index.php/tutorial/i
ndex/1/int/i

Quasiconcavity and quasiconvexity


http://mjo.osborne.economics.utoronto.ca/index.php/tutorial/inde
x/1/qcc/t

The elasticity of

An Interlude

f x

f
x

f x
xf' x
f' x
x

x
f x
f x
f x

d ln f x
d ln x

Elasticity

f(x)

d ln f e z

Change the variable:

dz

z = lnx,

MP
=
AP

f' x
f' e z z
=
x
=
z e
f x
f e

x = ez

-2x
=
40 - 2x

y = 40 - 2x

at x = 10 :
h

-20
=
-1
40 - 20

Take a logarithmic scale of the x ax


ln 20 = 2.5997

ex

ln 10 = 2.3026
ln 1 = 0

ln 0.5 = -0.69315

ln(h)

Now in the new axis


draw the function

ln 40 - 2e x
x

ln(x)

-2x
=
40 - 2x

y = 40 - 2x

at x = 10 :

-20
=
-1
40 - 20

Take a logarithmic scale of the x ax


ln 20 = 2.5997
ln 10 = 2.3026
ln 1 = 0

ln 0.5 = -0.69315

The slope of this graph


is the elasticity
of the above function

Now in the new axis


draw the function

ln 40 - 2e x
ln(x)

Its slope at x = 2.3026


is -1

MPUTING THE ELASTICITIES OF A TAB

Log(price)Log(demand)

Given
a table
of
deman
d and
prices
To
compute
the price
elasticity
of
demand:
Take the
log of the
table
Now
compute
the slope
of the log
table

3.63758616 - 3.663561646
-0.0374747
0 - -0.693147