Department of Economics Issn 1441-5429 Discussion paper 02/11 Mathematical Economics: A Reader Birendra K. Rai1, Chiu Ki So2 and Aaron Nicholas3 Abstract: This paper is modeled as a hypothetical first lecture in a graduate Microeconomics or Mathematical Economics Course. We start with a detailed scrutiny of the notion of a utility function to motivate and describe the common patterns across Mathematical concepts and results that are used by economists. In the process we arrive at a classification of mathematical terms which is used to state mathematical results in economics. The usefulness of the classification scheme is illustrated with the help of a discussion of fixed-point theorems and Arrow's impossibility theorem. Several appendices provide a step-wise description of some mathematical concepts often used by economists and a few useful results in microeconomics. Keywords. Mathematics, Set theory, Utility function, Arrow's impossibility theorem 1 Corresponding Author: Department of Economics, Monash University, Clayton, VIC, Australia, Email:
[email protected] 2 Department of Economics, Monash University, Clayton, VIC, Australia. 3 Graduate School of Business, Deakin University, Burwood, VIC, Australia. © 2011 Birendra K. Rai, Chiu Ki So and Aaron Nicholas All rights reserved. No part of this paper may be reproduced in any form, or stored in a retrieval system, without the prior written permission of the author. 1 1. Where do economic agents operate? Let us consider a standard question in consumer theory { What will be the optimal consumption bundle of an agent given her utility function, the amount of money she plans to spend, and the prices of the goods? Formulating this question is a two step procedure.