Quantitative analysis for

business
SKKU Business School
Young Bong Chang, Ph.D.
• Vectors
• Definition
• Basic operations
• Inner product
• Gauss elimination
• Decompositions
• Determinant and others
• Applications

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What is a vector?
• A vector is a collection of numbers in a definite order. If it is a collection of n numbers it is called a n-
dimensional vector. So the vector A given by

𝑎1
𝐴= ⋮
𝑎𝑛

• Is a n-dimensional column vector with n components, 𝑎1 , 𝑎2 , … . 𝑎𝑛 . The above is a column vector.

• A row vector B is of the form [𝑏1 𝑏2 … 𝑏𝑛 ] where B is a n-dimensional row vector with n components
e.g.,) Vector 𝑥 = (𝑥1 , 𝑥2 ) is an ordered pair of real numbers; Consumption bundle of a consumer

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What is a vector?

• Two vectors are equivalent if …

• Same direction & magnitude

• A vector is often represented by an arrow or a

directed line segment. The length of the arrow
represents the magnitude of the vector and
the arrow points in the direction of the vector.

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A vector space
A vector space
: a set of vectors together with rules for vector addition and multiplication
Vector addition:
Closure: If u and v are any vectors in V, then the sum u + v
Commutative law: For all vectors u and v in V, u + v = v + u ;
Associative law: For all vectors u, v, w in V, u + (v + w) = (u + v) + w
Additive identity: The set V contains an additive identity element, denoted by 0, such that for any vector v in
V, 0 + v = v and v + 0 = v.
Additive inverses: For each vector v in V, the equations v + x = 0 and x + v = 0 have a solution x in V, called an additive
inverse of v, and denoted by - v.
Vector multiplication:
Closure: If v in any vector in V, and c is any real number, then the product c ·v belongs to V.
Distributive law: For all real numbers c and all vectors u, v in V, c ·(u + v) = c ·u + c ·v
Distributive law: For all real numbers c, d and all vectors v in V, (c+d) ·v = c ·v + d ·v
Associative law: For all real numbers c,d and all vectors v in V, c ·(d ·v) = (cd) ·v
Unitary law: For all vectors v in V, 1 ·v = v

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A subspace

A subspace of a vector (W) is a nonempty subset that satisfies two requirements

If u and v are any vectors (including 0) in W, then u + v is in W.

If v is any vector in W, and c is any real number, then c ·v is in W.

e.g.,) consider all vectors whose components are positive or zero. If the original space is the x-y plane 𝑅2 , then the subset is the first
quadrant (i.e., x>=0, y>=0)
It is not a subspace because -1 * [1,2] is not in the first quadrant

𝑥
e.g.,) Let Γ = 𝑦 𝑠. 𝑡. , 𝑥𝑦 ≥ 0, Find vector u and v such that u+v is not in Γ
−3 4
𝑢= ,v= , both belongs to Γ but, u+v is not.
−2 1

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A subspace

• Verify that the set of all solutions to the following linear system is a subspace of 𝑅3 .

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A subspace

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A subspace: column space
A subspace of a vector (W) is a nonempty subset that satisfies two requirements
If u and v are any vectors in W, then u + v is in W. If v is any vector in W, and c is any real number, then c ·v is in W. Every
subspace containing u and v must contain all linear combinations cu+dv

Column space: consists of all linear combinations of the columns. The combinations are all possible vectors Ax.
e.g.,) The system Ax=b is solvable if and only if b is in the column space of A.

1 0 𝑥1 1 0
𝐴𝑥 = 5 4 𝑥2 → 𝑥1 5 + 𝑥2 4
2 4 2 4
Column space C(A) is a plane containing
the two columns. Ax=b is solvable when b
is on that plane.

Satisfy two requirements:

Suppose 𝑏 𝑎𝑛𝑑 𝑏′ lie in the column space
so that Ax=b and Ax’=b’.
→ A(x+x’)=b+b’: b+b’ is a combination of
the columns
→ A(cx)=cb
→ Vector b is closed under addition and
multiplication 9
A subspace: All linear combinations of columns

• V1=Pink [1 5 2]𝑇
• V2=Yellow [0 4 4]𝑇
• Green = linear
combinations of V1 and
V2

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A subspace: null space
Null space: consists of all solutions to Ax=0. The null space is also a subspace.
1 0 𝑥1 0 1 0
𝐴𝑥 = 5 4 𝑥2 = 0 → 𝑥1 5 + 𝑥2 4 → 𝑥1 = 0 𝑎𝑛𝑑 𝑥2 = 0; 𝑇ℎ𝑒 𝑛𝑢𝑙𝑙 𝑠𝑝𝑎𝑐𝑒 𝑐𝑜𝑛𝑡𝑎𝑖𝑛𝑠 𝑜𝑛𝑙𝑦 𝑡ℎ𝑒 𝑣𝑒𝑐𝑡𝑜𝑟 (0,0)
2 4 0 2 4

1 0 1 𝑐 0
𝐵𝑥 = 5 4 9 𝑐 = 0 -> The null space of B is x=c, y=c, z=-c
2 4 6 −𝑐 0

Why do we need to separate the null and particular solutions?

Complete solution: 𝐴𝑥𝑝 = 𝑏 𝑎𝑛𝑑 𝐴𝑥𝑛 = 0 → 𝐴𝑥𝑝 + 𝐴𝑥𝑛 = 𝑏

The reason why we need to find the complete solution:

It satisfies the original non-homogeneous equation for all values of x.
If we only have the homogeneous solution, it satisfies the homogeneous equation but not the non-homogeneous
equation. Therefore, we need to find the particular solution to satisfy the non-homogeneous equation, and then
add it to the homogeneous solution to obtain the general solution, which satisfies the non-homogeneous
equation.

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A subspace: complete solutions

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Vector space: Geometrical illustration

• To locate a point in a plane, two numbers are necessary.

• Any point in the plane can be represented as an ordered pair (a, b) of real numbers, where a
is the x-coordinate and b is the y-coordinate.
• In a similar manner, a plane is called two-dimensional. To locate a point in space,
three numbers are required.
• We represent any point in space by an ordered triple (a, b, c) of real numbers.

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Vector space: Geometrical illustration

• In order to represent points in

space, we first choose a fixed
point O (the origin) and three
directed lines through O that are
perpendicular to each other,
called the coordinate axes and
labeled the x-axis, y-axis, and z-
axis.

In two-dimensional analytic geometry, the graph of an equation involving x and y is a curve in ℛ 2 .

In three-dimensional analytic geometry, an equation in x, y, and z represents a surface in ℛ 3 .

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Linear combination

• Given vectors 𝑢1 , 𝑢2 … . 𝑢𝑘 , the vector 𝑤 = 𝑐1 𝑢1 + 𝑐2 𝑢2 + ⋯ 𝑐𝑘 𝑢𝑘 is called a linear

combination of the vectors 𝑢1 , 𝑢2 … . 𝑢𝑘 .
• A set of vectors is called linearly independent if:
• no vector in the set can be expressed as a linear combination of the other vectors in the set.
• Suppose 𝑐1 𝑣1 + 𝑐2 𝑣2 + ⋯ 𝑐𝑘 𝑣𝑘 is zero only when 𝑐1 = 𝑐2 = ⋯ 𝑐𝑘 = 0. Then 𝑣1 , 𝑣2 … 𝑣𝑘 are
linearly independent.
• Linearly independent vectors can span the space. That is, any point in the space can be
described as a linear combination of those vectors.
• In the two-dimensional Cartesian plane, (𝑥, 𝑦) can be written 𝑥𝑖 + 𝑦𝑗 where i=(1,0) and
j=(0,1)

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Vector addition (subtraction)

Component-wise addition and subtraction

𝐴 = [𝑎1 , 𝑎2 , … . 𝑎𝑛 ] , B = [𝑏1 , 𝑏2 , … . 𝑏𝑛 ] → 𝐴 + 𝐵 =

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Length of a vector
• The length of a vector V is
• 𝑣 = 𝑣12 + 𝑣22 + ⋯ 𝑣𝑛2

Apply Pythagoras theorem

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Length of a vector

• Note:
• A vector V of length one is a unit vector
• Standard unit vectors are the special unit vectors that are parallel to the coordinate axes,
pointing toward positive values of the coordinate.
• e.g.,) i=(1,0,0), j=(0,1,0), k=(0,0,1) in 𝑅3
• The length of vector 𝑂𝑃 from origin (0,0) to P (x,y)
• 𝑂𝑃 = 𝑥 ∙ 𝑖 + 𝑦 ∙ 𝑗

• In a similar manner, the distance from P=(𝑥1 , 𝑦1 ) to Q=(𝑥2 , 𝑦2 ) is

• 𝑥2 − 𝑥1 2 + 𝑦2 − 𝑦1 2

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Exercises_0_3

• What surfaces in ℛ3 are represented by the following equations?

• (a) z = 3 (b) y = 5
• Find the null space of 𝑥 + 2𝑦 + 3𝑧 = 0
1 2
• Find the null space of 𝐴𝑥 = 0 where 𝐴 =
3 5
• A set of vectors is linearly dependent if any one of them can be expressed as linear combination
of the remaining vectors. Otherwise, the vector sect is linearly independent. Consider a
regression equation specified as 𝑦 = 𝛼 + 𝛽1 𝑥1 + 𝛽2 𝐷1 + 𝛽3 𝐷2 + 𝜖 where 𝐷1 =1 if SKKU, 0
otherwise; 𝐷2 =1 if non-SKKU, 0 otherwise
• You run regression of y on a vector of x =[𝑥1 , 𝐷1 , 𝐷2 ], what happens?
• In the three-dimensional Euclidean space, what is the distance between the following points?
(a) (3,2,8) and (0,-1,5) ; (b) (9,0,4) and (2,0,-4)

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Solutions_0_3

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Vector equations

• A line in the xy-plane is determined when a point on the line and the direction of the line
(its slope or angle of inclination) are given.
• The equation of the line can then be written using the
point-slope form.
• Likewise, a line L in three-dimensional space is determined when we know a point P0(x0,
y0, z0) on L and the direction of L. In three dimensions the direction of a line is
conveniently described by a vector, so we let v be a vector parallel to L.

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Vector equations

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Vector equations

• But, since a and v are parallel vectors, there is a scalar t

such that a = tv.
• 𝑟 = 𝑟0 + 𝑡𝑣

which is a vector equation of L.

Each value of the parameter t gives the position vector r

of a point on L. In other words, as t varies, the line is traced out by the tip
of the vector r.

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Vector equations

• If the vector v that gives the direction of the line L is written

in component form as v = a, b, c, then we have
tv = ta, tb, tc.

• We can also write r = x, y, z and r0 = x0, y0, z0, so the vector equation becomes
• x, y, z = x0 + ta, y0 + tb, z0 + tc
• Two vectors are equal if and only if corresponding components are equal.

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Vector equations

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Planes

• A line in space: is determined by a point and a direction

• But a plane in space:
• A single vector parallel to a plane is not enough to convey the “direction” of the plane, but a
vector perpendicular to the plane does completely specify its direction.
• Thus a plane in space is determined by a point P0(x0, y0, z0) in the plane and a vector n that is
orthogonal to the plane.
This orthogonal vector n is called a normal vector.

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Planes

• Let P(x, y, z) be an arbitrary point in the plane, and let r0 and r be the position vectors of
P0 and P. Then the vector r – r0 is represented by

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Planes

• Find an equation of the plane through the point (2, 4, –1) with normal vector n = 2, 3,
4. Find the intercepts and sketch the plane.
• Solution:
• Putting a = 2, b = 3, c = 4, x0 = 2, y0 = 4, and z0 = –1 in Equation 7, we see that an equation of
the plane is
2(x – 2) + 3(y – 4) + 4(z + 1) = 0 or 2x + 3y + 4z = 12
• To find the x-intercept we set y = z = 0 in this equation and obtain x = 6.

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Planes

• Similarly, the y-intercept is 4 and the z-intercept is 3. This enables us to sketch the portion of
the plane that lies in the first octant

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Exercise 1

• 1. Differentiate the below with respect to x

• 𝑦 = 𝑙𝑛(7𝑥 2 + 4)
• 𝑦 = 𝑥 2 + 2 3𝑥
•
• 2. A firm’s output is related to capital input K and labor input L by the production
function as below.
• 𝑌 = 2𝐾 2/3 𝐿1/3
• Find the percentage change increase in Y resulting from 1% increase in both K and L.
•
• 3. Find parametric equations and symmetric equations of the line that passes through
the points A(2,4,-3) and B(3,-1,1)

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Solutions_1

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Assignment 1
• 1. Find out how long it takes A dollars deposited in a saving account to double when the annual
interest rate is r compounded continuously in which r=8%.
• 2. Suppose that you own real estate whose market value will be V(t) dollars t years from now on.
• 2-1) If the interest rate (r) remains constant over this period, t, what is the corresponding
time stream of present value of the real estate you own?
• 2-2) What is the optimal time 𝑡0 to sell your real estate given the time stream of present
value?
• 2-3) Discuss the economic implications you learned from your answer to 2-2).
• 3. Differentiate the below with respect to x

• 4. Find a vector equation and parametric equations for the line that passes through the point
(5, 1, 3) and is parallel to the vector i + 4j – 2k

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