Linear Algebra for Business
2025/2026
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Texbooks
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Plan
1 Vectors
2 Matrices and determinant
3 Linear equations and inequalities
4 Eigenvalue problems and diagonalization of matrices
5 Quadratic Forms
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Chapter 1: Vectors
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Preliminaries
Defintion (Vector)
A vector a is an ordered n-tuple of elements (numbers, functions, ¨ ¨ ¨ )
a1 , a2 , ¨ ¨ ¨ , an . a1 , a2 , ¨ ¨ ¨ , an are called the components (or coordinates)
of vector a. We write
¨ ˛
a1
˚a2 ‹
a “ ˚ . ‹ “ pa1 , a2 , . . . , an qT
˚ ‹
˝ .. ‚
an
for a column vector. For the so-called transposed vector aT which is a
row vector obtained by taking the column as a row, we write:
¨ ˛T
a1
˚a2 ‹
aT “ pa1 , a2 , . . . , an q “ ˚ . ‹ .
˚ ‹
˝ .. ‚
an
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Preliminaries
We use letters in bold face to denote vectors
We have defined a vector a always as a column vector, and if we
write this vector as a row vector, this is indicated by an upper-case
T which stands for ’transpose’.
If vector a has n components, we say that vector a has dimension
n or that a is an n-dimensional vector or n-vector.
In economics, an ordered n-tuple often describes a bundle of
commodities such that the i-th value represents the quantity of the
i-th commodity.
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Preliminaries
Defintion (Rn )
The n-dimensional (Euclidean) space Rn is defined as the set of all real
n-tuples: $¨ ˛ ˇ ,
’
’ a1 ˇˇ /
/
&˚a2 ‹ ˇ
’ /
.
n
R “ ˚ . ‹ ˇ ai P R, i “ 1, 2, . . . , n .
˚ ‹ ˇ
’
’ ˝ .. ‚ ˇ /
/
’ ˇ /
an
% ˇ -
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Preliminaries
Defintion (Some relations on vectors of the same dimension)
Let a, b P Rn with a “ pa1 , a2 , ¨ ¨ ¨ , an qT and b “ pb1 , b2 , ¨ ¨ ¨ , bn qT .
The vectors a and b are said to be equal if all their corresponding
components are equal, i.e. ai “ bi for all i “ 1, 2, ¨ ¨ ¨ , n.
We write a ď b if ai ď bi and a ě b if ai ě bi for all i “ 1, 2, ¨ ¨ ¨ , n.
Analogously, we write a ă b if ai ă bi and a ą b if ai ą bi for all
i “ 1, 2, ¨ ¨ ¨ , n.
Remark
Note that not every pair of n-dimensional vectors may be compared by
the relations
¨ ˛ ď and ě, respectively.
¨ ˛ For instance, for the vectors
3 2
a “ ˝´1‚ and b “ ˝0‚, we have neither a ď b nor a ě b.
2 2
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Preliminaries
Example
Consider the vectors
¨ ˛ ¨ ˛ ¨ ˛
2 1 0
a “ ˝4‚, b “ ˝´2‚ and c “ ˝3‚.
3 3 2
Then we have a ě b, a ą c, but vectors b and c cannot be compared,
i.e. we have neither b ď c nor c ď b.
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Preliminaries
Defintion (Special vectors)
We denote by ei the i-th unit vector, where the i-th component is
equal to one and all other components are equal to zero, i.e.
¨ ˛
0
˚ .. ‹
˚.‹
˚ ‹
˚0‹
i
˚ ‹
e “˚ ˚1‹
‹ Ð i-th component.
˚0‹
˚ ‹
˚ .. ‹
˝.‚
0
The n-dimensional zero vector
¨ ˛is a vector containing only zeroes
0
˚ .. ‹
as the n components: 0 “ ˝ . ‚.
0
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Operations on vectors
Defintion (addition of two vectors)
Let a, b P Rn with a “ pa1 , a2 , . . . , an qT and b “ pb1 , b2 , . . . , bn qT . The
sum of the two vectors a and b is the n-dimensional vector a ` b
obtained by adding each component of a to the corresponding
component of b:
¨ ˛ ¨ ˛ ¨ ˛
a1 b1 a1 ` b1
˚a2 ‹ ˚b2 ‹ ˚a2 ` b2 ‹
a ` b “ ˚ . ‹ ` ˚ . ‹ “ ˚ . ‹.
˚ ‹ ˚ ‹ ˚ ‹
.
˝.‚ ˝.‚ ˝ . ‚ . .
an bn an ` bn
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Operations on vectors
Defintion (multiplication of a vector by a scalar)
Let a P Rn with a “ pa1 , a2 , . . . , an qT and λ P R. The product of number
(or scalar) λ and vector a is the n-dimensional vector λa whose
components are λ times the corresponding components of a:
¨ ˛ ¨ ˛
a1 λa1
˚a2 ‹ ˚λa2 ‹
λa “ λ ¨ ˚ . ‹ “ ˚ . ‹ .
˚ ‹ ˚ ‹
˝ .. ‚ ˝ .. ‚
an λan
The operation of multiplying a vector by a scalar is known as scalar
multiplication.
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Operations on vectors
Defintion (Difference of two vectors)
Let a, b P Rn be n- dimensional vectors. Then the difference between
the vectors a and b is defined by a ´ b “ a ` p´1qb.
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Operations on vectors
Example
ˆ ˙ ˆ ˙
4 1
Let a “ and b “ . Compute a ` b, a ´ b, ´2a and 2a ´ 3b.
1 3
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Operations on vectors
Properties
Let a, b, c P Rn and λ, µ P R.
a ` b “ b ` a, (commutative law)
pa ` bq ` c “ a ` pb ` cq, (associative law)
λpa ` bq “ λa ` λb, (distributive law)
a ` 0 “ a, p0 P Rn q
1a “ a,
λa “ aλ, (commutativity of scalar multiplication)
pλµqa “ λpµaq, (associativity of scalar multiplication)
pλ ` µqa “ λa ` µa, (distributive law for scalar multiplication)
a ` p´aq “ 0.
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Operations on vectors
Defintion (Scalar product of two vectors)
The scalar product of two n-dimensional vectors a “ pa1 , a2 , ¨ ¨ ¨ , an qT
and b “ pb1 , b2 , ¨ ¨ ¨ , bn qT is defined as follows:
¨ ˛
b1
˚b2 ‹ n
ÿ
aT ¨ b “ pa1 , a2 , . . . , an q ¨ ˚ . ‹ “ a1 b1 ` a2 b2 ` . . . ` an bn “ ai bi .
˚ ‹
˝ .. ‚ i“1
bn
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Operations on vectors
Remark
The scalar product is also known as the inner product.
The scalar product of two vectors is not a vector, but a number
(i.e. a scalar).
aT ¨ b is defined only if a and b are both of the same dimension.
aT ¨ b “ bT ¨ a and aT ¨ pb ` cq “ aT ¨ b ` aT ¨ c for a, b, c P Rn .
In general, a ¨ pbT ¨ cq ‰ paT ¨ bq ¨ c.
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Operations on vectors
Example
Assume that a firm produces three products with the quantities
x1 “ 30, x2 “ 40 and x3 “ 10, where xi denotes the quantity of product
i. Moreover, the cost of production is 20 EUR per unit of product 1, 15
EUR per unit of product 2 and 40 EUR per unit of product 3. Let
c “ pc1 , c2 , c3 qT be the cost vector, where the i-th component describes
the cost per unit of product i and x “ px1 , x2 , x3 qT . The total cost of
production is obtained as the scalar product of vectors c and x:
¨ ˛
30
T
c ¨x “ p20, 15, 40q¨ 40‚ “ 20¨30`15¨40`40¨10 “ 600`600`400 “ 1,600.
˝
10
We have found that the total cost of production for the 3 products is
1,600 EUR.
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Operations on vectors
Example
Assume that a firm produces three products with the quantities
x1 “ 30, x2 “ 40 and x3 “ 10, where xi denotes the quantity of product
i. Moreover, the cost of production is 20 EUR per unit of product 1, 15
EUR per unit of product 2 and 40 EUR per unit of product 3. Let
c “ pc1 , c2 , c3 qT be the cost vector, where the i-th component describes
the cost per unit of product i and x “ px1 , x2 , x3 qT . The total cost of
production is obtained as the scalar product of vectors c and x:
¨ ˛
30
T
c ¨x “ p20, 15, 40q¨ 40‚ “ 20¨30`15¨40`40¨10 “ 600`600`400 “ 1,600.
˝
10
We have found that the total cost of production for the 3 products is
1,600 EUR.
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Operations on vectors
Example
Assume that a firm produces three products with the quantities
x1 “ 30, x2 “ 40 and x3 “ 10, where xi denotes the quantity of product
i. Moreover, the cost of production is 20 EUR per unit of product 1, 15
EUR per unit of product 2 and 40 EUR per unit of product 3. Let
c “ pc1 , c2 , c3 qT be the cost vector, where the i-th component describes
the cost per unit of product i and x “ px1 , x2 , x3 qT . The total cost of
production is obtained as the scalar product of vectors c and x:
¨ ˛
30
T
c ¨x “ p20, 15, 40q¨ 40‚ “ 20¨30`15¨40`40¨10 “ 600`600`400 “ 1,600.
˝
10
We have found that the total cost of production for the 3 products is
1,600 EUR.
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Operations on vectors
Example
Assume that a firm produces three products with the quantities
x1 “ 30, x2 “ 40 and x3 “ 10, where xi denotes the quantity of product
i. Moreover, the cost of production is 20 EUR per unit of product 1, 15
EUR per unit of product 2 and 40 EUR per unit of product 3. Let
c “ pc1 , c2 , c3 qT be the cost vector, where the i-th component describes
the cost per unit of product i and x “ px1 , x2 , x3 qT . The total cost of
production is obtained as the scalar product of vectors c and x:
¨ ˛
30
T
c ¨x “ p20, 15, 40q¨ 40‚ “ 20¨30`15¨40`40¨10 “ 600`600`400 “ 1,600.
˝
10
We have found that the total cost of production for the 3 products is
1,600 EUR.
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Linear dependence and independence
Defintion (Linear combination and convex combination)
Let ai , i “ 1, 2, . . . , m, be n-dimensional vectors, and λi , i “ 1, 2, . . . , m,
be real numbers. Then the n-vector a given by
m
ÿ
a “ λ1 a1 ` λ2 a2 ` ¨ ¨ ¨ ` λm am “ λi ai
i“1
is called a linear combination of the vectors a1 , a2 , . . . , am .
Furthermore, if
m
ÿ
λi ě 0, @i “ 1, 2, . . . , m, and λi “ 1
i“1
, then a is called a convex combination of the vectors a1 , a2 , . . . , am .
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Linear dependence and independence
Defintion (Linear combination and convex combination)
Let ai , i “ 1, 2, . . . , m, be n-dimensional vectors, and λi , i “ 1, 2, . . . , m,
be real numbers. Then the n-vector a given by
m
ÿ
a “ λ1 a1 ` λ2 a2 ` ¨ ¨ ¨ ` λm am “ λi ai
i“1
is called a linear combination of the vectors a1 , a2 , . . . , am .
Furthermore, if
m
ÿ
λi ě 0, @i “ 1, 2, . . . , m, and λi “ 1
i“1
, then a is called a convex combination of the vectors a1 , a2 , . . . , am .
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Linear dependence and independence
Defintion (Linear dependency and independency)
The m n-dimensional vectors a1 , a2 , . . . , am P Rn are linearly dependent
if there exist numbers λi , i “ 1, 2, . . . , m, not all equal to zero, such that
m
ÿ
λi ai “ λ1 a1 ` λ2 a2 ` ¨ ¨ ¨ ` λm am “ 0.
i“1
If this identity only holds when λ1 “ λ2 “ ¨ ¨ ¨ “ λm “ 0, then the vectors
a1 , a2 , . . . , am are said to be linearly independent.
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Linear dependence and independence
Defintion (Linear dependency and independency)
The m n-dimensional vectors a1 , a2 , . . . , am P Rn are linearly dependent
if there exist numbers λi , i “ 1, 2, . . . , m, not all equal to zero, such that
m
ÿ
λi ai “ λ1 a1 ` λ2 a2 ` ¨ ¨ ¨ ` λm am “ 0.
i“1
If this identity only holds when λ1 “ λ2 “ ¨ ¨ ¨ “ λm “ 0, then the vectors
a1 , a2 , . . . , am are said to be linearly independent.
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Linear dependence and independence
Remark
Since two vectors are equal if they coincide in all components, the
above identity represents n linear equations with the variables
λ1 , λ2 , . . . , λm .
The m n-dimensional vectors a1 , a2 , . . . , am P Rn are linearly
dependent if and only if at least one of the vectors can be written
as a linear combination of the others.
The m n-dimensional vectors a1 , a2 , . . . , am P Rn are linearly
independent if and only if none of the vectors can be written as a
linear combination of the others.
Two two-dimensional vectors are linearly dependent if and only if
one vector can be written as a multiple of the other vector.
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Linear dependence and independence
Example
ˆ ˙ ˆ ˙
3 ´9
Let a1 “ and a2 “ . In this case, we have a2 “ ´3a1 , which
1 3
can be written as
3a1 ` 1 ¨ a2 “ 0.
1 2
We can conclude
ˆ ˙ that vectors
ˆ ˙ a and a are linearly dependent.
3 ´1
Let a1 “ and a3 “ . In this case, the equation
1 2 #
3λ1 ´ λ2 “ 0,
λ1 a1 ` λ2 a3 “ 0 reduces to the system This is a
λ1 ` 2λ2 “ 0.
system of two linear equations with two variables λ1 and λ2 which can
easily be solved. Multiplying the first equation by 2 and adding it to the
second equation, we obtain λ1 0 and then λ2 “ 0 as the only solution of
this system. Therefore, both vectors a1 and a3 are linearly independent.
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Linear dependence and independence
Example
ˆ ˙ ˆ ˙
3 ´9
Let a1 “ and a2 “ . In this case, we have a2 “ ´3a1 , which
1 3
can be written as
3a1 ` 1 ¨ a2 “ 0.
1 2
We can conclude
ˆ ˙ that vectors
ˆ ˙ a and a are linearly dependent.
3 ´1
Let a1 “ and a3 “ . In this case, the equation
1 2 #
3λ1 ´ λ2 “ 0,
λ1 a1 ` λ2 a3 “ 0 reduces to the system This is a
λ1 ` 2λ2 “ 0.
system of two linear equations with two variables λ1 and λ2 which can
easily be solved. Multiplying the first equation by 2 and adding it to the
second equation, we obtain λ1 0 and then λ2 “ 0 as the only solution of
this system. Therefore, both vectors a1 and a3 are linearly independent.
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Linear dependence and independence
Remark
The above examples illustrate that in the case of two vectors of
the two-dimensional Euclidean space R2 , we can easily decide
whether they are linearly dependent or independent. Two
two-dimensional vectors are linearly dependent if and only if one
vector can be written as a multiple of the other vector, i.e.
λ1 1
a2 “ ´ a , λ2 ‰ 0.
λ2
On the other hand, in the two-dimensional space every three
vectors are linearly dependent: any vector c P R2 can be written
as a linear combination of the linearly independent vectors a1 and
a3 , i.e. c “ λ1 a1 ` λ2 a3 from which we obtain
1 ¨ c ´ λ1 a1 ´ λ2 a3 “ 0.
These vectors are linearly dependent since e.g. the scalar of
vector c is different from zero.
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Linear dependence and independence
Remark
In general, we can say that in the n-dimensional Euclidean space
Rn , there are no more than n linearly independent vectors.
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Linear dependence and independence
Example
Let us consider the three vectors
¨ ˛ ¨ ˛ ¨ ˛
2 1 3
a1 “ ˝0‚, a2 “ ˝1‚ and a3 “ ˝2‚,
0 0 1
and investigate whether they are linearly dependent or independent.
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Linear dependence and independence
Example
Let λ1 , λ2 , λ3 P R such that
¨ ˛ ¨ ˛ ¨ ˛ ¨ ˛ ¨ ˛
2 1 3 2λ1 ` λ2 ` 3λ3 0
λ1 ˝0‚` λ2 ˝1‚` λ3 ˝2‚ “ ˝ λ2 ` 2λ3 ‚ “ ˝0‚.
0 0 1 λ3 0
Considering the third component, we obtain λ3 “ 0. Substituting
λ3 “ 0 into the second component, we get from λ2 ` 2λ3 “ 0 the
solution λ2 “ 0. Finally, considering the first component, we obtain
from 2λ1 ` λ2 ` 3λ3 “ 0 the solution λ1 “ 0. Since
λJ “ pλ1 , λ2 , λ3 q “ p0, 0, 0q is the only solution, the three vectors are
linearly independent.
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Linear dependence and independence
Remark
The set te1 , e2 , . . . , en u of n-dimensional unit vectors in Rn is linearly
independent, and any vector a P Rn with
aJ “ pa1 , a2 , . . . , an q
can be written as a linear combination of these unit vectors:
¨ ˛ ¨ ˛ ¨ ˛
1 0 0
˚0‹ ˚1‹ ˚0‹ ÿ n
a “ a1 ˚ . ‹ ` a2 ˚ . ‹ ` ¨ ¨ ¨ ` an ˚ . ‹ “ ai ei .
˚ ‹ ˚ ‹ ˚ ‹
˝ .. ‚ ˝ .. ‚ ˝ .. ‚ i“1
0 0 1
In this case, the coefficients in the linear combination are precisely the
components of a.
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Vector spaces
Defintion (Vector space)
Given a set V “ ta, b, c, . . . u of vectors equipped with addition and
scalar multiplication, suppose that for all a, b, c P V and λ, µ P R the
following properties hold:
p1q a ` b “ b ` a p5q pλµq ¨ a “ λpµ ¨ aq
p2q pa ` bq ` c “ a ` pb ` cq p6q 1 ¨ a “ a
p3q D0 P V; a ` 0 “ a @a P V p7q λ ¨ pa ` bq “ λ ¨ a ` λ ¨ b
p4q @a P V, Db P V; a ` b “ 0 p8q pλ ` µq ¨ a “ λ ¨ a ` µ ¨ a
If additionally V is closed under these operations, i.e.,
a`bPV and λ ¨ a P V for all a, b P V and λ P R,
then V is called a vector space.
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Vector spaces
Example
The n-dimensional space Rn .
The set Cpra, bsq of all continuous functions on the closed interval
ra, bs.
The set of all polynomials
Pn pXq “ an X n ` an´1 X n´1 ` ¨ ¨ ¨ ` a1 X ` a0 of a degree of at most n.
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Vector spaces
Defintion (Basis)
A set B “ tb1 , b2 , . . . , bn u of linearly independent vectors in a vector
space V is called a basis of V if every vector a P V can be expressed
as a linear combination
a “ λ1 b1 ` λ2 b2 ` ¨ ¨ ¨ ` λn bn
of the basis vectors b1 , b2 , . . . , bn .
The number n “ |B| of vectors in the basis is the dimension dim(V) of
the vector space V.
Defintion (Canonical basis of Rn )
the set Bc “ te1 , e2 , ¨ ¨ ¨ , en u of unit vectors constitutes a basis of the
n-dimensional Euclidean space Rn .
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Vector spaces
Remark
An equivalent definition of a basis is that a maximal set of linearly
independent vectors of a vector space V constitutes a basis and
therefore, the dimension of a vector space is given by the maximal
number of linearly independent vectors.
We say that V is spanned by the vectors b1 , b2 , . . . , bn of B since
any vector of the vector space V can be ’generated’ by means of
the basis vectors.
The dimension of a vector space is not necessarily equal to the
number of components of its vectors. If a set of n-dimensional
vectors is given, they can contain at most n linearly independent
vectors. However, any n linearly independent vectors of an
n-dimensional vector space constitute a basis.
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Vector spaces
Remark
An equivalent definition of a basis is that a maximal set of linearly
independent vectors of a vector space V constitutes a basis and
therefore, the dimension of a vector space is given by the maximal
number of linearly independent vectors.
We say that V is spanned by the vectors b1 , b2 , . . . , bn of B since
any vector of the vector space V can be ’generated’ by means of
the basis vectors.
The dimension of a vector space is not necessarily equal to the
number of components of its vectors. If a set of n-dimensional
vectors is given, they can contain at most n linearly independent
vectors. However, any n linearly independent vectors of an
n-dimensional vector space constitute a basis.
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Vector spaces
Remark
An equivalent definition of a basis is that a maximal set of linearly
independent vectors of a vector space V constitutes a basis and
therefore, the dimension of a vector space is given by the maximal
number of linearly independent vectors.
We say that V is spanned by the vectors b1 , b2 , . . . , bn of B since
any vector of the vector space V can be ’generated’ by means of
the basis vectors.
The dimension of a vector space is not necessarily equal to the
number of components of its vectors. If a set of n-dimensional
vectors is given, they can contain at most n linearly independent
vectors. However, any n linearly independent vectors of an
n-dimensional vector space constitute a basis.
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Vector spaces
Theorem
Let B “ tb1 , b2 , . . . , bn u be a basis of an n-dimensional vector space V.
Then any vector c P V can be uniquely written as a linear combination
of the basis vectors from set B.
Remark (will be developed in next chapters)
While the dimension of a vector space is uniquely determined, the
basis is not uniquely determined. This leads to the question of whether
we can replace a particular vector in the basis by some other vector
not contained in the basis such that again a basis is obtained.
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