HW 3; Due on April 4

I strongly encourage you to organize a group recitation session and discuss and solve this HW
problem together.

Instruction:

- Please work in groups. It is strongly recommended that you collaborate with your
group members while completing the homework; however, each student must submit
their own work.
- The homework is due April 4 for Google Classroom submission and April 5 during
the class meeting for the paper copy. For the Google Classroom submission, please
upload only the cover page, which must include your student ID, group information,
and a brief description of your role in the group.
- Please start working early and submit your work within the deadlines. No excuses will
be accepted for late submissions or failure to submit the assignment.
- These homework problem sets are very important for your final test, so make sure you
understand each problem carefully. Your solutions should be aligned with the lecture
notes discussed in class and the examples covered during lectures.
- If you have any questions or concerns, please feel free to contact me.

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Question 1:

A household adjusts monthly consumption of three goods (food, transport, electricity).

The change vector is:

𝑣 = (4, − 2, 2)
(a) Compute the norm of 𝑣. Explain in words what this norm measures in daily economic life.

(b) Find the unit vector in the direction of 𝑣. Explain what information is preserved and what
information is removed by normalization.

(c) Suppose two households have adjustment vectors 𝑣 and 2𝑣. Compare their directions,
norms, and economic interpretations.
Question 2:

Two vectors represent economic forces:

• 𝑢 = (1, 2): marginal utility direction

• 𝑣 = (2, − 1): price-change direction

(a) Compute 𝑢 ⋅ 𝑣. State whether the interaction between the two forces is reinforcing,
conflicting, or independent.

(b) Compute the angle between 𝑢and 𝑣. Explain the economic meaning of this angle.

(c) Explain why 𝑢 ⋅ 𝑣 = 0 corresponds to independent effects in economics.

Question 3:

Let 𝑥 ∈ ℝ𝑛 represent income deviations from the mean.

(a) State the Chebyshev inequality in terms of the norm ∥ 𝑥 ∥and a threshold 𝑎 > 0. Derive
the Chebyshev inequality in RMS form:

𝑘 rms(𝑥) 2
≤( )
𝑛 𝑎
Explain the economic meaning of each term in the inequality.

(b) Explain, using words only, why many large deviations are impossible when ∥ 𝑥 ∥is small.

(c) If 𝑎 >∥ 𝑥 ∥, explain why no individual deviation can exceed 𝑎.

(d) Please reproduce the numerical example of the Chebyshev Inequality from your class
lecture and interpret the results.

Question 4:
1 1 0
1 1
Let 𝑎1 = [1] , 𝑎2 = [−1] , 𝑎3 = [0] .
√2 √2
0 0 1
(a) Verify explicitly that 𝑎1 , 𝑎2 , 𝑎3 are orthonormal. (Show all dot products and norms.)

(b) Using inner products, prove that 𝑎1 , 𝑎2 , 𝑎3 are linearly independent.

Question 5:
Let
1 1
𝑣1 = [ ] , 𝑣2 = [ ] .
0 2
(a) Define Gram–Schmidt algorithm in simpler and non-technical language. Apply the Gram–
Schmidt algorithm step by step to construct an orthonormal basis.

(b) Verify orthonormality of the resulting vectors.

(c) Explain why Gram–Schmidt preserves the span of the original vectors.

Question 6:

Let 𝑥 = (2,1, −1), 𝑦 = (1, −1,0).

(a) Compute the dot product 𝑥 ⋅ 𝑦.

(b) Determine whether 𝑥and 𝑦are orthogonal. Explain your reasoning.

(c) Interpret your result in terms of whether movements in 𝑥and 𝑦reinforce each other.

Question 7:

Let 𝑥 = (𝑥1 , … , 𝑥𝑛 )be a vector and define the de-meaned vector

𝑥̃: = 𝑥 − avg⁡(𝑥)1.
(a) Write down the definition of avg⁡(𝑥).

(b) Show that 𝑥̃ ⋅ 1 = 0.

(c) Explain in words what it means for 𝑥̃ to be orthogonal to the vector of one.

Question 8:

(a) Let 𝑣1 = (1,2)and 𝑣2 = (3,1). Show that {𝑣1 , 𝑣2 }is a basis of ℝ2 .

(b) Find the coordinates of the vector (5, 7)relative to the basis {𝑣1 , 𝑣2 }.

(c) Explain why adding a third vector 𝑣3 = (4,3)to this set cannot produce a basis of ℝ2 .
Relate your answer to the concept of dimension and minimality.

Question 9:

(a) Determine whether the set

{(1,0,0), (0,1,0), (0,0,1), (1,1,1)}
3
spans ℝ .

(b) Is this set a basis of ℝ3 ? Justify your answer carefully.

(c) Remove exactly one vector from the set to obtain a basis. Explain why your choice works
and why the remaining set is minimal.

Question 10 (must solve this problem in group):

Consider a two–good economy producing Corn (C) and Steel (S). Production bundles are
represented as vectors in ℝ2 :

𝑣 = (𝐶, 𝑆)
Suppose the economy adopts a new technological measurement system using the following
production “activity” basis:

𝑢1 = (2,1), 𝑢2 = (1,3)
These represent two composite production processes.

(i) Prove that {𝑢1 , 𝑢2 }is a basis of ℝ2 .

(ii) Express the production vector 𝑣 = (11,13)as a linear combination of 𝑢1 and 𝑢2 .

(iii) Interpret the coordinates you obtain as the activity levels of the two production
processes.

Assume the firm can only operate these two processes 𝑢1 and 𝑢2 .

(iv) Explain why the dimension of the production space equals 2.

(v) Interpret economically what “linear independence” of 𝑢1 and 𝑢2 means in terms of

technological freedom.
Let market prices be: 𝑝𝐶 = 5(per unit of corn), 𝑝𝑆 = 10(per unit of steel)
(vi) Compute the total value of production for 𝑣 = (11,13)in the standard (physical) basis.

(vii) Suppose prices change to 𝑝𝐶 = 8, 𝑝𝑆 = 6. Explain how this corresponds to a change in

the “value basis.”

Question 11:

Let 𝐿: ℝ2 → ℝ2 be defined by

𝐿(𝑥, 𝑦) = (2𝑥 − 𝑦, 𝑥 + 3𝑦).

(a) Verify that 𝐿satisfies scalar compatibility and additivity. Conclude that 𝐿is linear.

(b) Find all vectors 𝑣 ∈ ℝ2 such that 𝐿(𝑣) = (0,0). Describe this set geometrically.

(c) Explain whether 𝐿 preserves dimension. Does it collapse ℝ2 into a lower-dimensional

space? Justify your answer.

Question 12:

Let 𝐿(𝑥, 𝑦) = (𝑎𝑥 + 𝑏𝑦, 𝑐𝑥 + 𝑑𝑦),

where 𝑎, 𝑏, 𝑐, 𝑑 ∈ ℝ.

(a) Prove that 𝐿is linear for all constants 𝑎, 𝑏, 𝑐, 𝑑.

(b) Suppose

𝐿(1,0) = (1,2), 𝐿(0,1) = (3,4).

Find 𝐿(𝑥, 𝑦).

(c) Interpret this transformation as:

• a linear production aggregation, or

• a system of linear demand responses. Explain the meaning of the coefficients

economically.

Question 13:

Let 𝑣 = (4, −2,4) ∈ ℝ3

(a) Compute the norm ∥ 𝑣 ∥.

(b) Find the unit vector in the direction of 𝑣.

(c) Verify mathematically that the normalized vector has norm equal to 1.

Question 14:

Let 𝑎 = (1,2, −1), 𝑏 = (2, −1,0)

(a) Compute the dot product 𝑎 ⋅ 𝑏.

(b) Determine whether the vectors are orthogonal.

(c) Explain economically what orthogonality would imply if these vectors represented two
economic shocks affecting an economy.

Question 15:

Let 𝑥 = (4,2), 𝑦 = (1,1)

(a) Compute 𝑥 ⋅ 𝑦and 𝑦 ⋅ 𝑦.

(b) Using the projection formula

𝑥⋅𝑦
𝛼=
𝑦⋅𝑦
find the component of 𝑥in the direction of 𝑦.

(c) Compute the orthogonal component 𝑧 = 𝑥 − 𝛼𝑦 and verify that 𝑧 ⊥ 𝑦.

Question 16:

Let 𝑥 = (2,5,7,10,6)
(a) Compute the mean of the entries of 𝑥.

(b) Compute the standard deviation of the entries.

(c) Using Chebyshev’s inequality, determine the maximum proportion of entries that can lie
more than 2 units away from the mean.

Question 17:

Let 𝑥 = (1,4, −3,2,5, −6)

(a) Compute the Euclidean norm ∥ 𝑥 ∥.

(b) Using the vector Chebyshev inequality

∥ 𝑥 ∥2
𝑘≤
𝑎2
find the maximum number of components that can satisfy

∣ 𝑥𝑖 ∣≥ 4
(c) Interpret the result in terms of bounding extreme shocks in an economic dataset.

Question 18:
1 , 1 1 1
Let 𝑎1 = ( ) , 𝑎2 = ( ,− )
√2 √2 √2 √2
(a) Define Orthogonality and Orthonormality in vectors with examples. Why Orthogonality
Matters in economics? Compute ∥ 𝑎1 ∥and ∥ 𝑎2 ∥.

(b) Compute 𝑎1𝑇 𝑎2 .

(c) Determine whether the set {𝑎1 , 𝑎2 }⁡is orthonormal and explain why.