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Convexity is a geometric property with a variety of applications in economics. [1] Informally, an economic phenomenon is convex when "intermediates (or combinations) are better than extremes". For example, an economic agent with convex preferences prefers combinations of goods over having a lot of any one sort of good; this represents a kind of ...
A function f is concave over a convex set if and only if the function −f is a convex function over the set. The sum of two concave functions is itself concave and so is the pointwise minimum of two concave functions, i.e. the set of concave functions on a given domain form a semifield.
In convex analysis, a non-negative function f : R n → R + is logarithmically concave (or log-concave for short) if its domain is a convex set, and if it satisfies the inequality (+ ()) () for all x,y ∈ dom f and 0 < θ < 1.
The term convex is often referred to as convex down or concave upward, and the term concave is often referred as concave down or convex upward. [ 3 ] [ 4 ] [ 5 ] If the term "convex" is used without an "up" or "down" keyword, then it refers strictly to a cup shaped graph ∪ {\displaystyle \cup } .
Right graph: With fixed probabilities of two alternative states 1 and 2, risk averse indifference curves over pairs of state-contingent outcomes are convex. In economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter ...
A set of convex-shaped indifference curves displays convex preferences: Given a convex indifference curve containing the set of all bundles (of two or more goods) that are all viewed as equally desired, the set of all goods bundles that are viewed as being at least as desired as those on the indifference curve is a convex set.
A conical combination is a linear combination with nonnegative coefficients. When a point is to be used as the reference origin for defining displacement vectors, then is a convex combination of points ,, …, if and only if the zero displacement is a non-trivial conical combination of their respective displacement vectors relative to .
Convex analysis includes not only the study of convex subsets of Euclidean spaces but also the study of convex functions on abstract spaces. Convex analysis is the branch of mathematics devoted to the study of properties of convex functions and convex sets, often with applications in convex minimization, a subdomain of optimization theory.