f (x) > 0 = increasing functions at x = a 0 = 6x2-60x+126

f (x) < 0 = decreasing functions at x = a 6 y = -(x-8)4

0 = x2-10x+21
Concavity and convexity 0 =(x-3)(x-7) → critical points: 3 and 7 y I = -4(x-8) 3 = 0 Highest order III
f I (a) > 0 irrelevant x = 3; x = 7 x=8 derivative
f I (a) < 0 2. f II (x) = 12x-60 y II = -12(x-8)2 = y III = -24(x-8)
f II (a) > 0 : convex x=3 x =7 -12(0) 0 = -24(8-8)
f II (a) < 0 : concave x = 12(3)-60 x = 12(7)-60 y II = 0 =0
x = -24 x = -24 y IIII = -24
If the highest order of derivative is even: we have
f II (24) > 0 : minimum non-zero and interpret the value in itself.
f II (-24) < 0 : maximum
MC → additional cost from producing
Relative Extremum Maximize the π for a firm given the total revenue is MR → additional Profit
 One point where the function is at relative R = 4000Q-33Q2 and the total cost is C = 2Q3-3
maximum or minimum. Q2+400Q+5 ΔC ΔTR
MC = MR = ΔQ TR(Q) = TR I
 To be at the relative maximum/minimum at a point Π – Total Cost = Profit ΔQ
a, the function must be at a relative plateau. TR-TC = (4000Q-33Q2)-(2Q3-3 Q2+400Q+5) d(TC) with respect to quantity – first derivative of
f II (a) > 0 : convex; the graph is above the tangent = -2Q3-33Q2+3600Q-5000 TC
line; relative minimum. f I(a) = -6Q2-60Q+3600
ΔTC ΔTR
f II (a) > 0 : concave; the graph is below the tangent 0 = -6Q2-60Q+3600 I I

-6 ΔQ = TC ΔQ = TR
line; relative maximum
f II (a) = 0 : inconclusive 0 = Q2+10Q-600 TR = 75Q-4Q2 MR = 75-8Q
0 = (Q+30)(Q-20) → critical points: -30 and 20 TC 3 2
MR==Q75-8(3)
+7Q+23 MC
MR =
= 3Q +7
75-8(5)
f II (a) = 12Q-60
= 75-24 = 75-40
f II (-30) f II (20)
=51 =35
f (-30) = -12(-30)- f II (20) = -12(20)-60
II
MC = 3(9)+7 MC = 3(25)+7
60 x = -300
=27+7 =75+7
x = 300
=34 =82
Optimization Q=3 Q=5
f II (24) > 0 : minimum
 The process of finding the relative f II (-24) < 0 : maximum 75Q
maximum/minimum. (d)P = 30-2Q find MR
Q = 20 units will maximize the profit
1. Take the 1st derivative, set it equal to zero and = -2Q3-33Q2+3600Q-5000 TR=P(Q) = 30Q-2Q(Q)
find the critical points. TR= 30Q-2Q2
= -2(20)3-33(20)2+3600(20)-5000
2. Take the second derivative, evaluate it at the = -2(8000)-33(400)+72000-5000 MR = 30-4q
critical point, then check the ff: = -28000+67000 MR = 30-4(2) MR = 30-4(5)
f II (a) > 0 : maximum = 39000 MR = 30-12 MR = 30-20
f II (a) < 0 : minimum If the highest order of derivative is odd: the MR =18 MR = 10
f II (a) = 0 : inconclusive function is automatically at inflection point.
1. f (x) = 2x3-30x2+126+59 The convexity and concavity of the function 1. Optimize the function: f(x) = x2-18x2+96x-80
f II(x) = 6x2-60x+126 changes. It could also be equal to zero. f(x) = x2-18x2+96x-80
fI(x) = x2-36x+96 = 0 fxx ⋅ fyy > (fxy)2 fxx ⋅ fyy < (fxy)2 1. Will not immediately proceed to the first step.
3(x-8)(x-4) = 0 → critical points: 8 and 4  Verify the answer by satisfying the 3rd condition Constraints must be first set equal to zero.
Note: If fxx ⋅ fyy < (fxy)2, when fxx and fyy, have 2. Lambda Multiplier – a number which takes the
I 2
f (x) = x -36x+96 = 0 I 2
f (x) = x -36x+96 = 0 the same sign, the function is at the inflection increase and decrease of the function. It refers to
fII(x) = 6x-36 fII(x) = 6x-36 point. the small change in the function.
= 6(8)-36 = 6(4)-36 When fxx and fyy have different sign, the function λ(56-x-y = 0)
= 12 relative minimum = -12 relative is at the saddle point. 3. Lagrange function
maximum 1. First partial derivative: λ(56-x-y) = 0
z = 2y3-x3+147x-54y+12 4. Add the Lagrange function to z function.
2
2. Find MC and AC if TC = 3q +7q+12, Evaluate at zx = -3x2+147 = 0 zy = 6y2-54= 0 Differentiate/distribute the lambda first
Q = 3; Q = 5 Z = 4x2+3xy+6y2 - λ(56-x-y) = 0
2. Find the critical point Zx = 8x+3y- λ
MR = 6q+7 MR = 6q+7
147=3x2 6y2-54= 0 Zy = 3x+12y- λ
MR ΔTC= 6(3)+7 MR = 30+7
3 6 Zλ = 56-x-y
MRΔQ = 25 MR = 37
√ 49 = √ x2 √ y2= √ 9 5. Find the value of x, y, λ. Subtract the partial
3(5)+7+12 ±7 = x y = ±3 derivative of x and y.
= 3q+7+12 = AC
5 Critical Points 8x+3y-3x+12y = 5x-9y
ΔQ +7 +3 5x = 9y = 9y 1.8y
= 24.4 =
-7 -3 21x2+9y = 0 5 5 56-x-20 = 0
3. Maximize TR if TR = 32q-q2 +7 -3 9x+10x4 = 0 56-1.8y-y = =0 56-20 = x
TR = 32q2-q2 -7 +3 68 = 2.8y 36 = x
TR I = 32–2q = 0 Zxx = -6x Zyy = 12y 2.8 y = 20
= 32(16)-(16)2 Zy = 3(36)+12(20) – λ
TR I = 2(16-q) = 256 Zxx = -6(7) = -42 Zyy = 12(3) = -36
TR I = 32q Zxx = -6(-7) = 42 Zyy = 12(3) = -36 Zy = 108+240- λ
Q =16 maximum Zxx = -6(7) = -42 Zyy = 12(-3) = 36 Λ = 348
TR II = 32 maximum Zxx = -6(-7) = 42 Zyy = 12(-3) = 36 6. Substitute the values to z function to get the value
TR = 256 Zxx (-7, 3) = 42; 36 of z.
Zxx (7, -3) = -42; -36 → relative maximum Z =4(36)2+3(36)(20)+6(20)2 - 348(56-36-20)
PARTIAL DERIVATIVES We’ll only use this critical point which yieldsthe Z =5184+2160+2400
z = 2x3+xy2+12y3 same sign. Z = 9744
zx = 6x2+y2 zy = 6y2-54 maximum Minimum QI = a=bP1+cP Y 2+mY = demand function: Cross
zy = 2xy+36y2 zxy = 0 x=7 x = -7 Price Elasticity
Q 1
zxx = -12x zyx = 0 x = -3 x=3 2Q1
zyy = 2y+72y f fxx ⋅ fyy > (fxy) 2 Σy = 2y P2
zxy = 2y 42⋅36 > (0)2 Q1
zyx = 2y 1512>0 Σxy = Q1
z = 11x3y3 CONSTRAINTS P1
Factor that will hinder or affect the function.
OPTIMIZATION Utility = satisfaction = function. *how do you
P1
relative maximum relative minimum maximize the function? Q
fx1fy = 0 fx1fy = 0 z = 4x2+3xy+6y2 subject to constraint: x+y = 56 Σxy = 2Q
fxx1fyy < 0 fxx1fyy > 0
2P
 Cross Partial Derivation: no saddle point and no and uncertainties appropriately. It also provides for
inflection point goal establishment, policy formulation and effective
Q = 700-2P+0.02y decision making.
P = 25; Y = 5000 MANAGERIAL ECONOMICS Pragmatic: It is a practical and logical approach
Elasticity of demand  A branch of economics towards the day to day business problems.
P
Income elasticity of demand
Q  is a stream of management studies which
2Q = 700-2(25)+500y(2) emphasises solving business problems and Principles of Managerial Economics
2P = 750 decision-making by applying the theories and 1. People Face Tradeoffs
principles of microeconomics and To make decisions, people have to make choices
Σd = -2(25) macroeconomics. It is a specialised stream where they have to select among the various
750 dealing with the organisation’s internal issues by options available.
Σd = 0.06 -> relatively
Y elastic using various economic theories. 2. Opportunity Cost
Q1 Nature of Managerial Economics Every decision involves an opportunity cost
Σ = 2Q1 Art and Science: Managerial economics requires a
2y which the cost of those options which we let go
lot of logical thinking and creative skills for decision while selecting the most appropriate one.
making or problem-solving. It is also considered to
Σy = 0.02(5000) 3. Rational People Think at the Margin
be a stream of science by some economist claiming
750 that it involves the application of different economic (Incremental and Marginal)
Σy = 0.13333 – normal goods principles, techniques and methods, to solve People usually think about the margin or the
Positive = normal goods business problems. profit they will earn before investing their
Negative = inferior goods Micro Economics: In managerial economics, money or resources at a particular project or
Σd = elasticity of demand: unitary, perfect, relative managers generally deal with the problems related to person.
Σxy = cross price elasticity: complement, substitute a particular organisation instead of the whole 4. People Respond to Incentives
Σy = income price: normal, inferior economy. Therefore it is considered to be a part of Decisions making highly depends upon the
microeconomics. incentives associated with a product, service or
Zxy = 3x2-5y2-225x+70y+23 Uses Macro Economics: A business functions in an
Zx = 9x2-225 = 0 activity. Negative incentives discourage people,
external environment, i.e. it serves the market, which whereas positive incentives motivate them.
9x2 = 225 is a part of the economy as a whole.
X = 25 5. People Respond to Incentives
Therefore, it is essential for managers to analyse the
X=±5 Decisions making highly depends upon the
different factors of macroeconomics such as market
Zx = -10y+70 = 0 incentives associated with a product, service or
conditions, economic reforms, government policies,
-10y = -70 etc. and their impact on the organisation. activity. Negative incentives discourage people,
Y=7 Multi-disciplinary: It uses many tools and whereas positive incentives motivate them.
Critical points: (5,7) (-5,7) principles belonging to various disciplines such as 6. Time Perspective
Zxx = 18x Zyy = -10 accounting, finance, statistics, mathematics,
Z(5,7) = 18(5) Z(5,7) = 10 production, operation research, human
Z(5,7) = 90 Z(-5,7) = -10 resource, marketing, etc.
Z(-5,7) = -90 Relative maximum Prescriptive / Normative Discipline: It aims at goal
fxx ⋅ fyy > (fxy)2 achievement and deals with practical situations or
90(-10) > 0 problems by implementing corrective measures.
-900 < 0 saddle point Management Oriented: It acts as a tool in the hands
of managers to deal with business-related problems