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MATHEMATICS
A FIRST YEAR BOOK IN BUSINESS
MATHEMATICS
𝐶𝑜𝑚𝑝𝑖𝑙𝑒𝑑 𝐵𝑦: 𝑆𝑖𝑛𝑦𝑎𝑛𝑔𝑤𝑒. 𝑊. 𝑇. 𝐵𝑆. 𝑐 𝐼𝑛 𝑀𝑎𝑡ℎ𝑒𝑚𝑎𝑡𝑖𝑐𝑠
0
DEFINITION 1: A set is a collection of well-defined objects e.g. set of students doing BEC/BF 140, a set
of pencils etc. A set can either be stated or listed.
We use capital letters to denote sets. We also use brace brackets to enclose the elements or objects.
E.g.
: ℎ
: ℎ
Example;
ℎ ℎ .
The symbols
DEFINITION 3: The set containing the total of elements for any particular discussion or situation is
called a universal set.
DEFINITION 3:
A set which contains no elements is said to be an empty set of a null set. This is denoted by or .
1
ℎ . . . . ℎ
.
DEFINITIONS
1) The union of two sets and is the set which contains all the elements which are in
or or both.
2) The intersection of sets and is the set which contains all the elements
common in both sets and .
3) Two sets and are said to be disjoint if and
ℎ ℎ . Sets are said to be disjoint or in other words disjoint
sets if they contain no elements in common.
i. ( )
ii.
iii.
iv.
v.
vi.
vii.
viii.
ix.
x.
Suppose that the number of elements in a set is 7 and the number of elements in set is 5. Is it
possible to make any statement about the exact number of elements in Or in The answer
is no.
2
ℎ . . . . ℎ
The number of elements in plus the number of elements in minus the number of elements
in intersection
The number of subsets in a set is found by the formula , where is the number of elements.
EXAMPLES
1. Suppose that out of first year students at CBU, are taking business maths,
engineering maths and are taking both business and engineering math. How many first year
students are taking business maths or engineering maths?
= .
3
ℎ . . . . ℎ
Real numbers Rational and Irrational numbers . √ , √ etc.
5) The identity properties, for any real number , there are exists unique real numbers denoted by
under addition and under multiplication such that and . .
6) Inverse properties; for any real number , there exists unique real numbers under addition
such that and under multiplication such that .
.
7) The distributive properties.
I. , if and only if
II.
III.
4
ℎ . . . . ℎ
6)
7) ( )
8) √
9)
√
10) √ . √ √ .
√
11) √
√
12) √ √ √
13) √
EXAMPLE;
1. Rationalize the following
√ √ √
I. or
√ √ √ √
( ) .( )
II.
√
. √
III.
√
2. Simplify, expressing all answers in terms of positive exponents. Rationalize the denominator
where necessary to avoid fractional exponents in the denominator.
I. √ .√
.
II.
√ .√
5
ℎ . . . . ℎ
EXAMPLES
1) A piece of metal meters long is cut from a piece which is meters long. If meters
is lost in waste. Find the remaining piece
2) A man bought shares of oil stoke for and sold it months later for . Find
the increase in value per share of stoke.
INTEREST ; is a payment for the use of money borrowed. The money borrowed is called
the principal, . The amount equal the principal plus interest.
EXAMPLES
1) The manager of hardware of department in a supermarket mark all items so that the gross profit
is of the selling price. Find the selling price for a food mixer that cost
2) Mr Sinyangwe wishes to buy a lot of men’s suits to sell at , at a gross profit of the selling
price. How much can he pay for the suits?
3) Ten years ago a student paid . for a book. Today he must pay of that price for the
same book. Find the cost today.
4) A furniture store sold a dining room set for . The cost was . What percentage of the
selling price was the gross profit.
1) , where
2)
6
ℎ . . . . ℎ
3) . .
4)
Therefore, .
If numbers, represented by symbols, are combined by any or all of the operations of addition,
subtraction, multiplication, division exponents and extraction of roots then the resulting expression is
called algebraic expression.
EXAMPLES
a. √
b. √
c.
d.
EXAMPLES
1)
2)
7
ℎ . . . . ℎ
3) [ ]
a.
b.
c.
d.
e.
f.
g.
EXAMPLES
1)
2)
3) √ √
4)
5)
6)
; To divide a polynomial, we use so called long division when the degree of divisor is less
than or equal to the degree of the dividend.
EXAMPLE
Solve
2x 2 6x 4
x 3 2 x 0 x 2 14 x 5
3
8
ℎ . . . . ℎ
7
Therefore,
Rules of factoring
1)
2)
3)
4)
5)
6)
7)
8)
a.
b.
c.
d.
e.
f.
g.
h.
SIMPLIFYING FRACTIONS
Simplify
9
ℎ . . . . ℎ
EXAMPLES
a.
b.
Sometimes the denominator of a fraction has terms and involve square roots, such as √ or
√ √ . The denominator may be rationalized by multiplying by an expression that make the
denominator a difference of two squares.
EXAMPLES
a.
√
√ √
b.
√ √
√ √ √
a.
√ (√ ) √
√ √ √ √ √ √ √ √
b.
√ √ √ √ √ √
10
ℎ . . . . ℎ
EXAMPLE
Simplify
1)
2)
EQUATIONS
LINEAR EQUATION
A linear equation in the variable is an equation that is equivalent to one that can re-
written in the form where are constants and .
a. b. c.
11
ℎ . . . . ℎ
A radical equation is one in which an unknown occurs in the radicand
1. √
(√ )
2. √ √
(√ ) (√ )
DEFINITION; A quadratic equation in the variable is the equation that can be written in the
form where and are constant and
EXAMPLES
i.
ii.
12
ℎ . . . . ℎ
iii.
iv.
v.
i.
ii.
iii.
iv.
13
ℎ . . . . ℎ
[ ]
EXAMPLES
1.
2. √
14
ℎ . . . . ℎ
√
√ √ √
√ √
√ √
EXAMPLES
1.
Let , then
Thus
15
ℎ . . . . ℎ
√
Then we have,
When , we have
When , we have
3.
Let , then
When , we have
In most cases, to solve practical problems you must translate the relationship stated in the
problem into mathematical symbols. This is called modeling.
16
ℎ . . . . ℎ
EXAMPLE
Acid
Alcohol Acid
2) The company produces a product for which the variable costs per unit is and
fixed cost is . Each unit has a selling price of . Determine the number of
units that must be sold for the company to earn a profit of
. ,
RULES OF INEQUALITIES
Let and be real numbers
a. If then and
b. If and then and
17
ℎ . . . . ℎ
c. If and then and
d. and , then
e. If or , then
f. If or , then . Further for any positive integer ,
we have if then √ √
DEFINITION: A linear inequality in the variable is an inequality that can be written in the
form where and are constants and . To solve an inequality involving a
variable is to find all values of the variable for which the inequality is true.
EXAMPLES
i.
ii.
iii.
iv.
Solution
i. ii. iii.
iv.
ℎ ℎ ℎ
18
ℎ . . . . ℎ
EXAMPLES
i. For a company that manufactures chairs, the combined cost for labor and material is
per chair. Fixed cost are . If the selling price of a chair is , how many
must be sold/produced for a company to earn a profit?
ii. A builder decides whether to rent or buy an executing machine. If he were to rent
the machine, the rental fee would be per month and daily cost would be
for each day the machine is used. If he were to buy it, his annual fixed cost
would be and daily operating and maintenance cost would be for
each day the machine is used. What is the least number of days each year that the
builder would have to use to justify renting it rather than buying it?
iii. A publishing company find that the cost of publishing each copy of a certain
magazine . the revenue from dealers is . per copy. The advertising
revenue is of the revenue received from dealers from all copies sold beyond
. What is the least number of copies that must be sold to have a profit for a
company?
19
ℎ . . . . ℎ
DEFINITION; The absolute value of a real number written | | is defined by
| | {
Applying the above definition we have
| | | | | | | | | | .
Also note that | | is not necessarily and thus | | is not
EXAMPLES
Solving absolute value equations
a) | |
b) | |
c) | |
a) | | is either or
Or –
b) | |
or
or
or
a) | | implies that
b) | | implies that
c) | | implies that or
d) | | implies that or
EXAMPLES
Solving absolute inequality equations
20
ℎ . . . . ℎ
a) | |
b) | |
c) | |
d) | |
a) | | b) | | c) | |
d) | |
a) | | | || |
| |
b) | | | |
c) | | | |
d) | | | |
e) | | | | | |
called domain and a second set of elements called the range, such that the element in the
21
ℎ . . . . ℎ
The table set and are functions, since to each domain there corresponds exactly one range value.
The set table is not a function since to at least one domain value corresponds to more than one range.
DEFINITION; A function is a set of ordered pairs with the property that no two ordered pairs have the
same element and different second element.
EXAMPLES
1. The set
DEFINITION; A function, since no ordered pairs have the same first component and different
second element.
2. The set is not a function since ordered pairs with the same
first components and different second component.
In an equation in two variables, if there corresponds exactly on value of the dependent variable (output)
to each value. Value of the independent variable (input), then the equation specifies a function variable
to which there corresponds more than one value of dependent variable, then the equation doesn’t
specify a function.
EXAMPLE: Determine which of the following specify functions with independent variable of
a) for
b) for
a) b)
√
ℎ
ℎ ℎ .
We use different letters to denote names for numbers, in essentially the same way, we will now
use different letters to denoted names for functions. For example, if and ℎ may be used to
name the function specified by the equations and
22
ℎ . . . . ℎ
ℎ:
The symbols such as for any element in the domain of the function , represents
the elements in the range of . If is an input value, then is the corresponding out put
value.
EXAMPLES
a)
b)
Let,
This is called a case defined function, because the rule for specifying it is given by rule for each
of several disjoint case.
3. :
23
ℎ . . . . ℎ
| | {
4. : functions of the form
√
Where the polynomial is the radicand
There are several ways of combining two or more functions to create a new function. For any
functions , we define the sum the difference , the product and the
quotient as follows;
( *
i.
ii.
iii.
iv. ( )
v.
i.
ii.
iii.
24
ℎ . . . . ℎ
iv. ( )
v.
a. ( ) √
b. ( ) (√ ) √
ℎ ℎ
a. ( )
b. ( (ℎ )) ( | | ) | | | | | |
The function read as ‘ inverse’ and called the inverse of . A function has an inverse if it is one
to one function.
DEFINITION: A function that satisfies for and , if , then is called a one to one
function.
25
ℎ . . . . ℎ
Let , then making interms of we have,
Solving
( ) ( * ( *
And solving
( )
It may happen that a function whose domain is the natural one consisting of all elements for which
the defining rule make sense, is not one-to-one and yet a one-to-one function can be obtained by
restricting the domain of . For example, we can show that is not one-to-one, but the
function with the domain explicitly given as [ is one-to-one.
A rectangular co-ordinate system allows us to specifying and locating points in a plane. It also provides a
geometric way to graph equations in two variables, in particular those arising from function.
An of the graph of an equation in and is a point where the graph intersects the
.A is a point where the graph intersects the .
1.
26
ℎ . . . . ℎ
1.
2. √
ℎ
3. √
ℎ
4. | | ,
ℎ
27
ℎ . . . . ℎ
A straight line is one of the simplest mathematical functions. A straight line may be defined by two
properties.
The slope, usually represented by a symbol .
The vertical intercept. The point at which the line crosses the .
The slope or gradient of the straight line is simply the slant of the line.
DEFINITION: Let and be two different points on a non-vertical line. The slope of
the line is given by
EXAMPLE
The figure above shows the relationship between the price of a toy (in known) and quantity of toys
(in thousands) the consumers will buy at that price. Find and interpret the slope as we
increase the quantity of toys by one unit on the market then the prices will decrease by .
1. :
is a point form of an equation of the line through with slope .
EXAMPLE: Find an equation of the line that has slope 2 and passes through
28
ℎ . . . . ℎ
2. ℎ :
EXAMPLE: Find an equation of the line passing through and
3. :
is the point intercept form of an equation of the line with slope and intercept .
EXAMPLE:
a) Find an equation of the line with slope 3 and -4
is the required equation
1. : two lines are parallel if and only if they have the same slope/gradient.
2. : two lines with slope and are perpendicular to each other if and only
if
or
EXAMPLE: Two lines pass through one is parallel to the line and the other is
perpendicular to it. Find the equations of these lines.
1) Parallel
29
ℎ . . . . ℎ
2) Perpendicular
2. In testing the experiment diet for hens, it was determined that the average weight in grams of hen
was statistically a linear function of the number of days after the diet began .
Suppose the average weight of a hen beginning the diet was grams and 25 days later it was 675
grams.
a. as a linear function of
b. Find the average weight of hen when
30
ℎ . . . . ℎ
.
.
1. : The demand function, there are several variable that influence the demand for a good
. These may be expressed by the general
2. : Supply function; There are several variables that influence the supply of good . These
may be expressed by the general supply function.
31
ℎ . . . . ℎ
The simplest model for a supply function is written as , that is quantity supply depend
on price only, so long as the other variables upon which supply depend remain constant. The
equation of the supply function can be modeled by the simple linear function , where
and are constants.
EXAMPLES;
1. The demand function is given by the equation .
a. State and give a verbal description of the slope and intercept
b. What is the quantity demanded when
c. Plot the demand function . for
d. Find an expression for the domain function in the form and graph it.
.
a. For every unit increase in the quantity supplied, the price reduction by .
Intercept
Slope .
b.
.
.
.
c. ℎ
d. ℎ
.
a. For every one unit increase in quantity supplied price in increase by .
b. ℎ
Price elasticity of demand measure the responsiveness (sensitivity) of quantity demanded to the change
in the goods own price.
ℎ
ℎ
32
ℎ . . . . ℎ
.
.
A negative sign indicates that an increase in one variable is accompanied by a decrease in the other and
vice-versa.
A positive sign indicates that an increase (decrease) in one is accompanied by an increase (decrease) in
the other.
Given the linear demand function , then the formula for point elasticity of domain at any
is
( *
( *
An elasticity of demand measures the elasticity of demand over an interval on the demand function
instead of using the price and quantity at a point as in point elasticity. Elasticity uses the average of the
price and quantity at the beginning and end of the stated interval.
* +
* +
( *
1. ELASTIC:
Demand is strongly responsible to change in price that is the percentage change in demand is
greater than the percentage in price.
33
ℎ . . . . ℎ
2. UNITARY ELASTIC:
The percentage change in demand is equal to the percentage change in price.
3. IN ELASTIC:
Demand is weakly responsive to change in price that is the percentage change in demand is less
than the percentage in price.
Income elasticity of demand measure the responsiveness of quantity demanded to change in income.
ARC-Price elasticity formula for the income elasticity of demand measure the percentage change in
quantity demanded divided by the percentage in income.
ℎ
ℎ
( *
EXAMPLES
34
ℎ . . . . ℎ
b. If the price of computers increases by . Calculate the percentage change in quantity
demanded at .
.
a. .
.
.
.
( )
.
.
b. .
.
.
.
.
( )
.
.
.
.
.
.
35
ℎ . . . . ℎ
.
.
.
( *
. ( *
. ( *
A budget constraint (or budget line) relates the amount of goods that a consumer can afford to
purchase to his or her income and prices. Consider a consumer who spends all his income on
two goods. Referred to as and priced at and per unit respectively. The consumer can
choose to spend his or her income on
A cost constraint, also known as an isolate line relates the amount of input that a firm can afford
to purchase given its total.
Allowable expenditure (budget) and the cost per unit of the input, assume that the input are
labour and capital , the cost per unit of labour is the wage rate , the cost per unit of capital is
rent , while the company allowable expenditure is .
The equation of the isolate line is
EXAMPLE;
36
ℎ . . . . ℎ
A consumer has an income of to spend on good whose price is . and good
where
a. Write down the equation of the budget constraint, hence state the value of slope and
intercept.
b. Write down the equation of the budget constraint which result when each of the
following changes are introduced.
i. . while and
ii. . while . and
iii. . while and
a.
.
.
b. (i)
.
.
(ii)
. .
(iii)
.
.
A standard method for solving two linear equations in two unknowns is illustrated in the example below.
a.
37
ℎ . . . . ℎ
b. .
i. Algebraically
ii. Graphically
a.
Adding the two equations we get;
Solving for , by substituting for in any one of the given equations we get
b. .
.
}
.
.
Solving for
Substituting . we get
.
38
ℎ . . . . ℎ
3. Infinitely solutions
. : Occurs when a set of equations have no set of values which satisfy all equations
The set of solution has infinite solution set of all real numbers.
The method used to solve two equations in two unknowns may be extended to three equations with
three unknowns, four equations in four unknowns, etc. The strategy is to eliminate one of the variables
first by adding multiples of equations to other equations. Hence reducing the problem to two equations
in two unknowns
39
ℎ . . . . ℎ
..
..
Solving for
40
ℎ . . . . ℎ
Hence the solutions are;
Goods market equilibrium occurs when the quantity demanded by consumer and the quantity
supplied by producers of a good or service are equal. Equivalence market equilibrium occurs when
the price that a producer is willing to accept is equal to the price that producer is willing to accept
the equilibrium condition.
And
EXAMPLE: The demand and supply functions for a good are given as
. .
. .
Graphically
41
ℎ . . . . ℎ
Labour market equilibrium: occurs when the labour demanded firms is equal to the labour supplied
by workers or equivalently when the wage that a firm is willing to offer is equal to the wage
that workers are willing to accept labour market equilibrium is expressed as
and
Calculate the equilibrium wage and equilibrium number of workers algebraically and graphically.
. .
. .
: Are used by government in cases where they believe that the equilibrium price is too
high for the consumer. Thus, price ceilings operate below market equilibrium and are aimed at
protecting consumers.
EXAMPLE: The demand and supply function for a good are given by
.
i.
42
ℎ . . . . ℎ
. Demand (quantity demanded)
.
. (Quantity supplied) at the price of
. If the quantity supplied is then people are willing to pay for each
quantity demanded.
ii. Cost
Selling
: Are used by government in cases where they believe that the equilibrium price is too
low for producers to receive. Thus price floors operate above market equilibrium and are aimed at
protecting producers.
Analyse the effect on the labour market if the government introduces a minimum wage of per hour.
43
ℎ . . . . ℎ
.
Since labour supplied is greater than labour demanded, there is excess of labour. Thus, there is
improvement in the labour market.
EXAMPLE: Find the equilibrium price and quantity for two substitute goods and given their
respective demand and supply equation as
Equilibrium point
and
Equations are;
44
ℎ . . . . ℎ
.
..
Taxes and subsides are another examples of government intervention in the market. A tax on a good is
known as an indirect tax. Indirect taxes may be either
1. How does the imposition of the tax affect the equilibrium price and the quantity demand of the
good?
2. What is the distribution (incidence) of the tax that is what percentage of tax is paid by the
consumer and producers respectively?
In these calculations, the consumer always pays the equilibrium price and the producer receives the
equilibrium price minus the tax.
EXAMPLE: The demand and supply function for a good are given as
a.
i. Calculate the equilibrium price and quantity
45
ℎ . . . . ℎ
ii. Assume that the government imposes a fixed tax of per unit sold
iii. Write the equation of the supply function adjusted for tax
b.
i. Find the new equilibrium price and quantity algebraically and graphically
ii. Outline the distribution of the tax, that is calculate the tax paid by the consumer and the
producer.
.
a.
b.
i. .
.
.
ii. .
.
. .
.
.
.
The break-even point for a good occurs when total revenues are equal to the total cost.
EXAMPLE: The total revenues and total costs function are given and follows
46
ℎ . . . . ℎ
Note for subsides you add to the supply function because it benefits the producer. Given the subside
then the supply function is
; Is the difference between the revenue the producer receives for units of
good market price per unit and the revenue that the producer was willing to accept for successive
units of the good from to
is the total income generated within an economy from all productive activity over a
given period of time, usually one year. Equilibrium national income occurs when aggregate national
income , is equal to aggregate planned expenditure , that is
47
ℎ . . . . ℎ
Initially the model will assume the existence of only two economies agents, household’s consumption
expenditure, , modeled by the equation , where , is autonomics consumption that is
consumption which does not depend on income is called marginal propensity to
consumer, that is measures the change in consumption per unit change in income. The
firm’s investment expenditure is autonomics , .
a. Determine
i. The equilibrium level of national income, .
ii. The level of equilibrium of consumption, algebraically
b. Plot the consumption function . The expenditure function and the
equilibrium condition on the same diagram.
Given that determine the equilibrium level of sailing.
.
a.
i.
.
.
ii.
.
b. .
.
48
ℎ . . . . ℎ
ℎ
.
a.
i.
.
.
.
.
.
ii. .
b.
i. Multiplier
.
.
Effect on . The equilibrium level decreases by
49
ℎ . . . . ℎ
The government influences the level of national income in an economy in two ways.
1. Through the level of government expenditure on goods and services . It is assumed that
government expenditure is autonomous (fixed) therefore, government expenditure will
increase the level of national income (for any given value of the expenditure multiplier) through
its effect on the value of autonomous component of expenditure that is
; The foreign trade influences the level of national income in two ways
50
ℎ . . . . ℎ
2. Through the level of foreign of domestic expenditure on import, . The import function is
autonomous and is the marginal propensity to import.
, the equilibrium is now given as
.
Calculate the expenditure multiplier when,
a.
i. . and .
ii. . and .
b.
i. Determine the expenditure equation and hence find the equilibrium level of
national income given .
ii. Calculate the equilibrium level of taxation.
a.
i.
. .
. .
.
ii. . .
.
b.
i.
. .
.
ii.
.
51
ℎ . . . . ℎ
.
EXAMPLE
.
a.
. . .
.
.
b.
.
c.
: Determination of equilibrium
, where is the constant and with the interest rates. The equilibrium conditions for
the three sector economy (No foreign sector)
52
ℎ . . . . ℎ
Writing the above equation as given ℎ .
Then
EXAMPLE:
1. Calculate the equilibrium level of national income and the equilibrium interest rates, given the
following information of the goods and money market
: . .
: .
Where and
2. Calculate the effect on the equilibrium level of national income and the interest rate when
money supply increases to
.
1.
.
. .
.
.
. ℎ (Goods market)
.
.
. ℎ (Money market)
.
2. , (Solve simultaneously)
. .
.
53
ℎ . . . . ℎ
DEFINITION: A linear inequality in the variables and is an inequality that can be written in
one of the forms
ℎ
The line is dotted when it and solid when its meaning the line is part of the
solution.
a. {
b. {
54
ℎ . . . . ℎ
a. {
b. {
In a linear programming problem, the function to optimized (minimize or maximize) is called the
. Its domain is defined to be the set of all solutions to the system of linear
constraints is called the set of . Typically they are infinitely many feasible
solutions but the aim of the problem is to find a point that optimizes the value of the objective
function. If both the function to be optimizes and the constraints are restricted to two variables,
the optimus value may be found graphically as well as algebraically. If the number of variables
exceed two. The graphical approach is a longer possible. The optimal value is found by more
general linear programming method such as ℎ to be covered in third year.
EXAMPLE: A company produces two types of can openers. The manual and electric, Each
requires in its manufacture the use of the machine and . Each manual can opener requires
the use of machine for two hours, machine for one hour and machine for one hour and
electric can opener requires one hour on machine , two hours on machine and one hour of
machine . Further, suppose the maximum number of hours available per month for use of
and are and respectively. The profit on a manual can opener is and on an
electric can opener is . If the company can sell all it can produce. How many of each type
should it make in order to maximize the monthly profits?
Let and
be the number of manual openers and be the number of electric openers
Therefore,
Machine Profit
Machine Objective function
Machine
Try to maximize the profits given these conditions
55
ℎ . . . . ℎ
{ Re-write then making the subject we have {
.
.
. . .
. .
. .
. .
.
56
ℎ . . . . ℎ
EXAMPLE: A daily diet requires a minimum of of vitamin , of vitamin and
of vitamin . The content of these vitamins (per portion) in two foods mixes and are
given in the table below
.
Vitamin C
Vitamin D
Vitamin E
The theorem states that, if an optimal solution exists. It is found at the corner points of the
feasible region.
EXAMPLE: A company produces two types of wrought iron gates. The number of man hours
required to produce each type of gate along with the maximum number of hours available are
given in the table below.
57
ℎ . . . . ℎ
i. Write down the expression for
a. Constraints
b. Total revenue
c. Profit
ii. Plot the constraints and shade the feasible region
iii. Determine the number of gates which should be produced and sold to maximize
a. Revenue
b. Profit
iv. Calculate the number man hours which are not used when
a. Revenue is maximized
b. Profit is maximized
i.
a. wielding
Finishing
Administration
b.
c.
ii. ℎ
iii.
58
ℎ . . . . ℎ
Wielding Finishing Administration
Type I gate
Type II gate
Total
Maximum
Not used up
EXAMPLE; The supply and demand functions for a particular market are given by the equation
and
Sketch the graph of each function on the interval [ ]. Find the equilibrium price and quantity,
graphically and algebraically
59
ℎ . . . . ℎ
Q
0
1
2
3
4
5
.
i.
ii. ℎ
iii.
. .
.
[ ( ) ( ) ]
* . +
.
Using the completing the square method
60
ℎ . . . . ℎ
[ ]
* ( * ( * +
*( * +
*( * +
( *
.
A cubic function is expressed by a cubic equation which has a general equation of the
form
, where and are constants. Cubic functions are
continuous curves which may have
One root or three roots
No turning or two turning points
Quadratic and cubic functions being to a group of functions called polynomial, of the
form
EXAMPLE: A firm total cost function is given by the equation , the demand
function for the good is .
a. Write down the equations for total revenue and profit. Calculate the break even
points
b. Graph the total revenue and total cost function on the same graph for
c. Estimate the total revenue and total cost, at the break-even point
d. From the graph estimate the values of Q which moves
i. A profit
ii. A loss
61
ℎ . . . . ℎ
.
No real roots/solutions
a.
b.
c.
When the curve is above the curve then the firm is making a profit and when the
curve is below the curve then the firm makes a loss.
d. ℎ
62
ℎ . . . . ℎ
The exponential function has the general form or , when is any constant
and is referred to as the base of the exponential function, is called the index or power of the
exponential function. It is the variable part of the function.
1. All curves are continuous and pass through the point and
2. When the index is positive, the curves are increasing as increases, provided . These are
called growth curves.
3. When the index is negative, the curves are decreasing as increases, provided . These are
decay curves.
4. Exponents with large bases increase more rapidly for and decrease more rapidly for
5. The graph of and are always above the , Thus, is always positive.
EXAMPLES
1. Sketch the following exponential functions
i.
ii.
iii.
iv.
v. ( )
2. The population of a village was in . If the population grows according to the equation
.
, where is the number of persons in the population at time .
a. Find the population in the year
i.
ii.
b. In what year will the population reach ?
1. ℎ
2. (a)
.
i.
.
63
ℎ . . . . ℎ
.
ii.
.
.
(b)
.
. ( )
.
( ) . .
.
EXAMPLE
.
A consumption function is modeled by the equation . Graph the
consumption function over the interval , use the graph to describe how
consumption changes as income increases.
ℎ
Cannot exceed as much as you increase
64
ℎ . . . . ℎ
What is the of the number? If a number is written as a base to a power such as
. , the of the number is found as follows;
, then
EXAMPLE
Write in a logarithmic form and .
. .
EXERCISE: Solve the following
i.
ii.
.
iii.
EXAMPLES
iii. ( )
65
ℎ . . . . ℎ
.
1.
i.
ii. (√ *
(( ) )
( ( ))
[ ]
[ ]
iii. ( )
But ( ) ℎ and so ℎ
. ℎ ℎ ,
2.
i.
ii.
Changing both of them to the same base (in base 2)
ℎ ℎ
66
ℎ . . . . ℎ
( )
EXAMPLE:
.
1.
a.
b.
c.
67
ℎ . . . . ℎ
d.
ℎ ℎ
let , then , solving the quadratic equation we get
. .
When . ,We have . .
i.
( )
ii.
iii.
68
ℎ . . . . ℎ
( )
. .
69
ℎ . . . . ℎ
A function which is given by the equation is called hyperbolic function. The simplest
hyperbolic function is . The graph of consists of two separate parts
ℎ
Functions of the form model average, cost, supply demand and other functions.
EXAMPLE
The demand function of a good is given by the equation which is the supply
function is linear function .
a. Write the demand function in the form
b. Graph the supply and demand function on the same graph
c. Estimate the equilibrium point using your graph.
.
a.
b. ℎ
The output of any production function process demands on a validity of input, known as factors of
production. These include land, capital labour and enterprise. For simplicity we restrict our attention to
capital and labour. Capital and labour . Capital denotes all man made aids to production such as
building tools and plant machinery. Labour denotes all paid work in production process, which depends
on and may be written as which is called production function.
A production function is said to be homogeneous, if when each input factor is multiplied by a positive
real constant . The constant can be completely factored out. If the exponent of the factor is one; The
function is homogeneous of degree greater than one. If the exponent of the factor is less than one; The
function is homogeneous of degree less than one. Mathematically, a function is
homogeneous of degree , if for all positive real values of
EXAMPLE: Determine if the following are homogenous and if they are what is the degree of their
homogeneous?
a.
70
ℎ . . . . ℎ
b.
. .
c. ℎ
d.
e.
.
a.
b.
. .
c. ℎ
. .
ℎ
. . . .
. . .
. [ℎ ] it is homogeneous of degree less than one.
d.
[ ]
e.
A production function exhibits returns to scale if when all inputs are increased given constant
production , output increase by the same proportion greater than , there are increasing returns to
scale. If output increase by a proportion smaller than , there are diminishing returns to scale. In other
words, if the production function is homogeneous of degree greater than, equal or less than one returns
to scale are increasing, constant or diminishing respectively.
71
ℎ . . . . ℎ
In which is positive constant, and are inputs of capital and labour respectively and are positive
fraction less than one. In a strict cobb-douglas function . In a generalized cobb-douglas
function may be greater or equal to one. In either case, the degree of homogeneity return to
scale can be read immediately from the sum of exponents. If you have
ℎ .
.
. .
a.
. .
. . . .
. . [ . . ]
. . . , Thus the return to scale is increasing.
. .
b.
. .
. . . .
. . . .
. .
EXAMPLE; Given where and . Find
.
. .
. .
. .
.
72
ℎ . . . . ℎ
.
.
[ ] * + [ ] * +
The square brackets are commonly used to enclose the numbers in a matrix called the entries of the
matrix. A matrix is determined by the numbers of rows and columns.
[ ℎ]
* + * + * + * +
* + * + * +
* + * + * +
73
ℎ . . . . ℎ
.
We can only multiply two matrices if and only if the number of columns in first matrix is equal to the
number of rows of the second matrix.
⏟ ⏟ ⏟
⏟ ⏟ ⏟
The null or zero matrices is a matrix of any dimension in which every element is zero, such as
* + * +
The unit or identity matrix is a square matrix in which matrix is zero, except the elements in the main
diagonal, each of which has value such as
* + [ ] [ ]
If a matrix is a matrix formed from by interchanging its rows with its columns is called the transpose of
.
DEFINITION: The transpose of an matrix is denoted is the form matrix whose row is the
column of .
e.g. * + ℎ [ ]
74
ℎ . . . . ℎ
, Example. [ ]
, Example. [ ]
Equal matrix has the same dimensions and same elements, e.g. * + * +
If is an matrix and is a real number, then will denote the matrix obtained by
multiplying each entry by . This operation is called scalar multiplication and is called the scalar
multiples of .
a) * + * +
b)
* + * + * + * + Cannot be subtracted because
matrices have different dimensions
Multiplication of two matrices with dimensions is and requires that the matrices be
conformable, that is or the number of column in , the leading matrix equals the number of
rows in ,the matrix. Each row vector in the lead matrix is then multiplied by each column vector
of the matrix. According to the rule of multiplying row by column vectors
EXAMPLE; Given
* + [ ] * +
Find
75
ℎ . . . . ℎ
* +[ ]
* +
* +
[ ]* +
[ ]
[ ]
EXAMPLE; Given
[ ] [ ]
Find
[ ][ ] [ ]
[ ][ ] [ ] [ ]
76
ℎ . . . . ℎ
A distributor records the weekly sales of personal computers in their retails outlets in different
parts of the country
ℎ ℎ
ℎ
ℎ
ℎ
The cost price of each model is
Pentium Basic .
Pentium Extra .
Pentium latest .
ℎ . . .
ℎ . . .
ℎ . . .
.
a. Let [ ] [ . ]
.
. .
[ ][ . ] [ . ]
. .
ℎ .
ℎ .
ℎ .
. . . . . .
b. [ . . . ] [ . . . ] [ ]
. . . . . .
77
ℎ . . . . ℎ
. . . . .
[ ][ . . . ] [ . . . ]
. . . . . .
. .
c. [ . ] [ . ]
. .
. .
[ . ] [ . ]
. .
.
[ . ]
.
* + * + [ ]
| | * +
| | * +
* + * + * +
[ ] [ ] [ ]
Practical example
78
ℎ . . . . ℎ
[ ] * + * + * +
Matrix algebra permits the concise expression of a system of linear equation. As a simple illustration;
Note that the system of linear equation
EXAMPLE; Given
* +[ ] * +
Row operations mean application of simple algebraic operations to the rows of a matrix with no change
in the linear relationship. The three basic row operation allow
79
ℎ . . . . ℎ
Given a system of equations in matrix form , the augmented matrix | is the coefficient matrix
with column vector of constants set alongside. Its separated by a line or a bar.
Is given by | ( | +
To use this method to solve linear equations, simply express the system of equations as an augmented
matrix and apply row operations to the augmented matrix until the coefficient matrix is reduced to an
identity matrix. The solution to the system of equations can be read from the remaining element in the
column vector . To transform the coefficient matrix into identity matrix, work along the principle axis,
first obtain a 1 in the position of the coefficient matrix, and then use the row operation to obtain
zero everywhere else in the first column. Next to obtain a one in the position and use the row
operations to get zero everywhere else in the column. Continue getting ones along the principle
diagonal and then clearing the column until the identity matrix is obtained.
EXAMPLE 1;
Use the reduction method to solve for and in the system of equations.
( | )
( | )
( | )
( | )
80
ℎ . . . . ℎ
( | )
EXAMPLE 2;
( | +
( | +
( | +
( | +
( | +
( | +
( | +
81
ℎ . . . . ℎ
An inverse matrix , which can only be found for a square non-singular matrix , is a unique matrix
satisfying the relationship
Given * + ℎ * +
* +
Given [ ]
| | | | | |
| | | | | |
| | | | | |
[ | | | | | |]
[ ]
82
ℎ . . . . ℎ
[ ]
EXAMPLE; Given * +* + * +
* +
* +* +* + * +* +
* +* + * +
* + [ ] * +
The determinant of the inverse of a matrix will be illustrated by the following example
| | | | | |
83
ℎ . . . . ℎ
| | | | | |
| | | | | |
[ | | | | | |]
[ ]
[ ]
[ ][ ] [ ]
[ ]
| | | | | |
| | | | | |
[ | | | | | |]
[ ]
84
ℎ . . . . ℎ
[ ]
[ ]
[ ] [ ][ ] [ ]
Use determinant to solve equations (crammers rule). The crammers rule uses determinants to solve a
system of equations
{ {
* +* + * +
* +
* +
85
ℎ . . . . ℎ
{
* +[ ] * +
* + * +
Note: If you are using crammers rule and the determinant of the first matrix is , then you have infinite
solution; if the other determinants are also zeroes, or no solution.
EXAMPLE; The equilibrium condition for three related products simplifies to the following equations.
| |
| | | | | |
| | | | | | | |
86
ℎ . . . . ℎ
| | | | | | | |
| | | | | | | |
EXAMPLE;
1. Use the Gaussian elimination method to find the inverse of the following matrices
a. ( | )
( | )
( | ,
87
ℎ . . . . ℎ
( | *
( ,
b. ( +
( | ,
|
( )
|
( )
( | +
[ ]
Consider a three sector economy such as industry agriculture and financial services. The output from
any sector such as agriculture may be required by
88
ℎ . . . . ℎ
2. The same sector
3. External demand, such as sales, exports etc.
For example, the output from all three sectors (in millions kwacha) In these three sector economy could
be distributed as follows
So the total output required from each sector must satisfy the final demand as well as the demand from
other sectors which require this as basic raw material or input.
The table above is perfectly balanced, put suppose the other demand from each sector change, how is
the total output required re-calculated. We use matrices to answer this question and one fundamental
assumption is needed that is
ℎ .
. ℎ
.
ℎ
Divide each input to each sector by the total input to calculate the fraction of the total input which
comes from all sectors.
The relationship between the total outputs from the three sectors to the input requirement from all
sectors and final other demands may now be described by the matrix equation.
[ ][ ] [ ] [ ]
89
ℎ . . . . ℎ
Where the column of total outputs is, is a column of final (other) demand from outside the three
sectors. The matrix is called the matrix of technical coefficients. Each column of gives the fraction of
inputs to that sector. If the final other demands are changed this equation may be used to solve for the
total output required.
[ ]
[ ]
EXAMPLE;
Find the output matrix if final demand changes to for and for
[ ]
* + [ ]
[ ]
( * ( *
90
ℎ . . . . ℎ
[ ]
[ ]* + [ ]
.
[ ] * +
.
1. Form the technical matrix by dividing each entry by the total demand.
2. Subtract
3. Find the determinant
4. The inverse
5. Multiply it by the increase or decrease.
A sequence is a list of numbers which follows a definite pattern or rule. A series is a sum of a sequence.
Consider the A.P with the first term and common difference , and then the
ℎ term of the progression is
We may write the sum of the first terms of the A.P in two ways
91
ℎ . . . . ℎ
EXAMPLE: Find the ℎ term and the sum of the first terms of an A.P given by
From we have
92
ℎ . . . . ℎ
An individual borrows , agreeing to reduce the principal by at the end of each month and
pay annum that is per month, on all unpaid balances. Find the sum of all interest payments.
. . .
. .
. .
93
ℎ . . . . ℎ
When | | , alternatively
EXAMPLE; Find the ℎ term and the sum of the first terms of the G.P
a.
b. . . .
a.
( )
b.
.
. .
.
. [ . ]
. [ . ]
.
EXAMPLE;
94
ℎ . . . . ℎ
The value of a certain machine at the end of each year is as much as its value at the
beginning of the year. If the machine costs . Find its value after years.
. .
| |
EXAMPLE:
Find the sum of infinite G.P
a.
b.
a.
b.
95
ℎ . . . . ℎ
Simple interest is a fixed percentage of the principal, , that is paid to an investor each year,
irrespective of the number of years the principal has been deposited that is money invested at simple
interest will increase in value by the same amount each year. So if the investor is paid a fixed annual
amount of , then the amount of simple interest , received over years is given by the formula
Therefore, the total value after years is the principal plus interest and is given by
When total value (future value), the interest rate and time are known, the principal (present value) may
be calculated by re-writing the formula
a.
b.
c.
96
ℎ . . . . ℎ
.
In the modern business environment, the interest on money borrowed is usually compounded.
Compound interest pays interest on the principal plus on any interest accumulated in previous years.
The total value, of the principal, when interest is compounded at per annum each year, the
interest earned is added to the total amount on deposit ( Principal, , plus any accumulated interest) at
the beginning of that year.
Notice that the amounts due at the end of each year form a geometric progression where and
the common ratio giving the sequence
EXAMPLE: Calculate the amount owned on loan of over three years at an interest rate of
compound annually
The present value of a future sum , is the amount which when put on deposit at , at rate
interest will grow to the value after years. The present value, , is calculated by rearranging
a. Calculate the value of the investment at the end of the three years.
b. Compute the present value of receiving in three years when the discount rate per
annum
a. .
.
.
b.
97
ℎ . . . . ℎ
.
.
In the compound interest formula, there are four variable and . If any of three of these
variables is given the forth may be determined. For instance, given
( *
( )
( *
( *
EXAMPLE;
1. Suppose that amounted to . in a savings account after three years. If the interest is
compounded annually , find the rate of interest compounded annually
2. How long will it take for to amount to at an annual rate compounded annually
1. ( )
98
ℎ . . . . ℎ
.
( *
. .
( )
2.
( * .
.
So far, it has been assumed that the compound interest is compounded once every year. In reality,
interest may be compounded several times per year. For example it may be compounded daily, weekly,
monthly, quarterly, semi-annually or continuously.
We may denote the number of conversions per year by , the interest rate applied at each conversion
is . For example an investment compounded twelve times per year will have twelve conversions
period. Thus if a five years investment is compounded twelve times annually, then the investment would
have sixty conversion period. Therefore, the value of the investment at the end of conversion periods
is
( ) ( )
a.
( )
.
( *
99
ℎ . . . . ℎ
b.
.
.
c. ( )
.
i. ℎ ( )
.
ii. ( )
This is because
( ) [( ) ] [ ]
Since ( )
EXAMPLE: A financial consultant advises you to invest at compounded continuously for three
years. Find the total value of your investment.
[( ) ]
EXAMPLES
100
ℎ . . . . ℎ
3. If an investor has a choice of investing money at compound daily or compounded
quarterly which is the better choice?
1. Semi-annually
[( ) ]
.
*( * +
. .
Quarterly
[( ) ]
.
*( * +
. .
2.
3. *( ) +
.
( *
. .
[( ) ]
.
( *
. .
EXAMPLE; A trust fund for a child’s education is being set up by a single payment so that at the
end of years this will be . If the fund earns interest at the rate of compounded
semi-annually, how much money should be paid into the fund?
101
ℎ . . . . ℎ
( )
.
( ) .
( )
The single payment due now must be such that it would grow and eventually pay off the debt when
they are due, that is it must equal the sum of the present values of the future payment.
. . .
EXAMPLE: A debt of due six years now is instead to be paid off by three payments; now,
in three years and a final payment at the end of five years. What would this payment be if aan
interest rate of compounded annually assumed
. . .
. .
An annuity is any finite sequence of payments made at fixed periods of time over a given interval. The
fixed period of time we consider will always be of equal length and we refer to that length of time as the
payment period. The given interval is the term of the annuity
102
ℎ . . . . ℎ
ℎ
That is
( )
[ ]
[ ]
EXAMPLE
1. Find the present value of an annuity of per month for years at an interest of
compounded monthly.
2. Given an interest of compounded annually, find the present value of the following;
due at the end of each year for three years, and due thereafter at the end of each year
for four years
3. The premiums of an insurance policy are a quarter payable at the beginning of each
quarter. If the policy order wishes to pay premiums in advance, how much should be
paid provided that the interest rate is compounded quarterly
.
.
1. A present value of an annuity
[ ]
[ . ]
.
103
ℎ . . . . ℎ
.
2. Ordinary annuity
ℎ
[ . ] [ . ] [ . ] .
. . .
[ ]
[ ]
[ ]
EXAMPLES
.
.
1.
[ ]
[ . ]
.
.
104
ℎ . . . . ℎ
[ ]
2.
.
[ . ]( )
.
.
Suppose that a bank lend a borrower and charges interest at the normal rate of
compounded monthly. The plus interest is to be re-paid by the equal payments of kwacha at
the end of each month for ℎ . Essentially, by paying the borrowers the bank is purchasing
an annuity. Three payments of , using the formula, we find the months payment given by
.
.
.
This is called amortizing. A loan is amortized when part of each payment is used to pay interest and the
remaining part use to reduce the outstanding principal. Since each payment reduces the outstanding
principal. The interest portion of a payment decreases as time goes on.
1. Period payment:
105
ℎ . . . . ℎ
.
Net present value and internal rate of return are two techniques used to address investment projects.
EXAMPLE: Suppose that you can invest in a business that guarantees too cash flows at the end
of years and
Assume an interest rate of compounded annually. Find the net present value of the cash flows.
. . .
DEFINITION; If gets closer and closer to a number as gets closer and closer to from both sides,
then the limit of as approaches . The behavior is expressed by writing
EXAMPLE: find
. . . . . .
. . . . . .
106
ℎ . . . . ℎ
√
Therefore, as gets closer to gets closer to . , hence,
√
.
1. [ ]
2. [ ]
3. * +
4. [ ] [ ] [ ]
EXAMPLE
√ √ √
5.
6.
NOTE; It is important to remember that the limit describe the behavior of a function near a particular
point, not necessary at the point itself.
EXAMPLES
a.
b.
c. √
d.
107
ℎ . . . . ℎ
.
√ √ √ √
[ ] [ ][ ]
√
1. (Rationalize the numerator)
√ (√ )(√ )
(√ ) (√ ) √
√
2. (Rationalize the numerator)
(√ )(√ )
(√ ) (√ ) (√ )
√ √ √
108
ℎ . . . . ℎ
1. :
2. :
and , for any constant and , with
EXAMPLE: Find
a)
b)
Divide each term in by the highest power that appears in the denominator polynomial.
Compute using algebraic properties of limits and reciprocal power rules.
( )
( )
( )
EXAMPLE; If a crop planted in soil where the nitrogen level is , then the crop yield can be modeled
by the function
Where and are positive constants. What happens to the crop yield as the nitrogen level is increased
indefinitely?
109
ℎ . . . . ℎ
.
( )
or
EXAMPLE
a)
b)
c)
a)
. . .
b)
-0.999 -0.999999 -1.0001
2000 200 000
EXAMPLE
110
ℎ . . . . ℎ
2. Find
i.
ii.
And
2. Evaluating
i.
ii.
The limit of a function exists if and only if the two-sided limits exists and are equal, that is
111
ℎ . . . . ℎ
.
i. is defined
ii. exists
iii.
EXAMPLE;
1. , we show that the three conditions for continuity are satisfied, that is
i. defined
ii. and the limit exists
iii. , hence the function is continuous at
2. , we need only show that the three conditions for continuity hold, that is
i. it is defined
ii. limit exists
iii. Thus, the rational function is continuous at
EXAMPLE 2;
i.
ii.
112
ℎ . . . . ℎ
iii. ℎ ,
ii. ,
is discontinuous at
iii. ℎ ,
We check the left and right limits, that is ℎ and ℎ . Now
ℎ
And
ℎ
Since, ℎ ℎ , the function ℎ is not continuous.
In other words, continuity on an interval, means that the graph of is one piece throughout the
interval.
An important feature of continuous function is the intermediate value property, which says that if
is continuous on the interval [ ] and is a number between and . Then for some
number between and
113
ℎ . . . . ℎ
In other words, a continuous function attains all values between any two of its values.
The expression
ℎ
ℎ
Is called a difference quotient for the function , the derivative of a function with respect to
is the function given by
ℎ
ℎ
This is called the first principal of differentiation. The process of computing the derivative is called
differentiation and we say that is differentiable at , if exists.
EXAMPLE
114
ℎ . . . . ℎ
.
( )
a.
ℎ ℎ
ℎ
b.
√ √
(√ √ )(√ √ )
(√ √ )
(√ √ )
√ √
√ √ √
115
ℎ . . . . ℎ
The delta process provides a method of computing which is required to find
1. Form
2. Divide by to obtain , provided
3. If the limit as approaches zero exists then the limit is the desired derivative.
1.
2.
3. √
1.
[ ]
* +
116
ℎ . . . . ℎ
If the function is differentiated at , then it is also continuous at
is increasing at , if
is decreasing at , if
If we had to use the limit definition every time we wanted to compute a derivative, it would be both
tedious and difficult to use calculus in application. There are techniques that greatly simplify the process
of differentiation.
EXAMPLE; Differentiate
i.
ii.
√
117
ℎ . . . . ℎ
.
4. ; If ℎ , where and
ℎ exist, then, ℎ
EXAMPLE;
i. Suppose , find
( )
ii. Given , find
i.
( )
ii.
iii.
√
i.
ℎ
ℎ ℎ
118
ℎ . . . . ℎ
ii.
ℎ
ℎ ℎ
ii. If , find
i.
ℎ
[ ]
ii.
ℎ
ℎ ℎ
[ℎ ]
7. If where , then,
EXAMPLE;
i. Given determine
i.
Let ℎ
119
ℎ . . . . ℎ
ii.
ℎ
8.
[ ] , then [ ] .
EXAMPLE;
i. Find the derivative of
Exponential and logarithmic functions have simple derivatives. The derivative of , given by
Given , then
EXAMPLE;
a.
√
b.
c. ℎ
a.
ℎ
Then by the product rule
ℎ ℎ
√
b.
120
ℎ . . . . ℎ
( *
c. ℎ
By the chain rule;
[ ] .
ℎ ( *
( *√
Given then
a.
b.
a.
ℎ
b.
[ ]
NOTE;
1. Derivative of is
2. Derivative of is
121
ℎ . . . . ℎ
EXAMPLE; Find the derivative of the following functions
1.
2.
3.
.
1.
2.
The functions we have worked with so far have all been given in the form of . The function in
this form are said to be explicit. For example
However, some practical problems will lead to equations in which the function is not written explicitly
in terms of independent variable , for example
Since it has not been solved for , such equation is said to define implicitly a function of and the
function is said to be in implicit form.
a.
122
ℎ . . . . ℎ
b.
1. Differentiate sides of the equation with respect to , remember that is really a function of
and use chain rule when differentiating terms containing .
2. Solve the differentiated equation algebraically for
When we have a function which is a product or quotient function in which variables occur in powers by
taking the natural logarithms of both sides of simplifies the differentiation of the function.
( )
a. * +
√
b.
√
c.
( )
a. * +
* +
* +
[ ]
123
ℎ . . . . ℎ
[ ]
[ ]
* + [ ]
( )
1. Fixed costs; unchanged or un-varied costs that is flat although the number of units of a product
varies. For example monthly rental of a building
2. Variable costs; the costs which depend on the number of units produced for example raw
material. In general, the function for cost can be written as
124
ℎ . . . . ℎ
3. Average total cost; is total cost for producing one unit of a product that is
Marginal or ultimately total cost function , in business, the rate of change for a function is
known as marginal function, denoted, is the rate of change for total cost function over
quantity.
a.
b.
c.
In business and economics, the cost is usually minimized to obtain the (higher) maximized production
revenue and total profit.
1. Find and
2. Let and solve for , suppose and has to be positive.
3. If , then is the quantity or level of production which minimizes the cost.
EXAMPLE;
125
ℎ . . . . ℎ
.
a.
.
.
b. . ,
c.
.
126
ℎ . . . . ℎ
a. What is the total revenue function?
b. Determine the marginal total revenue function
a.
b.
In business the total revenue is usually maximized to achieve the maximum profit.
1. Find and
2. Let and solve for . Suppose and has to be positive.
3. If , then is the quantity or level of production which maximizes the revenue.
a. * +
b.
The total profit or loss function, is obtained from the production of a single product. In general
127
ℎ . . . . ℎ
EXAMPLE;
a) Given the demand function for vehicle spare parts item as and the average total
cost per unit item given by a function; . Determine the total profit
function
b) The demand function for a product is given by . and the total cost is
. Find
I. Total revenue function
II. Total profit
III. The marginal profit
a)
( )
b) . .
.
.
.
[ ] .
A production function illustrates the relationship between input and output. Thus, the production
function may take a general form of
The expression states that the level of output depends on the amount of input used in production
process. In the short run, the input can be assumed to be fixed so the level of output is
then only a function labour , that is . For example . . The marginal product of
labour is the rate of change in total output , with respect to labour. The average product of
labour is the total output divided by the number of units of labour.
128
ℎ . . . . ℎ
EXAMPLE; Given the short run production function .
a) Determine the equation for the marginal product of labour, calculate and comment on the
marginal product of labour when of labour employed
b) Derive the equation for the average product of labour, calculate and comment on the average
product labour for the first of labour used.
.
. .
Total production
In the analysis of labour supply function, a distinction is made between. A perfect competitive firm that
faces horizontal labour supply function . This firm must accept the market wage rate. The wage
rate is not affected by the number of units of labour. A monopoly is a firm that faces an upward sloping
laabour supply function . The wage rate is paid by a determined by the labour
supply function.
a) . .
.
b)
129
ℎ . . . . ℎ
The marginal propensity to consume is defined as the change in consumption per unit change in
income, likewise, the marginal propensity to save, is defined as the change in saving per unit
change in income.
.
EXAMPLE; Given the consumption function
.
.
a)
. .
. .
.
.
. .
.
b) .
. .
.
.
Utility is described as the level of satisfaction or benefit a consumer receives from consuming various
goods. Total utility, , can be defined as total benefit or satisfaction received by an individual from all
the goods that he or she consumes. Assuming that the consumer considers a single product . The utility
function is written as
Where a quantity of good consumed, for example; if represents beer, total utility is the satisfaction
received from consuming paints of beer
is the derivative of the total utility with respect with respect to that is
130
ℎ . . . . ℎ
EXAMPLE; Given the total utility function for as , calculate and comment on the
values of marginal utiity when
a)
b)
c)
d)
a)
b)
c)
d)
Optimization is mainly concerned with finding maximum and minimum points, also known as optimum
points on a curve.
We know that gives the equation for slope at any point . Also, at turning points.
a)
b)
a)
131
ℎ . . . . ℎ
b)
. ℎ
1. Find and
2. Solve . The solution of this equation gives the x-co-ordinates of the turning points
EXAMPLE;
a)
b)
EXAMPLE;
2. A hotel charges different prices for the same meal in two different markets. The demand
function in each market is given by the respective equations.
132
ℎ . . . . ℎ
. The company’s cost function is given by the equation
ℎ
a) For each market, write down the marginal revenue and marginal cost
b) Determine the price and quantity at which profit is maximized
c) If price discrimination is declared illegal, which price should the company charge to maximize
profit?
1.
ℎ ℎ
That is
ℎ
ℎ
NOTE; Since demand decreases as the unit price increases, we have . Therefore, since
and , it follows that, the price elasticity of demand we get is negative;
133
ℎ . . . . ℎ
EXAMPLE; Suppose the demand and price for a certain commodity are related by the linear equation
where
a)
b)
This implies that increases in price at will produce a decrease in demand.
c)
.
d)
Economist usually defines price elasticity of demand as a positive number | | | |. There are three
categories of elasticity;
EXAMPLE; The manager of a bookstore determines that when a certain new novel is prices at kwacha
per copy. Then daily demand will be
Copies, where √
a. Determine where the demand is elastic, inelastic or unitary with respect to price
b. Interpret the result off part (a) in terms of behavior total revenue as a function of price
134
ℎ . . . . ℎ
.
| | | |
Elastic
| |
[ ]
√
Inelastic
Interpretation
EXAMPLE; Suppose that at certain factory, output is given by the production function
units, where is capital investment measured in unit of and the size of labour
of force measure in worker hour
135
ℎ . . . . ℎ
.
a.
EXAMPLE: Find the first order partial derivatives for each of the following function
a)
. .
b)
c)
a) With respect to
With respect to
b) With respect to
. .
. .
With respect to
. . . .
.
c) With respect to
136
ℎ . . . . ℎ
With respect to
To find the second-order partial derivatives, simply differentiate first-order partial derivative again. The
only problem is that there are several possibilities, if there are two first-order partial derivatives,
each first-order partial derivative could be differentiated with respect to the same variable again, giving
two second partial derivatives.
( * ( *
However, these two mixed second order partial derivatives are equivalent, that is
( * ( *
137
ℎ . . . . ℎ
c) If is increased by , use differential to approximate change in
a)
b)
c) ( )
The argument for the differential of a function of one variable may be extended to functions of two
variables, so the total differential of , a function of two variables is written as
a) ( ) ( )
b) ( )
.
.
. .
.
.
. .
( ) ( )
. .
. .
. .
138
ℎ . . . . ℎ
i. ( ) ( )
Minimum provided
Maximum provided
ii. . You neither have maximum nor minimum (point of inflation). (test failed) sandal
point.
EXAMPLE; Examine the given function for maximum or minimum by using the second derivative test
( )
Unconstrained optimization
EXAMPLE: A monopolist produces a single good but sells it in two markets. The demand function for
each market is and , where and , and are the price and
quantity in market and respectively. The cost function is , where
a) Find the price and quantity of the good in each market, which maximizes profit
b) Determine the price elasticity for each market
c) Find the price and quantity of the good in each market which maximizes profit when the
monopolist does not use price discrimination, that is
a)
But
[ ]
139
ℎ . . . . ℎ
.
b) ( ) ( .
)( )
( ) ( )
The method of langrage multiplier uses the fact that any relative extreme of the function subject
to the constraint must occur at a critical point of the function
140
ℎ . . . . ℎ
[ ]
Where is a new variable (the langrage multiplier). To find the optimum value of a function
subject to a constraint, we define the langragian function as given above.
EXAMPLE;
a) The total revenue function for two goods is given by . Find the
number of each good which must be sold if revenue to be maximized when the firm is subject to
a budget constraint
b) The highway department is planning to build a picnic area for motorist along a major highway, it
is rectangular with an area of square meter and is to be fenced of a three side not adjacent
to the highway. What is the least amount of fencing that will be needed to complete the job?
a)
Solving for
b)
141
ℎ . . . . ℎ
{ Solve using substitution method
..
{ . Solving using substitution method, we get
From equation
( ) ( )
142
ℎ . . . . ℎ
. .
d) Find the values of and for which the utility function is maximized subject to the
budget constraint
.
. .
. .
. . . .
. .
. .
.
. . } Solve using substitution method
.
If , the optimum value of utility will increase by for each unit in the constraint and decrease by
for each unit reduction in the constraint.
EXAMPLE; Given the utility function , find the change in the maximum level of utility when the
budget constraint is increased by one unit
..
Solve by substitution
( )
For example; , then ∫
143
ℎ . . . . ℎ
1. ∫
2. ∫ Provided
3. ∫
4. ∫
5. ∫
a) ∫ ( )
∫ ∫
b) ∫ √
∫ ∫( * ∫ ∫
A linear function is expressed as , where and are constants. The rule for integrating
a linear function raised to a power is given as
EXAMPLE;
1. ∫(√ )
144
ℎ . . . . ℎ
2. ∫
∫ ( *
3. ∫
The integration discussed so far applies only to limited types of functions. Certain functions can be
integrated by substituting a variable for a function and integrating with respect to the substituted
variable.
EXAMPLE;
1. ∫
ℎ
∫ ∫
2. ∫
3. ∫
ℎ
The formula for the derivative of the product of two functions is often useful in evaluating integrals. If
and are differentiable functions, then
145
ℎ . . . . ℎ
∫ . ∫
EXAMPLE;
1. ∫
∫ . ∫
∫ ∫
2. ∫
∫ . ∫
∫ [ ∫ ]
1. ;
We now consider the integral of fractional function without loss of generality, we may assume
that the numerator and denominator have no common polynomial factors and the
degree of is less than the degree of (that is , define a proper rational function).
For if the numerator were not of lower degree could use long division to divide by
. Here would be a polynomial easily to integrate and would be a polynomial
lower degree than . Thus would then be a proper rational function.
EXAMPLE; Find
146
ℎ . . . . ℎ
2x 1
x 2 x 3x 2 x 3x 4 x 17x 6
3 2 4 3 2
∫ ∫* +
∫ ∫ ∫
∫ ∫( *
| | | | | |
EXERCISE; Solve
147
ℎ . . . . ℎ
2. ;
If the denominator of contains any linear factors, some of which are repeated, then for
each factor, , where is the maximum number of times occurs as a factor,
therefore, will correspond the sum of partial fractions
EXAMPLE; Determine
∫ ∫( *
| | | |
3.
Suppose a quadratic factor occurs in and it cannot be expressed as a
product of two linear factors with real coefficient. Such a factor is said to be irreducible
quadratic factor over real number. To each distinct irreducible quadratic factor that occurs
exactly one in , there will correspond a partial fraction of the form
EXAMPLE; Determine
148
ℎ . . . . ℎ
∫ ∫[ ]
| | ∫
| | ∫
| | | |
| | | |
The area under a given curve can be computed by using definite integrals. That is
a) ∫
* + ( +
b) ∫ . ( )
.
* | |+ ( . )
.
.
149
ℎ . . . . ℎ
EXAMPLE; Calculate the consumer surplus for the demand function
a) . ∫
⌉
b) . ∫
| | .
150
ℎ . . . . ℎ