10/5/2021

LINEAR EQUATION AND FUNCTION

COST EQUATION:
• The equation of a straight line 𝑦 = 𝑚𝑥 + 𝑐 is known as cost equation or cost
function, where y = total cost, 𝑚𝑥 = variable cost, 𝑐 = fixed cost, 𝑚 = marginal cost
or variable cost per unit, and 𝑥 = number of units. Therefore we have a relationship
between TC, VC and FC, That is: total cost = variable cost + fixed cost.
• If taxi fare (y) is 50 cents plus 20 cents per quarter mile, write the equation retailing
fare to number of miles traveled, m.
• Solution: We know the cost equation for 𝑦 in terms of 𝑥 is: 𝑦 = 𝑚𝑥 + 𝑐.
• Here, fixed cost, 𝑐 = 50 cents = 0.5 dollar (since 1 dollar=100 cents) Variable cost, 𝑚
= 20 cents per quarter mile = 20 x 4 =80 cents per mile = 0.80 dollar per mile.
• Therefore, the cost equation for 𝑦 in terms of 𝑥 is: 𝑦 = 0.8𝑥 + 0.5. However, according
to the question, the cost equation for 𝑦 relating fare to number of miles traveled, 𝑚 is: 𝑦
= 0.8𝑚 + 0.5. (Ans.)
MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 11

LINEAR EQUATION AND FUNCTION

• Disposable Income= Personal consumption expenditure+ Savings

(Disposable income, consumption expenditure)
(312, 295) and (575,537)
Slope=?
MPC = Marginal propensity to consume is the extra consumption that accompanies
when income is increased $1
Savings=?
MPS= 1- MPC
• If x represents sales and y represents selling expense, then (30,22) would mean $30
in sales were accompanied by $22 of selling expense. Suppose last month’s figure
were (14,10) and this month’s are (30,22). How much the sales increase? How much
the selling expense increase? Make a graph showing the points and labelling the
increase.

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 12

1
 10/5/2021

LINEAR EQUATION AND FUNCTION

Example: An agency rents cars for one day and charges $22 plus 20cents per mile the car is
driven. a)write the equation for the cost of one day’s rental, y in terms of x, the number of miles
driven b) Interpret the slope and y-intercept c) what is the renter’s average cost per mile if the
car is driven 100miles? 200 miles?
𝑎 𝑦 = 0.2𝑥 + 22
(b) Slope, m = 0.2, Rental Charge Increases $0.2 per mile driven.
y intercept, x=0, y=0.2x0 + 22= 22
Fixed charge would be incurred even if the renter used the car only for a secret meeting with a
friend and did not drive it out of the parking lot.
(c) Total Cost for x=100 miles, 𝑦 = 0.2 × 100 + 22 = $42
$42
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑠𝑡 = = $0.42 𝑝𝑒𝑟 𝑚𝑖𝑙𝑒 𝑑𝑟𝑖𝑣𝑒𝑛
100
(d) Total Cost for x=200 miles, 𝑦 = 0.2 × 200 + 22 = $62
$62
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐶𝑜𝑠𝑡 = = $0.31 𝑝𝑒𝑟 𝑚𝑖𝑙𝑒 𝑑𝑟𝑖𝑣𝑒𝑛
200

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 13

PAGE-30 EXAMPLE
• Problem: It costs $𝟐𝟓𝟎𝟎 to set up the presses and machinery needed to print and
bind a paperback book. After setup, its costs $𝟐 per book printed and bound. Let
𝒙 represent the number of books made and 𝒚 the total cost making this number of
books. a) Write the equation for 𝒚 in terms of 𝒙. b) State the slope of the line, and
interpret this number. c) State the 𝒚-intercept of the line, and interpret this number.
• Solution: (a) The required cost equation for 𝑦 in terms of 𝑥 is:
𝑦 = 𝑚𝑥 + 𝑐,
∴ 𝑦 = 2𝑥 + 2500. (Ans)

14

2
 10/5/2021

• In the case of business problem, the slope of a cost function indicates the extra cost
when an additional copy is made. The slope of a cost function also known as
marginal cost or variable cost per unit. The slope of the above cost function is 2.
[Do not confuse with the average cost and marginal cost. For example, if
𝑥 = 100 books are made, then, 𝑦 (100) = (2×100) + 2500 = $2700,

average cost per copy is: = = $27

• (c) According to the cost equation 𝑦 = 2𝑥 + 2500, the 𝑦-intercept is

$2500, that indicates the total cost when no books are made. i.e.,
• 𝑦(0) = 2 (0) + 2500 = $2500.
• The 𝑦-intercept of a cost function is also called fixed cost (cost of making no units).
15

• Page#33 (Example Problem)

Problem: The total cost, y of producing x units is a linear function. Records show that
on one occasion 100 units were made at a total cost $200, and on another occasion,
150 units were made a total cost of $275. Write the linear equation for total cost in
terms of the number of units produced. What is the total cost if 250 units are made?
• Solution: Here, 𝑦 represents the total cost and 𝑥 represents the number of units
produced. So, we have two points (100, 200) and (150, 275)
• We know that, an equation of a straight line passing through two points 𝑦−𝑦 =𝑚 𝑥−𝑥

𝑦 −𝑦 275 − 200
𝑆𝑙𝑜𝑝𝑒, 𝑚 = = = 1.5
𝑥 −𝑥 150 − 100
Now the equation of the straight line, 𝑦 − 200 = 1.5 𝑥 − 100 [you may also use(150, 275)]

𝑦 − 200 = 1.5𝑥 − 150; 𝑦 = 1.5𝑥 − 150 + 200; 𝑦 = 1.5𝑥 + 50

Now, for 250 units made, x = 250; So Total Cost, 𝑦 = 1.5 × 250 + 50 = $425
16

3
 10/5/2021

LINEAR EQUATION AND FUNCTION

• Page#34 (Exercise Problem)
A publisher asks a printer for quotations on the cost of printing 1000 and 2000
copies of a book. The printer quotes $4500 for 1000 copies and $7500 for 2000
copies. Assume that cost y is linearly related to x, the number of books printed.
a) Write the coordinates of given points
b) write the equation of the line
c) what is the cost of printing 2500 copies?

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 17

LINEAR EQUATION AND FUNCTION

Solution:
Here, 𝑦 represents the total cost of printing and 𝑥 represents the number of books
printed. So, we have two points (1000, 4500) and (2000, 7500)
• Here, (𝑥, 𝑦) ≈ (1000, 4500) and (2000, 7500)
• We know that, an equation of a straight line passing through two points 𝑦−𝑦 =𝑚 𝑥−𝑥

𝑦 −𝑦 7500 − 4500
𝑆𝑙𝑜𝑝𝑒, 𝑚 = = =3
𝑥 −𝑥 2000 − 1000
Now the equation of the straight line, 𝑦 − 7500 = 3 𝑥 − 2000 [you may also use(1000,
4500)]

𝑦 − 7500 = 3𝑥 − 6000; 𝑦 = 3𝑥 − 6000 + 7500; 𝑦 = 3𝑥 + 1500

Now, for 2500 books printed, x = 2500;
So Total Cost, 𝑦 = 3 × 2500 + 1500 = $9000
MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 18

4
 10/5/2021

LINEAR EQUATION AND FUNCTION

• Page#37 (Exercise Problem 32)

A sales s change from $100 to $ 400. selling expense

y changes from $75 to $150. Assume that given data
establish the relationship between sales and selling
expense as the two change and assume the
relationship is linear. Find the equation of the
relationship.

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 19

LINEAR EQUATION AND FUNCTION

• Page#37 (Exercise Problem 32): A sales s change from $100 to $ 400. selling
expense y changes from $75 to $150. Assume that given data establish the
relationship between sales and selling expense as the two change and assume the
relationship is linear. Find the equation of the relationship.
 Solution:
Here, 𝑥 represents the sales and 𝑦 represents the selling expenses. So, we have two
points (100, 75) and (400, 150)
We know that, an equation of a straight line passing through two points 𝑦 − 𝑦 =
𝑚 𝑥−𝑥
𝑦 −𝑦 150 − 75
𝑆𝑙𝑜𝑝𝑒, 𝑚 = = = 0.25
𝑥 −𝑥 400 − 100
Now the equation of the straight line, 𝑦 − 75 = 0.25 𝑥 − 100 [you may also
use(400, 150)]
𝑦 − 75 = 0.25𝑥 −25; 𝑦 = 0.25𝑥 − 25 + 75; 𝑦 = 0.25𝑥 + 50

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 20

5
 10/5/2021

LINEAR EQUATION AND FUNCTION

Page#37 (Exercise Problem 33)
As the number of units manufactured increases from 100 to
200, total manufacturing cost increases from $350 to $650.
Assume that the data establish the relationship between cost -
y and the numbers of units manufactured - x and also the
relationship is linear. Find the equation of the relationship.

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 21

LINEAR EQUATION AND FUNCTION

Page#37 (Exercise Problem 33) : As the number of units manufactured increases from
100 to 200, total manufacturing cost increases from $350 to $650. Assume that the
data establish the relationship between cost - y and the numbers of units manufactured -
x and also the relationship is linear. Find the equation of the relationship.
 Solution:
Here, 𝑦 represents the total manufacturing cost and 𝑥 represents the number of units
manufactured. So, we have two points (100, 350) and (200, 650)
We know that, an equation of a straight line passing through two points 𝑦 − 𝑦 =
𝑚 𝑥−𝑥
𝑦 −𝑦 650 − 350
𝑆𝑙𝑜𝑝𝑒, 𝑚 = = =3
𝑥 −𝑥 200 − 100
Now the equation of the straight line, 𝑦 − 350 = 3 𝑥 − 100 [you may also use(200,
650)]
𝑦 − 350 = 3𝑥 − 300; 𝑦 = 3𝑥 − 300 + 350; 𝑦 = 3𝑥 + 50

MD MAMUNUR RASHID, ASSISTANT PROFESSOR, IUB 22