1|M ATH FO R B USI NESS CHAPTER 2

Chapter 2

NON – LINEAR EQUATION

2.1. Quadratic functions

I. Solve a quadratic equation

Form: f(x) = ax2 + bx + c
1. Solve a quadratic equation using ‘the formula’
- Step 1: Determine the discriminant 𝛥 = b2 – 4ac

- Step 2: ax2 + bx + c = 0 has solutions

2. Solve a quadratic equation given its factorisation.

f(x) = ax2 + bx + c = (x – x1)(x – x2) = 0
 x = x1 and x = x2

II. Sketch the graph

by finding the coordinates of the intercepts.
- Step 1: Determine the basic shape. The graph has a U shape if a > 0, and an inverted U shape if a <
0.
- Step 2: Determine the y intercept. This is obtained by substituting x = 0 into the function, which
gives y = c .

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- Step 3: Determine the x intercepts (if any). These are obtained by solving the quadratic equation
ax2 + bx + c = 0

Coefficient of x2 is positive → the graph bends upwards → U shape

Coefficient of x2 is negative → the graph bends downwards → inverted U shape

III. Solve quadratic inequalities using graphs.

1. Solve inequalities using graphs
Example: Solve the quadratic inequalities
a) −x2 + 8x − 12 > 0 b) −x2 + 8x − 12 ≤ 0
Solution
- Sketch the graph
- The parabola lies above the x axis (that is, the line y = 0)
between 2 and 6 and is below the x axis outside these
values.
a) The quadratic function takes positive values when the graph
is above the x axis so the inequality has solution, 2 < x < 6.
(The values of 2 and 6 must be excluded from the solution since
we require the quadratic to be strictly greater than zero)
(b) The graph is on or below the x axis at or to the left of 2, and
at or to the right of 6, so the complete solution is x ≤ 2 and x ≥ 6.

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2. Solve inequalities using sign diagrams

Problem: Solve ( x − 2)( x + 3) ≥ 0
Solution:
- The factor x – 2 = 0 when x = 2. So, it is negative to the left of 2 and is positive to the right of 2

- The factor x + 3 = 0 when x = -3. So, it is negative to the left of -3 and is positive to the right of -3

 The expression ( x − 2)( x + 3) is the product of the two factors

IV. Determine equilibrium price and quantity given a pair of quadratic demand and supply
functions.
At the equilibrium point PE = PQ = PD
QE = Q s = QD
2.2. Revenue, cost and profit
Formulas (cái này quan trọng lắm lắm lắm – gặp nó tới final luôn)
Total revenue: TR = PxQ (tổng doanh thu)
Total cost = Fixed costs + total variable costs (tổng chi phí)
TC = FC + TVC = FC + (VC)Q
𝑇𝐶 𝐹𝐶+𝑉𝐶(𝑄) 𝐹𝐶
 Average cost: AC = = = + 𝑉𝐶
𝑄 𝑄 𝑄

Profit = Total revenue – total cost (lợi nhuận)

𝜋 = 𝑇𝑅 − 𝑇𝐶
o Make a profit of a units: π = a
o Make a loss of a units: π = -a
o Breaks even: π = 0
o Maximise profit: πmax
▪ Solution 1:

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4|M ATH FO R B USI NESS CHAPTER 2

- π = 0 at Q1 and Q2
1
- By symmetry, the parabola reaches its maximum halfway between Q 1 and Q2: that is, at Q = (Q1
2

+ Q2)
▪ Solution 2:
𝑑𝜋
- 𝑑𝑄
= 0 at Qx

- (d2π )/(dQ2) < 0 → π maximises at Qx

- (d2π )/(dQ2) < 0 → π minimises at Qx

I. Sketch the graphs of the total revenue, total cost, average cost and profit functions.
π = aQ2 + bQ + c
Sketch the graphs:
- Step 1:
+ The coefficient of Q2 is positive (a>0) so the graph has an U shape
+ The coefficient of Q2 is negative (a<0) so the graph has an inverted U shape

- Step 2: The constant term is c, so the graph crosses the vertical axis when π = c.
- Step 3: The graph crosses the horizontal axis when π = 0, so we need to solve the quadratic
equation aQ2 + bQ + c  Q = Q1 or Q = Q2
 The profit curve is sketched

II. Find the level of output that …

Problem: π = -2Q2 + 20Q - 32
Find the values of Q for which the fi rm
(a) breaks even (Answer: Q = 8 or Q = 2)
(b) makes a loss of 432 units (Answer: Q = 20)
(c) maximises profit. (Answer: Q = 5)

2.3. Indices and logarithms

I. Index notation

M = bn
→ bn is the exponential form of M to base b
→ n: index, power, exponent
bn = b x b x b x … x b (a total of n b(s) multiplied 2gether)
→ b1 = b; b0 = 1
1
→ b-n = 𝑏𝑛

→ b1/n = nth root of b

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5|M ATH FO R B USI NESS CHAPTER 2

𝑛
= √𝑏

→
II. Rules of indices

➢ Production function Q = f(K, L)

➢ Homogeneous f (λK, λL) = λn f(K, L)
- n < 1, the function is said to display decreasing returns to scale
- n = 1, the function is said to display constant returns to scale
- n > 1, the function is said to display increasing returns to scale .
➢ Cobb–Douglas production functions: Q = AKαLβ → homogeneous of degree α + β

III. Logarithms
M = bn → logbM = n
Rule:

2.4. The exponential and natural logarithm functions

e = 2.718 281 828 459 . . . → f(x) = ex : exponential function

Natural logarithm to base e; if M = en then n = lnM

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