Mathematical Economics II (ECO607) VU

Lesson 11

FIRMS ANALYSIS USING INTEGRALS (CONTINUED 1)

TOPIC 041: POLLUTION IN CATTLE FATTENING ANALYSIS USING INTEGRALS

Cattle Fattening involves environmental costs.

Here an intensive cattle-fattening unit is adding pollutant (in hundreds of gallons) to a river at the
rate of 𝒓(𝒕) = √𝒕, where 𝒕 is the number of months that the unit has been in operation.
(a) Graph the rate of pollution for t = 0 to 12 months. Comment.

(b) Calculate the volume of pollutant in the river during the first six months.
Here 𝒕 = 𝟔, therefore diagram becomes:

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Mathematical Economics II (ECO607) VU

⊿𝑶𝑩𝑪 = ▯𝐎𝑨𝑩𝑪 − 𝑨𝒓𝒆𝒂 𝒖𝒏𝒅𝒆𝒓 𝒕𝒉𝒆 𝒄𝒖𝒓𝒗𝒆

𝟔
⊿𝑶𝑩𝑪 = (|𝑶𝑨| × |𝑶𝑪|) − ∫ 𝒓(𝒕) 𝒅𝒕
𝟎
𝟔
⊿𝑶𝑩𝑪 = (|𝟐. 𝟒𝟓| × |𝟔|) − ∫ √𝒕 𝒅𝒕
𝟎
𝟑 𝟔
𝒕𝟐
⊿𝑶𝑩𝑪 = 𝟏𝟒. 𝟕 − ( )]
𝟑
𝟐 𝟎
𝟐 𝟑 𝟑
⊿𝑶𝑩𝑪 = 𝟏𝟒. 𝟕 − {(𝟔)𝟐 − (𝟎)𝟐 }
𝟑
𝟐
= 𝟏𝟒. 𝟕 − (𝟏𝟒. 𝟕)
𝟑
= 𝟏𝟒. 𝟕 − 𝟗. 𝟖
⊿𝑶𝑩𝑪 = 𝟒. 𝟗
As the units of pollutant is in hundreds of gallons, the pollutant in first 6 months will be:
⊿𝑶𝑩𝑪 = 𝟒. 𝟗 × 𝟏𝟎𝟎
⊿𝑶𝑩𝑪 = 𝟒𝟗𝟎 gallons

TOPIC 042: CROP FARMING ANALYSIS USING INTEGRALS

It is estimated that 𝒕 days from now a farmer’s crop will be increasing at the rate of
𝟎. 𝟑𝒕𝟐 + 𝟎. 𝟔𝒕 + 𝟏 bushels per day. By how much will the value of the crop increase during the
next 𝟓 days if the market price remains fixed at $3 per bushel?
𝒅𝑪(𝒕)
= 𝟎. 𝟑𝒕𝟐 + 𝟎. 𝟔𝒕 + 𝟏
𝒅𝒕
Moreover, it is given that 𝑷 = $𝟑.
Let 𝑪(𝒕) represent the rate of increase in crop bushels per day.

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𝒕 𝒕
𝒅𝑪(𝒕)
∫ = ∫(𝟎. 𝟑𝒕𝟐 + 𝟎. 𝟔𝒕 + 𝟏) 𝒅𝒕
𝒅𝒕
𝟎 𝟎
𝟓 𝟓
𝒅𝑪(𝒕)
∫ = ∫(𝟎. 𝟑𝒕𝟐 + 𝟎. 𝟔𝒕 + 𝟏) 𝒅𝒕
𝒅𝒕
𝟎 𝟎
𝟓
𝒕𝟑 𝒕𝟐
𝑪(𝒕) = (𝟎. 𝟑 × + 𝟎. 𝟔 + 𝒕)]
𝟑 𝟐 𝟎

𝟓
𝑪(𝒕) = (𝟎. 𝟏𝒕𝟑 + 𝟎. 𝟑𝒕𝟐 + 𝒕)]𝟎
𝑪(𝒕) = [𝟎. 𝟏{(𝟓)𝟑 − (𝟎)𝟑 } + 𝟎. 𝟑{(𝟓)𝟐 − (𝟎)𝟐 } + (𝟓 − 𝟎)]
𝑪(𝒕) = 𝟐𝟓
The crop after 𝟓 months will be 𝟐𝟓 bushels.
It is the crop function over time, however, if the increase in value of crop is required, Value of
crop = crop × price
𝑽𝑪 (𝒕) = 𝑪(𝒕) × 𝑷
𝟓
𝑽𝑪 (𝒕) = (𝟎. 𝟏𝒕𝟑 + 𝟎. 𝟑𝒕𝟐 + 𝒕)] × $𝟑
𝟎
𝟑 𝟐 𝟓
𝑽𝑪 (𝒕) = (𝟎. 𝟑𝒕 + 𝟎. 𝟗𝒕 + 𝟑𝒕)]𝟎
Applying the lower and upper limits in 𝑽𝑪 (𝒕), we get:
𝑽𝑪 (𝒕) = [𝟎. 𝟑{(𝟓)𝟑 − (𝟎)𝟑 } + 𝟎. 𝟗{(𝟓)𝟐 − (𝟎)𝟐 } + 𝟑(𝟓 − 𝟎)]
𝑽𝑪 (𝒕) = $𝟕𝟓
Interpretation: The value of crop will be $𝟕𝟓, after 𝟓 months, if the price is $3 per bushel.

TOPIC 043: MOBILE PRODUCTION ANALYSIS USING INTEGRALS

Bejax Corporation has set up a production line to manufacture a new type of mobiles. The rate
𝒅𝑷 𝒕
of production of the mobiles is 𝒅𝒕 = 𝟏𝟓𝟎𝟎 (𝟐 − 𝟐𝒕+𝟓) units/month. How many telephones are
produced during the third month?
Given the rate of change of production over time:
𝒅𝑷 𝒕
= 𝟏𝟓𝟎𝟎 (𝟐 − )
𝒅𝒕 𝟐𝒕 + 𝟓
Integrating w.r.t 𝒕 to get the production as a function of time (𝒕).
𝒅𝑷 𝒕
∫ 𝒅𝒕 = ∫ {𝟏𝟓𝟎𝟎 (𝟐 − )} 𝒅𝒕
𝒅𝒕 𝟐𝒕 + 𝟓
𝒕
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 (∫ 𝟐 𝒅𝒕 − ∫ 𝒅𝒕)
𝟐𝒕 + 𝟓
𝒕
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 (𝟐𝒕 − ∫ 𝒅𝒕 )
𝟐𝒕 + 𝟓
𝒕
∫ 𝟐𝒕+𝟓 𝒅𝒕 requires integration by substitution:
𝒖−𝟓 𝒅𝒖 𝒅𝒖
Let 𝒖 = 𝟐𝒕 + 𝟓 ⇒ 𝟐
= 𝒕, 𝒅𝒕
=𝟐⇒ 𝟐
= 𝒅𝒕
Substituting, we get:
(𝒖 − 𝟓)
{ 𝟐 } 𝒅𝒖 (𝒖 − 𝟓)
∫ ⇒∫ 𝒅𝒖
𝒖 𝟐 𝟒𝒖
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𝟏 𝟓
= ∫ (𝟏 − ) 𝒅𝒖
𝟒 𝒖
𝟏 𝟏
= (∫ 𝟏 𝒅𝒖 − 𝟓 ∫ 𝒅𝒖)
𝟒 𝒖
𝟏
= (𝒖 − 𝟓 𝐥𝐧|𝒖|) + 𝑪𝒖
𝟒
𝟏
= {(𝟐𝒕 + 𝟓) − 𝟓 𝐥𝐧|𝟐𝒕 + 𝟓|} + 𝑪(𝟐𝒕+𝟓)
𝟒
𝟏
= 𝟒 (𝟐𝒕 + 𝟓 − 𝟓 𝐥𝐧|𝟐𝒕 + 𝟓|) + 𝒄 [∵ 𝑪(𝟐𝒕+𝟓) = 𝒄′ ]
𝒕 𝟏
∫ 𝒅𝒕 = {(𝟐𝒕 + 𝟓) − 𝟓 𝐥𝐧|𝟐𝒕 + 𝟓|} + 𝒄′
𝟐𝒕 + 𝟓 𝟒
𝒕
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 (𝟐𝒕 − ∫ 𝒅𝒕 )
𝟐𝒕 + 𝟓
𝟏
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 {𝟐𝒕 − {(𝟐𝒕 + 𝟓) − 𝟓 𝐥𝐧|𝟐𝒕 + 𝟓|} }
𝟒

𝟐𝒕 + 𝟓 𝟓
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 {𝟐𝒕 − ( − 𝐥𝐧|𝟐𝒕 + 𝟓|)}
𝟒 𝟒
𝟐𝒕 + 𝟓 𝟓
𝑷(𝒕) = 𝟏𝟓𝟎𝟎 (𝟐𝒕 − + 𝐥𝐧|𝟐𝒕 + 𝟓|)
𝟒 𝟒

Recalling the given information regarding time: “during the 3rd month”. Mathematically;
𝟑
∫𝟐 𝑷(𝒕)𝒅𝒕 which implies 𝒕𝒍𝒐𝒘𝒆𝒓 = 𝟐 and 𝒕𝒖𝒑𝒑𝒆𝒓 = 𝟑.
𝟐(𝟑)+𝟓 𝟐(𝟐)+𝟓 𝟓
= 𝟏𝟓𝟎𝟎 [𝟐(𝟑) − 𝟐(𝟐) − { 𝟒
− 𝟒 } + 𝟒 {𝐥𝐧|𝟐(𝟑) + 𝟓| − 𝐥𝐧|𝟐(𝟐) + 𝟓|}]
𝟏𝟏 𝟗 𝟓
= 𝟏𝟓𝟎𝟎 [𝟐 − ( − ) + (𝐥𝐧|𝟏𝟏| − 𝐥𝐧|𝟗|)]
𝟒 𝟒 𝟒
𝟏 𝟓 𝟏𝟏
= 𝟏𝟓𝟎𝟎 {𝟐 − + (𝐥𝐧 | |)}
𝟐 𝟒 𝟗
𝟑 𝟓 𝟏𝟏
= 𝟏𝟓𝟎𝟎 { + (𝐥𝐧 | |)}
𝟐 𝟒 𝟗
𝑷(𝒕) = 𝟐𝟔𝟐𝟔. 𝟐𝟓𝟕𝟓
Interpretation: Approximately, 𝟐𝟔𝟐𝟔 telephones will be produced during the third month by
Bejax Corporation.

TOPIC 044: FIRM'S AVERAGE PROFIT ANALYSIS USING INTEGRALS

Firm’s profit function is 𝝅 = 𝒇(𝑸) and the level of output (𝑸), varies between 𝒂 and 𝒃 units, then
𝟏 𝒃
the firm’s average profit is 𝝅 = 𝒃−𝒂 ∫𝒂 𝒇(𝑸) 𝒅𝑸. Calculate a firm’s average profit when 𝑻𝑹 =
𝟏𝟎𝟎(𝟏 − 𝒆−𝟎.𝟏𝑸 ), 𝑻𝑪 = 𝟎. 𝟏𝑸𝟐 + 𝟐𝑸 + 𝟏 and output varies from 3 to 8 units.
Solution: 𝝅 = 𝒇(𝑸) = 𝑻𝑹(𝑸) − 𝑻𝑪(𝑸)
𝝅 = 𝒇(𝑸) = {𝟏𝟎𝟎(𝟏 − 𝒆−𝟎.𝟏𝑸 )} − {𝟎. 𝟏𝑸𝟐 + 𝟐𝑸 + 𝟏}
𝝅 = 𝒇(𝑸) = 𝟏𝟎𝟎 − 𝟏𝟎𝟎𝒆−𝟎.𝟏𝑸 − 𝟎. 𝟏𝑸𝟐 − 𝟐𝑸 − 𝟏
𝝅 = 𝒇(𝑸) = 𝟗𝟗 − 𝟏𝟎𝟎𝒆−𝟎.𝟏𝑸 − 𝟐𝑸 − 𝟎. 𝟏𝑸𝟐
Introducing integral with upper and lower limits on general formula of average profit:
𝟏 𝒃 𝟏 𝟖
𝝅𝒂𝒗𝒈 = 𝒃−𝒂 ∫𝒂 𝒇(𝑸) 𝒅𝑸 ⇒ 𝟖−𝟑 ∫𝟑 (𝟗𝟗 − 𝟏𝟎𝟎𝒆−𝟎.𝟏𝑸 − 𝟐𝑸 − 𝟎. 𝟏𝑸𝟐 ) 𝒅𝑸

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𝟏 𝟖
𝝅𝒂𝒗𝒈 = 𝟓 ∫𝟑 (𝟗𝟗 − 𝟏𝟎𝟎𝒆−𝟎.𝟏𝑸 − 𝟐𝑸 − 𝟎. 𝟏𝑸𝟐 ) 𝒅𝑸
𝟖
𝟏 𝒆−𝟎.𝟏𝑸
𝝅𝒂𝒗𝒈 (𝑸) = {𝟗𝟗𝑸 − 𝟏𝟎𝟎 ( ) − 𝑸𝟐 − 𝟎. 𝟎𝟑𝑸𝟑 }]
𝟓 −𝟎. 𝟏 𝟑
𝟏 −𝟎.𝟏𝑸 𝟐 𝟑 𝟖
𝝅𝒂𝒗𝒈 (𝑸) = {𝟗𝟗𝑸 + 𝟏𝟎𝟎𝟎(𝒆 ) − 𝑸 − 𝟎. 𝟎𝟑𝑸 }]𝟑
𝟓
𝟏
𝝅𝒂𝒗𝒈 (𝑸) = [{𝟗𝟗(𝟖 − 𝟑)} + 𝟏𝟎𝟎𝟎{𝒆−𝟎.𝟏(𝟖) − 𝒆−𝟎.𝟏(𝟑) } − (𝟖𝟐 − 𝟑𝟐 ) − 𝟎. 𝟎𝟑(𝟖𝟑 − 𝟑𝟑 )]
𝟓
𝟏
𝝅𝒂𝒗𝒈 (𝑸) = {𝟗𝟗(𝟓) + 𝟏𝟎𝟎𝟎(𝒆−𝟎.𝟖 − 𝒆−𝟎.𝟑 ) − (𝟓𝟓) − 𝟎. 𝟎𝟑(𝟒𝟖𝟓)}
𝟓
𝟏
𝝅𝒂𝒗𝒈 (𝑸) = {𝟒𝟗𝟓 + 𝟏𝟎𝟎𝟎(𝟎. 𝟒𝟒𝟗 − 𝟎. 𝟕𝟒𝟏) − 𝟓𝟓 − 𝟏𝟒. 𝟓𝟓}
𝟓
𝝅𝒂𝒗𝒈 (𝑸) = 𝟐𝟔. 𝟒𝟔
Interpretation: Between 𝟑 and 𝟖 units of output, the firm makes 𝟐𝟔. 𝟒𝟔 units of average profit.

TOPIC 045: FIRM'S AVERAGE COST ANALYSIS USING INTEGRALS

The cost of producing 𝒙 units of a new product is 𝑪(𝑸) = 𝟑𝑸𝟐 − 𝟐 hundred dollars. What is the
average cost of producing 𝟑 to 𝟕 units?
Solution: Given the total cost function, 𝑪(𝑸) = 𝟑𝑸𝟐 − 𝟐, we can find the average cost between
the lower and upper limits [𝟑, 𝟕] by general formula for average of a function using definite
integrals:
𝒃
𝟏
𝒇𝒂𝒗𝒈 (𝒙) = ∫ 𝒇(𝒙) 𝒅𝒙
𝒃−𝒂
𝒂
𝟏 𝟕
𝑪𝒂𝒗𝒈 (𝑸) = 𝟕−𝟑 ∫𝟑 (𝟑𝑸𝟐 − 𝟐) 𝒅𝑸
𝟕
𝟏
𝑪𝒂𝒗𝒈(𝑸) = 𝑨𝑪(𝑸) = ∫(𝟑𝑸𝟐 − 𝟐) 𝒅𝑸
𝟒
𝟑
𝟕 𝟕
𝟏
𝑨𝑪(𝑸) = {𝟑 ∫(𝑸𝟐 ) 𝒅𝑸 − 𝟐 ∫(𝟏) 𝒅𝑸}
𝟒
𝟑 𝟑
𝟑 𝟕
𝟏 𝑸
𝑨𝑪(𝑸) = {𝟑 ( ] ) − 𝟐(𝑸]𝟕𝟑 )}
𝟒 𝟑 𝟑
𝟏 𝟕
𝑨𝑪(𝑸) = {(𝑸𝟑 ]𝟑 ) − 𝟐(𝑸]𝟕𝟑 )}
𝟒
𝟏
𝑨𝑪(𝑸) = {(𝟕𝟑 − 𝟑𝟑 ) − 𝟐(𝟕 − 𝟑)}
𝟒
𝟏
𝑨𝑪(𝑸) = {(𝟑𝟏𝟔) − 𝟐(𝟒)}
𝟒
𝑨𝑪(𝑸) = 𝟕𝟕
Interpretation: The firm will incur 𝟕𝟕 units as average cost if we consider production of 𝟑 to 𝟕
units.

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