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LICEO DE CAGAYAN UNIVERSITY

COLLEGE OF ARTS AND SCIENCES


Department of Mathematics
CALCULUS FOR COMMERCE
I REVIEW ON SETS AND INTERVALS
SETS
A SET is a well-defined collection objects.
Example:

The set of integers: = { , 3, 2, 1,0,1,2,3, } = {| = , 3, 2, 1,0,1,2,3, }


The set of counting numbers: = 1,2,3, = {| = 1,2,3, }

We label a set with the capital letters of the English alphabet such as A,B,C, and enclosed
the elements with braces { }. The symbol is read as an element of or belongs to. For
example, 1 which means 1 is an integer. If the set is empty we denote it by or {}.
INEQUALITY and INTERVALS
Recall the four inequalities: < , , > and .
Inequality Properties
An equivalent inequality will result, and the sense or direction will remain the same if each
side of the original inequality:
1. has the same real number added to or subtracted from it.
2. is multiplied or divided by the same positive number.
An equivalent inequality will result, and the sense or direction will reverse if each side of the
original inequality:
3. is multiplied or divided by the same negative number.
NOTE: Multiplication by 0 and division by 0 are not permitted.
If < , the double inequality < < means that < and > ; that is, x is between a
and b. Interval notation is also used to describe sets defined by inequalities, as shown in the
Table 1. The numbers a and b in Table 1 are called the endpoints of the interval. An interval is
closed if it contains all its endpoints and open if it does not contain any of its endpoints. The
intervals [, ], ( , ], and [, +) are closed, and the intervals (, ), ( , ), and (, +)
are open. Note that the symbol (read infinity) is not a number. When we write [, + ), we
are simply referring to the interval that starts at b and continues indefinitely to the right. We
never refer to as an endpoint, and we never write [, +]. The interval (, + ) is the entire
real number line. Note that an endpoint of a line graph in Table 1 has a square bracket through
it if the endpoint is included in the interval; a parenthesis through an endpoint indicates that it is
not included.
Table 1

II CARTESIAN COORDINATE SYSTEM


Recall that to form a Cartesian or rectangular coordinate system, we select two real number
lines one horizontal and one vertical and let them cross through their origins as indicated in
Figure 1.Up and to the right are the usual choices for the positive directions. These two number
lines are called the horizontal axis and the vertical axis, or, together, the coordinate axes.
The horizontal axis is usually referred to as the x axis and the vertical axis as the y axis, and
each is labeled accordingly. The coordinate axes divide the plane into four parts called
quadrants, which are numbered counterclockwise from I to IV.

Figure 1
Now we want to assign coordinates to each point in the plane. Given an arbitrary point P in the
plane, pass horizontal and vertical lines through the point (Fig. 1). The vertical line will intersect
the horizontal axis at a point with coordinate a, and the horizontal line will intersect the vertical
axis at a point with coordinate b. These two numbers, written as the ordered pair (a, b) form
the coordinates of the point P. The first coordinate, a, is called the abscissa of P; the second
coordinate, b, is called the ordinate of P. The abscissa of Q in Figure 1 is -5 and the ordinate
of Q is 5.The coordinates of a point can also be referenced in terms of the axis labels. The x
coordinate of R in Figure 1 is 10, and the y coordinate of R is -10. The point with coordinates
(0, 0) is called the origin.
III RELATION and FUNCTIONS
A Relation is a set of ordered pairs of mathematical quantities. The domain of a relation is the
set of first coordinates of the ordered pairs of that relation. The range of a relation is the set of
second coordinates of the ordered pairs of that relation.
A Function is a correspondence between two sets of elements such that to each element in
the first set, there corresponds one and only one element in the second set. The first set is
called the domain, and the set of corresponding elements in the second set is called the range.
Vertical-Line Test for a Function
An equation specifies a function if each vertical line in the coordinate system passes through,
at most, one point on the graph of the equation. If any vertical line passes through two or more
points on the graph of an equation, then the equation is a relation.

IV DOMAIN AND RANGE OF A FUNCTION


To find the domain of a function, solve for y in terms of x.
To find the range of a function, solve for x in terms of y.
Example: Find the domain and range of each of the following functions
1
(a) =
(b) = 2
3

Solutions: (a) Find the domain of ():


Solve for y in terms of x.
1
= =
3
Note that 3 0, since if the denominator is 0 it will make the function
undefined. Thus, 3. Therefore, the domain of () is the set of all real
numbers except 3.
Domain: = {}
Find the range of :
Solve for x in terms of y.
1
3
3 = 1
3 = 1
= 1 + 3
1 + 3
=

Note that the denominator should not be zero, hence, 0. Therefore, the
range of () is the set of all real numbers except 0.
Range: = {}
=

(b) Find the domain of ():


Solve for y in terms of x.
== 2
Note that values of a square root should be greater than or equal to 0. Thus,
2 0 which implies that 2. Therefore, the domain of () is the set of
positive numbers greater than or equal to 2.
Domain: = [, +)
Find the range of ():
Solve for x in terms of y.
= 2
2

2 = 2
2 = 2
= 2 + 2
The values of are all real numbers. Therefore, the range of is the set of
all real numbers.
Range: =
EXERCISES:
Find the domain and range of the following functions:
1. = 2 + 1
3. =
2.

4. =

3
+4
2

+9

V EVALUATION OF FUNCTIONS
It is often convenient to represent a functional relationship by an equation = (), and in this
context, and are variables. In particular, since the numerical value of is determined by
that of , we refer to as the dependent variable and to as the independent variable. To
evaluate a function, just substitute the value of the independent variable to the equation of the
function.

EXAMPLES:
1. Find (3) if = 2 + 4.
Solution: 3 = 3 2 + 4 = 13.
1

2. If = 2 2 , find (if possible) (27), (5), and 1 .


Solution:
Rewrite the function as = 2. Then
27 = 27 2 = 25 = 5.
5 = 52 = 3
and
1 = 1 2 = 1
is undefined, since negative numbers do not have real square roots.
APPLICATION TO BUSINESS
Example: Suppose the total cost in dollars of manufacturing units of a certain commodity is
given by the function = 3 302 500 + 200.
(a) Compute the cost of manufacturing 10 units of the commodity.
(b) Compute the cost of manufacturing 10 th unit of the commodity.
Solution: (a) The cost of manufacturing 10 units is the value of the total cost function when
= 10. That is,
Cost of 10 units = (10)
= 103 30 10 2 + 500 10 + 200 = 3,200
Thus, the cost of manufacturing 10 units of the commodity is 3,200 dollars.
(c) The cost of manufacturing of the 10 th unit is the difference between the cost of
manufacturing 10 units and the cost of manufacturing 9 units. That is,
Cost of 10th unit = 10 9 = 3,200 2,999 = 201
Thus, the cost of manufacturing 10 th unit of the commodity is 201dollars.
EXERCISES:
1. Suppose the total cost in dollars of manufacturing units of a certain commodity is
given by the function = 3 302 + 400 + 500.
(a) Compute the cost of manufacturing 20 units.
(b) Compute the cost of manufacturing 20 th unit.
2. At a certain factory, the total cost of manufacturing units during the daily production
run is = 2 + + 900 pesos. On a typical workday, = 25 units are
manufactured during the first hours of a production run.
(a) What is the domain of the function ?
(b) Express the total manufacturing cost as a function of .
(c) How much will have been spent on production by the end of the third hour?
(d) When will the total manufacturing cost reach 11,000 pesos?

VI TYPES OF FUNCTIONS
All functions are classified as either algebraic or transcendental. The algebraic functions are
polynomial functions such as rational and irrational functions. The elementary transcendental
functions are trigonometric and inverse functions, exponential and logarithmic functions.
Some Types of Algebraic Functions
1. Linear Functions
2. Absolute Value Function
3. Greatest Integer Function
4. Signum Function
5. Quadratic Function

VII APPLICATIONS OF FUNCTIONS TO BUSINESS AND ECONOMICS


BREAK- EVEN ANALYSIS
Businessmen are always concerned with the problems of the following nature: How
many items should be sold in a week to make a profit or to stay in business? What should the
price of an item be to break even ( no gain or loss) or to make some profit from such
investment?
If the revenue from sales exceeds the cost of production, then the business is running
at a profit; if the revenue equals the cost production, then the company neither gains nor
loss, it breaks even; and if the cost of production exceeds the revenue, then the business
operating is at loss.
A. THE PRODUCTION COST FUNCTION
The total production cost equals the variable cost plus the fixed cost. Thus,
= +
where the variable cost is the slope of the cost function and the fixed cost is considered
as the overhead cost.
B. THE REVENUE FUNCTION
The total revenue function of any function () of the number of units of the product it
sells. The total revenue function is given by
=
where is the number of units sold and is the selling price.
C. THE PROFIT FUNCTION
Let () be the cost function and () the revenue function of certain company. Then
its profit function () is given by
Profit = Revenue Cost
= ()
To break-even means the cost is equal to the revenue thus, = ().
The marginal profit is the slope of the profit function which is equal to 150.
D. CONSUMPTION AND SAVING FUNCTIONS
The relationship between consumption and disposable income is expressed as
= = +
Where
C = consumption
= disposable income
= autonomous or basic consumption
= marginal propensity to consume
Note that consumption depends on income; autonomous or basic consumption
indicates the level of consumption when = 0; the marginal propensity to consume
measures the change in consumption with respect to a unit change in income or it is the
slope of the consumption curve.
Similarly, saving depends upon income. Thus saving, , is also a function of income .
That is,
= +
Basically, consumption refers to the amount spent by households on goods and
services whereas investment refers to domestic spending by business on capital goods
in addition to inventories, and construction.
Consumption + Saving = Consumption + Investment
Saving = Investment
At an equilibrium level the income derived by production is either spent or saved by
households. That is,
Income = Consumption + Saving

EXAMPLE 1:
Suppose that a company has a fixed cost equal to P10,000 and has a variable cost of P50 per
unit which depends upon sales volume. If the company sells the product for P150.00 per unit,
find
a. The total cost function.
b. The total cost when the company sells 100 units.
c. The total revenue function.
d. The total revenue when the company sells 100 units.
e. The profit when the company sells 100 units.
f. Find the break-even point.
SOLUTION:
Let = the number of units made or sold
= the selling price
P 50.00 = the variable cost per unit
P10,000.00 = the fixed cost (overhead cost)
P 150.00 = the selling price
100 units = total number of units made and sold
a. The total cost function ():
() = (variable cost per unit)(no. of units made) + fixed cost
() = P50.00 x + P10,000.00
b. The total cost when 100 units are made:
() = ? when x = 100
100 = P50.00 100 + P10,000.00
100 = P5,000.00 + P10,000.00
100 = P15,000.00
c. The total revenue function ():
= selling price number of units sold
=
= 150
d. The total revenue for the sales of 100 units
= 150
100 = 150 100
100 = 15,000.00
e. Profit when the company sells 100 units
= ()
100 = 100 100
100 = 15,000 15,000
100 = 0, the company neither gains nor losses.
f.

Break-even point
To break-even means = :
=
150 = 50 + 10,000
150 50 = 10,000
50 = 10,000
= 200 units
We substitute = 200 into () or () to find the break-even point. We have
= 150
200 = 30,000
Hence, the break-even point occurs at (200, P30,000).

EXAMPLE 2:
Suppose that the consumption function is given by = 80 + 0.48 where C is the aggregate
consumption and is disposable income (in billions of pesos).
a. What is aggregate consumption when disposable income (in billions of pesos).
b. When disposable income is P10 billion, what proportion of it is consumed?
Solution:
a. If = 20billion, then
= 80 + 0.48
= 80 + 0.48 20
= 89.6
Thus, aggregate consumption is 89.6 billion pesos when disposable income is P20 billion.
b. The proportion of disposable income that is consumed id 0.48 for any level of
disposable income. That is, if = 10billion, then
= 80 + 0.48
= 80 + 0.48 10
= 84.8
Thus aggregate consumption is P4.8 billion [0.48(10) =4.8] when disposable income is
4.8
P10 billion, which is 84.8 0.057 of aggregate consumption.
EXERCISES:
1. Suppose the fixed cost of production for a certain commodity is P10,000 and the
variable cost is P85.00 per unit. Determine the production cost function. How much is
the cost of production when 1,000 units are made?
2. The cost of producing x units of a product is = 500 2 + 180,000. The revenue
from selling x units is = 800 2 + 1,000. Find the profit function (). Compute
the profit when 1,000 units are sold.
3. Suppose JunComs Enterprises is selling a new line of product for P350.00. It costs
P200.00 to produce a unit with an overhead cost of P56,250 per day.
a. Find the production cost function and the revenue function.
b. Find the break-even point.
c. Suppose the company sells 500 units a day, find the average daily profit.
d. Find the marginal profit if the company sells 501 st unit.
4. It is estimated by the Flors Peanut Butter Shop that the cost of making x glasses of
peanut butter a day is given by = 0.5 + 4,500. If an average of 150 glasses can
be sold a day, what should be the price of a glass of peanut butter to break-even?
5. A Shop & Eat Restaurant makes siopaos and has a daily overhead of P1,500. If costs
P10.00 to make a siopao which sells for P15.00.
a. Find the cost function () and revenue function ().
b. Find the break-even point.
c. If 100 siopaos are sold a day, is the restaurant operating with a profit?
6. Brad Pitt estimates that the cost of manufacturing a certain product for a day is
= 100 2 20,000. If an average of 8,000 units must be sold a day, what should be
the price of the product?
7. Suppose that the consumption function C is given by = 100 + 0.68
Where C is the aggregate consumption and is disposable income in billions of pesos.
a. Find the amount
i. Consumed when disposable income is P250 billion?
ii. Saved when disposable income is P250 billion?
iii. Consumed when disposable income is zero?
b. Find the marginal property to consume?
c. Express the saving S as a function of disposable income .
d. If investment is P100 billion determine the equilibrium level of disposable income.
References:
Comandante, F.L., Calculus For Business and Economics
Hoffman,L., et.al., Calculus for business, economics, and the social and life sciences
Gordon, W., Applied Calculus for business, economics and finance
Barnett, et.al., Calculus for business, economics, life sciences and social sciences