MATHEMATICS

FOR BUSINESS
Chapter 2
Le Ngoc Anh Khoa, MS.c

Non-Linear Equation
Outlines
● Quadratic functions
● Revenue, cost and profit
● Indicies and logarithms
● The exponential and natural logarithm functions
2.1 Quadratic Function
• General form : y = f(x) = ax2 + bx + c
(a # 0)
• ∆ = b2 − 4ac
∆ > 0 : equation has 2 solutions
∆ = 0 : equation has 1 solutions
∆ < 0 : no solutions

• Solution where y = 0:
−𝑏 ± 𝑏2 −4𝑎𝑐
x=
2𝑎
Practice example

Result:
a)
b)
c)
d)
Application
Application
 Sketch the graph of quadratic function:
y = f(x) = ax2 + bx + c

Step 1 Step 2
 Determine the basic shape. The  Determine the y intercept. This is
graph has a U shape if a > 0, and obtained by substituting x = 0 into
an inverted U shape if a < 0. the function, which gives y = c.
Step 3
 Determine the x intercepts (if any). These
are obtained by solving the quadratic
equation: ax^2 + bx + c = 0
U shape Inverted U shape
 2.2 Revenue, Cost and Profit
 Cost function
• Cost (TC) is the total cost of producing output.
The cost function consists of two different types of cost:
- Variable costs
- Fixed costs.

• Variable cost (VC) varies with output (the number of units

produced). The total variable cost can be expressed as the product
of variable cost per unit and number of units produced. If more
items are produced cost is more.

• Fixed costs (FC) normally do not vary with output. In general these
costs must be incurred whether the items are produced or not.
Formula: TC = FC + (VC)Q
Average cost: AC = TC/Q
 Revenue
Revenue (TR) is the total payment
received from selling a good or
performing a service.
Formula : TR = PQ
 Profit (𝛑)
Formula : 𝜋 = TR - TC
 Example
If fixed costs are 30, variable costs per
unit are Q + 3, and the demand
function is
P + 2Q = 50
Show that the associated profit
function is
π = −3Q2 + 47Q − 30.
 Example
If fixed costs are 30, variable costs per
unit are Q + 3, and the demand
function is
P + 2Q = 50
Show that the associated profit
function is
π = −3Q2 + 47Q − 30.
Find the break-even values of Q and
deduce the maximum profit.
2.3 Indicies and logarithms
2.3 Indicies and logarithms
2.3 Indicies and logarithms
2.3 Indicies and logarithms
Practice exam[;e

Result:
a)
b)
c)
d)
e)
2.3 Indicies and logarithms

Four rules of Indices Three rules of logarithms

bm x bn = bm+n If M = bn then logbM = n

bm: bn = bm-n logb(xy) = logbx + logby

(bm)n = bmn logb(x/y) = logbx – logby

(ab)m = ambm logbxm = mlogbx

Example
Cobb – Douglas production function: Q = f(K,L) =
AKαLβ
( K : capital ; L : labour )
A function Q = f(K,L) is said to be homogenous if:
f(λK,λL) = λnf(K,L) = A(λK)α (λL)β = Aλα+β Kα Lβ
The power, n , is called the degree of
homogeneity:
+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
2.4 The exponential and natural
logarithm functions

● Exponential function : f(x) = ex

Natural logarithm : If M = en then n = lnM

● ln(xy) = lnx + lny

ln(x/y) = lnx – lny
lnxm = mlnx