5.1 Derivative nd optnization Derivatives and optimization la this chapter the concept ofthe derivative - an expression trom which the slope ofthe fanction can be found and which helps to Idenuily any turning points ~ is introduced, Rules fr finding deisaves for functions o singe variable are studied. Decivatives are then ‘applied to optimication prblems in economics and business ~ whet the best value of fanctons is sought ~ and points of inflection are considered. LEARNING OUTCOMES By the end ofthe chapter you shouldbe able to find derivatives for many polynomial and rational functions, understand their uses io ‘management and economic applications, and find local and plobal optima in a variety of cases Jn mormative modes ia busines ance and economics the decsie- ‘maker's ee isto nd values ofthe decsion variables that optinize« function representing tir objectives, Many posible goals may be relevant, For example, a manafactrer may wish to know: the level o production that misimize the fn’ nit eos how to combine proses to make a given outpt st miimum cots how best to apportion scarce factor between products: the wotume of product ales at which company turnover peak hhow to maximiae company profits or return on capital ‘Addressing these questions through analysis snot just a mater of Finding slats bt abo inoles nding ropites charactering coptina 6 eq, The maya esl make clear important __ “eamcepts such as marjal revenue. marginal cst and esti of eamand, and bring ont the elatonship betwos them. Although decision-makers may seek merely satisfactory performance ~ sach 25 2 target rte of turn othe sles growth or prt noc fo the Inds = thee are few convincing reso for no ing fr an opimum eae all relevant factors hve bea taken into account. This usualy corresponds to maximum or icimum of &fancton, although tare vs176. 5.2 Slope and turning points Figure 5. Consider the fancton of Figure 5.1. The expesson. if any. that produce a function ofthis appearance would be of daunting bat itis only the graph that Is of interest here Fo values of x which farge in absolute terms the function has the x ads as an asymptote approaches ths from above. The function has seven turning points values of x frem x; to x; Ibis clear that x). 25.15. and xy produce values ofthe function which are the largest in their own neighbour = i not necessarily overall, The values of the function, a these points a= ‘tid to be local maxima, The values of x =x). x). and x produce the lowest value of the function In their immediate veinity. The values of function at these points are local minima. Tossing points can be either ‘maxima or minima and are called stationary points or extreme ‘points. The term ‘stationary point’ highliphes the property common to all turning poins ~ the fact that a the precise point the function is stationary ~it has zero slope. If @ function does not have zero slope at fa point it must increase for a change in x in one detion (either an. increase ora decrease) and fall asx changes inthe other direction. So the function cannot have either & maximum or a minimums at the point itsell oo) Zero slope isa necessary condition for a foc maximum or a ‘minimum, For a micximum, zero slope is essed but is not enoagh on its own — itis nota sufficient condition. AI the values f(s). Jos), {les} and f(e;) are local maxima, but only fis) isthe global maxiimurn. ‘This isthe Highest value taken by the functiow at any point i the ‘domain, Salary, ffx) isthe global minimum. For a point to be the ‘global maximum ofa fanction with an unrestricted domain, the value of ‘$l at this point mast be greater than at the other local maxima and be ‘greater than f(x) a8 increases or decreases without limi. That is. as "x-tte0 and as 21-00 ‘Mathematics for bsimss, Eronce and economicsWhere the demain ofthe function Is restcced it is necessary that ~ ‘the turning point which is a potential global maximum mast not be {ess than the value of f(x) at the end-points of the domain, The usual Purpose is to End the global maximum or minirium. tn Figure 5.1 the * global maximum is unique. but it may be the case thot the overall highest value ofthe function occurs at more than one x wake. Such ‘non-uniqueness pes the decision-maker an extra choice and i may be clear that one ofthe points is better on grounds nt incded in the function tthe prt strategy can be ust to iva lol ‘maximom a flows 1 Find all turning points of the function. 2. Distinguish between turning points giving local maxima and those producing lal minima, 3 Find the global maximum from amongst the focal maxiva ‘The first step requires a means by which to determine all values of x for ‘which the fonction has zero slope. This could be done if * an expression could be obtained which gives the ope ofthe fanction at each value of x; * if this epresion were set equal to zero and solved for x ‘The valacs af the function corresponding to these x valves iaclude all local maxima and minima produced by turning point. The procedures can be applied to business and economle models ~ for ‘example finding revenue or profits maximizing output levels for a firm, the level o use of plant giving a minimurn of wit cas. or many ‘other applications. 33 ‘To move to fading an expression which glues the loge of tbe function, ‘An approach to the, consider the mst convenient non-lineat function the squaring derivative fnction: yar Es ‘Take any point Pon this function. As shown in Fighre 5.2. the slope of ‘the function at point P is approximately equal to de dope ofthe straight line comecting P and the nearby P® (a wide separation of P and P*is shown fr illustrative purposes) ‘et the value ofthe independent variable at P° be'r+ Ax. where ‘Ax, read as dela x, means a small change in x, The value ofthe function at P is? and at P® itis (e-+ Ax)? Thus the chang in the value of the fonction as x changes to x + Ax will be Ay, whee Ana (tba? =‘The slope ofthe line PP® (which approximates the slope ofthe fanctioa Pi or pp? 0 dope ot oe 9 __ change in vaue of function erage in : _ Sct dx) — fix) a ‘Ar 3 4 Be ‘This ratio will now be used to describe the slope of the line segment PP? From what we have already established we can write by_ (e+ As? : ies ar : “Peale date : ae _2xte + (Oe Serr. sothat mi Ay A Hareb Ox ‘ . 62) ‘$02 ¢ Axis the precise slope ofthe line PP. Now as P ges closeeto Pw Ax becomes smaller and (5.1) becomes a better approximation to = + theslope of the curve itself at BThe value of (5.1) as Axx becomes + smaller approaches’ 2x. and no leap of imasination is needed to se Ua 178 atheros for business, finance ond excnonicsDerivatives dnd épliizaton the slope ofthe function itself at P s 2x NOle that 2rls a formal | sich sates the slope ofthe fncton y =" at any point tn the 4 domain ~ this expfesston js the derivative ofy =x? $0 when x = 1 the derivative gives the slope of y= 2 as 2; when x = ~4 the slope is =8: and when x = 4150 the slope is +300, Figure 5.3 plots the errative dy/dx = 2 on a graph set below that of the function y = 2 The same horizontal scale is used in both cases. Note thatthe height of the derative graph gives the slope ofthe original function. We ned new notation to distinguish he derivative its from the slope ofthe chord PE, The two most eonssonly used forms of notation ! forte derivative are shown in equation (5.2) =f") (62) Back scheme has its advantages und we wil use them both. The ‘dy/ax notation for the derivative compares most directly with the ratio ‘Sy/Ax, which gave the slope ofthe chon. This is Leibnia’s notation. In a simdar vein, the derivative of () cam also be Indicated by Fy, ve) &* The fe) representation ofthe derivative I called function ‘The remaining notation that is used to indicate the derivative is Dffe) or De) ‘The above approach to obtaining the derivative of y = x? could be * ‘used, laboriously, to find derivatives for higher powers of x and establish 63) while moving in the other dcectom we can obtain yas! dy/dr : 54) gas? dy/dr ue sotbe derivative of a constant is zero. Exercises 5.3 1 Using the Ay/Ax appcoach above, find the derivative of os 5A (vr results so far invite the condusion that to obtain the derivative of x ‘The power function raised to any power. the power is reduced by one andthe ‘old’ power | rote “becomes the coeficient of x in the derivative. That is if ~ | gee | ppt ga (55) - (5.5) isan important formula co which s based the power function rele fr differentiation ~ the mae given tothe proces of cbtsving the derivative. Consider exayypies of (5.5) in the following cases: : When ms post integer = 31s 1458, and : or erample the slope ofthe funtion y = 3 when ‘the slope when x is —2 is —392. When mis eater 180 ‘Mothomatics for business, Finance ond economics ~‘We have found here the derivative of 1/22, to which it was not obvious ‘that the rule applied, To use it, convert the reciprocal to the form where 2s raed toa nejtive power inthis way we have found that or 1 : ua fy 2 a When m isa raion a & Here we have found the derivative of y = yx. Agnin the first xp 612 ‘convert the expression to a form to which the rule can be appl, de Dye ‘As with reciprocals. io obtsin the derivative: terms involving dal signs should be converted to power function fam. As another examri Sa) = yx? ‘Remembering thatthe radical sign isin effect an instruction to divide the exponent by 2. we can re-express this function as Sah Jn the orignal notation this =15ye When mis on iain! nur fisy= 0? Si) va 0 the rule applies without variation when m is an irrational number. ~ Minor generalization of (5.5) produces the power function rule. A rover function takes the farm cx where the base. vale and the exponent. mis a constnt. The rule is The power function rule Where y = 8 eget : 1B‘The rule applies where ¢ and a are any real valued constants. fixy=-27.5 si)= Nor Consider the special case ofthe power function rule where m= 0. For y=a? to which application of the power function rule produces a result of 2et0, This outcome Is lselfa named rule: ‘The constant function rale Where fix) = © Ja) =0 “This confinms that the slope ofa horizontal line is zero! Exercises 5.4 1 Find the derivative forthe folowing functions: (i) Fa) 2. Find the derivatives for he Iolowing: f=... | fy fide? (i) “fish et 182 a ‘Mashetics for business, finance and economics64 fix) = 1004100 20 bly 5 3 Find the derivatives fio fllowing uncons, in which 0, b, 1m, n,p ond ore constants: bl fla) | a fa) =] | Mil ya (i) Aide? 4 Find the derivatives forthe following: Wy mye apne Wa) y= (V2- ye?! +) Ae) = 0.280? SS We now consider mult-term expressions. The sum-dlifference rule Differentiating allows the power fonction rule to be extended w functions where polynomials ‘several such terms are separated by plus and minus signs. The rule ts ‘The sum-difference rule Where y=fls) + (2) ay “ i. Brey) 69) ‘in (5.6) the separated components are shown as functions. ‘They may ‘be individual terms or themselves comprise several elements. [neither case the expression as a whole consists of « number of terms each of which can be differentiated individually. This is the fub of a powerful rue. No matter how many functions are Inked by the plus and minus sign it always bolls down to a number of stinct terms which can be tackled one at a time. As an exemple ofthe ru, consider ya artes 88 sae 4? Benaess Now apply the rue to the diflerence between terms: . ga 98 eponsre Ba 5x46 Declines andl optimization551 1 the Application mexginel onclysis of he fren 164 oth sums and dlflerences may be involved, as in poe 22843870 4422425 y sitet 3 Bae 120 + 1504212 +8 Now use the rule to differentiate a now-polyriomial: So artS saat? t= 1a 5 fae? 2g 41's nol a polynomial as not all exponents are positive integers. The sum-difleence rule can be applied when x is raised to any real power Jn the marginal analysis of the firm in Chapter 4 we considered a fxm with quadratic revenue and profit functous and used the properties of parabolas. The same data can be used to show the effectivenesé of ‘derivatives. The revenue function was R=50x- 0.12? 67 where i is sales revenue and x represents physical sales volume (output in this mode). We know that (5.7) produces a paeabla ‘which opens down = so the turning point (lhe vertex) is @ maxienam (ater on we will distinguish maxima from minima using decivatives). -Avpying the power function and sum-diference rules, the derivative fs & en 0-02 68) ‘hich shows the rate of change of revenue as output (= sales her) is varied. This isthe important economic concept of marginal revesme (GM), Defined as a derivative, marginal revenuc is a'rate of change at a ‘ant but it is often helpful to think in terms of small practical ‘aration, usually one unit. Ths finkte approximation to MR is ‘defoed as the extra revenue from one more unit of output 0% 28 ‘caawenient, the loss of revenue resulting from the sale of one less unit. Gnsiler an output of 100 units. Seting x = 100 In (5:8) produces aR 50 — 0.20100) = 30 = MR & So the rate of change dt revenue at += 1001s 30. Now coir finite approximations. We can use (5.7) to caeulate revenues when x = 100, 101 and 99. Results are shown in Table 5.1. "hese approximations to MR are within one-third of percent ofthe rate of change figure. In absolute terms the Bnite change in revente. ees doven by 0.2 for each unit increase in x. This onstant rate of ‘honge(--0:2) is the slope of the marginal revenue line. The value ~O.2is the slope of the slope of the revenue function. ‘Mathematics for buses, finonce and economicsso that Table 52 a 1004090 0 10140288 49 99 39688 31 [Now repeat the calulaions fr a level of output where the unit ‘change is a greater proportion of the intial output level. At equation (5.8) gives the marginal revenue as 49.6. Table 5.2 shiws the finite change calculations around the initial x = 2 position. The finte measures are an even beter approximation accurate to one-ith of percent ofthe rate of change figure. The significance of this high precision is thit where the derivative is easy ta calculate it can be used to assess the consequences of finite changes. Where the derivative hard (0 find, finite mersures may approximate well enough tothe rate of change at a point. As we have sen, to give a stationary’ vale ofthe fonction the derivative mast bene, In the present example the one stationary value isa maximum taken fora value of x satisfying an fe 50-0280 50 ‘Sales of 250 units per perc! will produce revenue of 6250 (by substitution of x = 250%n(5.7)). Rgore 5.4 graphs the problem. : mR TAG) — TRA) 3 996 0 3 149 +495 1 493 2 [Note that MR stars at 50 an i a sralght line (being the drive fa quacatic), Under nooalcreamstances a frm would not chowe tw.operate at a level of output t which MR was negative. A revenue tninded fr. would se outpat vel so that MR was zero, while. we wil se, the prof minded fen chooses an output where MI i oie ‘The equilibrium condita for maxiowm revenue is MR = 0. This Tn a cornmonsense appeal, bt this is not skys so. condition seems counterintuitive to understand its validity confirm that an ‘optinuim would mot be achieve ifthe condition di rit hold. tn the ‘resent case f MR was pave revenue could be increased by Increasing output while MR was ngatiné revenue could be increase ty reiciny output. Soi seseata that MR be zero for # maximum of total reyenue. Now consdee profits ain. Gven the cost function Co 4x +450, profs (eps bythe symbel x) are n= 46x— 0.12450” . 69) 185186 Using the knowledge thatthe profits parabola opens down, a maximut of profit occurs when the derivative of (5.9) 8 zero, That i an $= 46-02x=0 (510) from which ¥=230 “ ‘which confirms the result found in Chapter 4 sxing the properties of parabolas. The derivative dr/dx Is marginal profit, whichis nero at a ‘maximum, However, the contition for meximam profit is usually sttod in terms of marginal tevenue and marginal cost. dc/ax. By definition, z=R-C ar _an ac = (51) ace on (5.12) states that, for a maximum of profit, marginal revenue should. on a S ‘Mathematics for busin, nanes and eccnamicsTo confirm this inthe curresit example: MR ~ 50 -02(230) = 4 a. Mon a4 Appreciation of his fandamental economic principe can be reinforced by suppsing that the frm operated where XT # MC. In particular, suppose that the output level was such that MR=2 Me=4 ‘0 the frm could increase profit by reducing output, asthe rate of lss ‘of revenue (2) s less than tho rate of reduction of cot}. so the excess ‘of revenue aver cost must rise. An alternative description of marginal “cost as escapable cost comes to mind. Again, if an output bevel (225 ‘nits) was set such that MR=5 and MC=4 the firm could increase profs by stepplng up production, asthe vse io ‘costs would be mare than offset by the Increase in revenne. ‘Now consider an example v Suppose ‘that the average total east (unit cost) for the manufacture of product is y= —90r+ $000 + 25 0002-* (5.13) | where y i erage cast and x Is output level The domain ofthis rational fanction is x >0, and the graph is Wlustrated in Figure 5.5. "The function asymptote tothe y axis and for high values of it ‘approaches unit weil costs as given by 902+ 4000 as unit fed costs Decome exer sna. The Bm wishes to know the lew of onput. 2° for which wt cof lowest. This isthe outa where mast compeitie pice can be charge without making a las. While thi is | fot likly to be Use met proBtable point in the short eam. can be 2 L Innportantin aggresive competition. In theory a minimus unit cost postion soch as ths shoul esule under conditions of pure competition in the long tun. Knowing the general shape of the eave the minimum | . runit eos pion is found by setting the derivative of (5.13) o zero. | | That oy 2 : OW 2g 99250008: = 5. 2x99 250008? = 0 (5.14) : : sr Desnote dd optimization‘Multiplying both sides of (5.1/4) by x” £0 produces the cubic 2x? ~ 90x? - 25000=0 ‘This equation has one real solution at 3° = 50, the ether two roots being compler. An output of $0 units minimizes unit cost at £2500, tis a useful exercise to compare this value of x = SO with the ‘output level at which unit variable cost reaches @ mininum. Given the shape of the unit fixed cost hyperbola. unit variable cost always reaches its minimum at a lower ovipat ew! than unit cost as.a ‘whole. Inthe present case unit variable cost reaches iis minimum Exercises 5.5 2. Find the derivative, for the folowing expressions, in which 0, i, ced, k, mond n're constants: aoe My S008 tat + ont tay? +0405 vee ‘Mathematics fr busines, inones and economiessar The product rule Find th derivative forthe fallow fnctions, and he points ‘ot wich the fonctions have sonary values. = ; y= 6x2 — 156x+ 100 pegs Sx? + 100x= 20 oS 9x? — 60x + 100 Its often necessary to find the derivative of expressions which are ratio. cr the product of two oF more functions. each of which may be ease te dilerentiate than the expression asa whole. So ifthe derinative the whole can be'set out in tems ofthe derivatives of ts paris a more convesient method wil result. Here we consider nxo rules for ferentiation: the product rule and the quotient rue. For a function which isthe product oftwo functions, the product rule states The product rake Where y=f(te) #ragesare — 618 oe ee Sita ‘Begin with an expression for which the result is elready known. The | cubing function y= 25 can be represented as the product of two functions, Jey=? md gs) =* apressat inthis way. our task Isto find the derivative of gate Anobing the prod rues expected, | fe | rd el +xde et pease Now consider the date of yates ae) ‘This expression can be seen as the prodbet of Se) = gla) = (2 4225). ‘Application of the product rule produces: Bo aap + 1058 4 4 ache 2a! + 40x + Bx + 166 Fs ; = 2028 + 5604 which could be checked by multiplying out the bracket in y anid differenating the result using the sumdifierence rule. As may be confirmed, the slope of the function when x= 3is 42-444, ‘The more complicated are f(x) and glx). the greater is the value of the product rule. Por example. consider y= (8 42x? — Su — at 4429-70 ty) applying the rule # Bete) + 2x? ~ sense! ~ ae 4 12 te Goa tet + 20? ~ sense ~ 4x84 127 142+) $ Bx? 4 4x 5)(x5 — at 4427 +2) ‘which could be simpliled to 38s + 7° ~ 18x" 4 30x" — 1320? 4 111-10) “The unsimplifed form of the derivative may well ufice, Ifthe aim is to find the numerical value of slope it is usually quicker to use the ‘unsimplifed form. The product rule also applies to expressions involving the product of more than two fanctions. For example, y= fllgsdh(x) ap yes inssion ‘Thus fr = 2x3x- 14x +2) = da(3x = If + 2x3(4x + 2) + 284-1) +2) ie Which mls to 722" + 8x — 4, which can be confirmed by ‘expanding y 20d using the suum-difference rue 562 ‘As its ne suggests, the quotient rule applies othe diflerentiation of The quetioa’ rule the ratio of two functlons: f(s) «) o ‘The quotient rule Where y (5.16) 190 : Mathematics for busines, france ond économicsist apply the rule wth cubing function, but whse iss ‘The valuc of the rake isn ts aplication to more imvaked exressis such as vis re for which the quate rule podces dy _ G4 2)G2 4 Yb 4 22x Using this expression. when x = ~2 the slope of wis (y/éx = 52/49 2 1.04, Now consider dy _ (4 =2°X5e4 — 6) + 720% a aa 3) {A special case of the quotient rule arises when the numerator is . ‘This is the reciprocal re, giving the derivative ofthe reciprocal of a function. If Se) bey? For example if) = =, ther by the reciprocal rule Re yy wae ‘which confirms the result akeady objained by other reat, [Desiratnes Bnd opfinization a1cee 5.7 The chain rule 2 “1 Use the product rule find the drivatve fo the fllowing- . y=? +Xlbe x2) [St A210 +735) [6x8 + 3x2 4 Ball + x2 tt) b+ Mbe~ 1) Use thin ad dart fx he how (e417) os Wy eed a er Wi Bo = a Ax — = +3 (0) Fle) = 3G) Use the. cea tle to find the derivative of Fle} = 2 = Wc? Con your result be confirmed by proceeding in a diferent woy? {il) Find the derivative of f(x) = (x? — 2x2}[x2 + 2x)(3x - 5)? ‘nd ovale the slope of he fonction fx} at } ‘The chain rate applies to expressions which are a function of a function. This is an alternative name forthe rule which is also known as the composite function rule. Consider = (P42) (637) Currently our only means of finding the derivative is by expanding the ‘bracket. Expansion is practicg! here but ifthe exponent ofthe bracket is 53 instead of 3 iti clear that a more efficient tochnique i rogue ‘The expression in the bracket js self function, which we wil call 92). That is Pera) ‘To obtain y-g{x) must have a further operation applied to it — eubing. So for (5.17) we write oe bate ‘So (5.17) is a function (cubing) of a function (adding its square to the + Original value) and is thus & composite function. The second operation we will refer to as (x), and the chain rule can be stated as ‘Mathematics fr busines, finance and economiesnegra eae ‘The chain rule Where y = figs] ee 2-32 (5:8) Begin by applying the rule to case foe which the outcome is known, The function yest : could be expressed 3s yeu) fur which, in terms of the chain rule, wey=x? and y= flats = [ni ‘Applying the rule ag oy Shear and 3 sigan so om (5.18) oy = sen = 3x2 =o Aeglying the rule to the original case of y~ a? +x]? gives ast? +1 a So fom the rule B= 3? +7240) Now consider the chat rale as applied to w= 4) — 722+ Bx) In this case the derivative is 8 oye aes Ge 200? — 7a + Sa)" Lae 8) 193‘The chain rule can be used, with the sw | P sppled ata number of points. Asan exert w= 44a) — 08 42? A 2 Bao ee) an 44) 265471624 2) ‘The chain rule is applied separately to each term in y If each of several functions can be differentiated individuals. then in principle sums . dilferénces, products, quotients and powers of the functions are ao dilferentible. The chain rule andthe product rule can also be used = together If yeti -aeeeyt oy & te — 27a 2+ 20 Stet etfyie 222-1) ‘where the chain rule is applied within the provuct rule. It may also be | necessary to use the chain and quotient rules together. As an example, eorisder tte “The chain rule abo applies to fonctions where bracketed lerms are raised to non-integral powers. Consider y= Qr+it ‘The rule gives , yy & ae Lorerh 1 oer ‘Now consider'the rule applied to a case where the relationship _betieen y sd + is mediated through anther variable, x 4 y=32 ond p= 22 ‘As usual 7 dy ay ae aed de i ~ Mathematics for bse, nance ond economics *= dex i i into which, subsitution for = gies Me pe= a8 This result is confirmed by substitution fr = in zoe eriginal functn: w= 32x? = 124 sothat y é ‘The chain rule can also be applicd to find the derivative dy/dx where there are several intermaliate’vaibes: Fr exenlei y=Jia) and 2=g(w) and w= Ks) then by the chain rule 430 ‘Gwen the particular functions ya? oe ‘the derivative of with respect tox is antes ‘which after substitution for 2 in terms ofw gives sw wo5r41 a ‘which after substitution for w in terms of x gives £ 25x? 41) + Gx? + Se +1) + 3]0x) which simplifies to 20x(5? + 1)(50x* + 3527+ 6) 195: 10 when x = 1, dy/de = 10920. As more functions are nterpoel between 2 the varlablesy end'x, more wot sinoved in riding the detente dy/dx ‘even with the use ofthe chain rule and the eventual expression becomes ‘more complicated, but the pnp ofthe rule stl apples. BS ‘The chain rule the power fanction rule, the sum- Hlow can the derivative dy/dx be foend? Reeall the definition ofa - unetion. The relationship y= fla) is fimetion if each value of xin ‘Masienates for business, finance ond economicsDerivaives Gnd epimizction the domain yields a unique corresponding value of y Iflt is also true tat each value of y results from a unique value of s, then the inverse function exists. The inverse function rule is “The inverse function rule Where y = ix) and x= f-hy) a 5.20) ae” dria ee where dx/ay #0 Take an eximple that can be checked by other means x= 0259-3 621) As the Inverse function always exists for straight lines (with defined non-zero slope) we ean find the derivative dx/dy = 0.25 and apply the rut to produce are SESE de Ge/dy 025 This reault as be cnfimed by obtaining the terse fncin for (521) and oaning dy dey. The inverse fncon wil be y= es 12 for which ay a The wetoave rdationsip between x and y needa forthe imserse function rte can be expressed in terms of slope. The mers faction exits ifthe slope of = ay) does not change sige in the domain ~ in ‘other word, ifthe fanetion is monotonic. I the fanetion does nat change dope then for any value of yx) there is only one veal valve of 2g), An example where this does not apply sy =22, where cause of the change in slope thee are two values of 2 foe any (now 20) yin the range. Soto se the inverse function rule ie the case of wv the domain should be restricted to either y > 0 or y <0. This done, ‘expressed in terms of x will satisly the requirements for function, ‘Therefore the inverse function rule will apply. and we can write 7198 Exercises 5.8 ‘The inverse function rule comes Into its own with more complicated ‘eapresions where the inverso function cannot be explicitly stated. A ood example is provided by (5.19). so given P+9y? + 39y +100 : for which # oy + 189439 are the inverse function rule prdiues: elas “Sy? + 18y +39 using the rule we shouldbe stisfed that it applies. That the slope of (5.19) is aliays postive fllows from the fact that the roots of ddx/dy are complex ~ the graph does not cross the axis so the derivative {the slope ofthe original function) does not change sign. 1 Use the inverse function rule to find the devivaive dy /dx ofthe folowing: W) x=440.2y (i) 0.25" =0.125y-25 (iil x= {ho} x= 2/7 — 3)5 + 6y— 100 2 Find the dorivative dy/ds forthe following O) x= By + nly4+ yy) (i) x=(5y? + 12y— 19} 3. Find the derivative dx/dy for y = x5 + 2x? + 5x ond evaluate the eau for x = 1. ‘Much work using functions ofa single variable invoies the form where ‘ote variable isthe subject of the equation assy ia = f@) . (5.22) Another way of describing this relationship isto say that y is stated as an explicit fonction of x. If (5.22) is rearranged as y-Je)=0 Sle =0 then the relationship ts stated as an tmpllel functian in which all ‘terms are on the sime side of the equation, This form is not asymmetric in the way the variables are treated. Consider: fla, y) = xy ~ 5x~ 6y+4=0 (5.23) ‘Mathematics for business, finance and economicsDerive ond opimizsion SSUEEEESEneeeeeeeee oo} ‘he poe to lente ach rm with repel x nd whe ‘tem inches to et ya an unknown fncton of Take st tem, To ifreat this wih eget ste put re ued $0, eating nmin he way weedeat te pod ae pes bay” ayer See dy ate ~3e diflerentiates with respect to x as -5 and the term +4 has zero as ts derivative. The derivative with respect to x of the term —6y is aa ‘de So the derivative with respect to x of (5.23) as a wholeis 0 6.24) (5.20 is an implicit function lvokng dys which can be rearranged to sate dy/dr exltly as wasoy 6.25) dr 6 Note that dy/dx is expressed in terms ofboth x and y In (5.23) we chose an example that could be rearranged to state y as an explicit fonction of x. We now make the rearrangement and differentiate the ‘results to confirm (5,25), Equation (5.23) can be written as ya—6)-Sr+4=0 feom which Sena ye 625) fom which dy/dx can be obtained by use of the quotient rue: dy _(r-6)5~(Gx—a) eer | 627) e-F At fist glance, (5.27) docs not look a great deal lke equation (5.25), ‘but substitution for y from (5.26) ito (5.25) results in x6 &- 6) =26 G- ‘which confirms our original result.Exercises 5.9 5.10 Higher-order derivatives ‘Now try implicit differentiation on a function of higher degree: fez y)= 24? + 3y—4r=0 (528) Dieretiaton of the est term with respect ox produces * Foyt 4 yo (629) where the chain rule is employed in producing the derivative.o y? with respect tox as aut The tae f te other em flow and he orca es wall can 434-420 shires dy 4-20? a ty +3 1. Find the derivative dy dx forthe folowing implicit nctions: @ 4x-Sy+10 (i 10x + Sxy—2y- 100=0 2 Rearrange function 1) above to state y as an explicit funetion of x ond obtain on expression for dy /dx using the ‘quotient rule. Confirm hot the resul agrees with 1) by ‘evaluating the expressions at f) x=10 yo fi) x=1 y=30 3 Use the implicit function rule fo find the derivative dy dx for the following fix, y)=5y 2x4? =0 Ui) fle, y)= 20)? But + ay ~7y =0 ‘The devivative of a function of x is in general a function of x which can be diferentiated to obtain the second derivative ~ the derivative of the derivative. The ‘second derivative, also typically function of x, can be diflrentiated to obtain the third derivative. This process can be continued to fine still higher-order derivatives where these exist. Just as the first derivative is the expression giving the slope of the original fanction. so the second derivative gives the slope of the slop. To ilasrate higher-order derivatives, consider the quartic ya det 7x? 44x 4 82+20 (5.30) Mathematics for business, finance and economiesA list of the derivatives i: First derivative: Besa tents ‘Second derivative: ax? 420+ 8 we Third derivative dy Sera Ar 42 Fourth derivative: a ate Filth and all higher-order derivatives: Ty 0 tor n>5 ay In function notation the second derivative of fx) with respect to xis represented as fe) while the third derivative is shown as £2) Although higher-order derivatives can be represented in this manner, the notation soon becomes cumbersome. It is more economical to write - x) for the nth derivative of f(x) with respect to x. For example, conser Jos) foc which derivatives down to the fourth are 0 aah 4 ds 4 ot 03° — 16x7 + 2024 + 4x? jOx" — 1128" + 80x? 4 127 20x” — 672x5 + 2400? + 24x 040e* — 3360s + 480r +24 polynomial of degree four such as (5.30) has nof-nero derivatives down to the fourth. For an nth degree polynomial, all derivatives ‘beyond order n will be zero. For other classes of function ~ such as 201ee Exercises 5.10 511 ‘economics rarely go beyond the second derivative so we shall concentrate on the properties and uses ofthe second derivative. 1 Find the second derivative forthe following functions xe fo) (ii) fle) = 5x4 + 3x2 + 2 (i) fle) = Bt 9.4 4720 — 8? 2 Find the third ond fourth derivatives forthe following: f) yx? {il) y= 208 3x4 (ii) y = 0.01% 0.05.20 3. Find the second derivative fr the fllowing fh Ail) fd = pa 4. Find the socond derivatives forthe following: yaar sho +o? +dr te. ‘An important use ofthe second derivative is in distinguishing local ‘maxima from local minima (for which the slope changes fa diferent way). Through a maximum the slope of the func diminishes, so the slope ofthe slope ~ the second derivative ~ is nayative. Tough a local ‘minimum, the slope of the function inereases with x — the second, derivative is posite (strictly speaking. at 2 maximum the slope of a function will not be increasing and at a minimutn it will not be rationals ~ there maybe no lit to the onder of derivative that can found. For example with and, for example. the sixth derivatives 29 py £4 _ 220¢ Of the higher-order derivatives. the second ithe most ten used. A ‘rather surprising implied use of a third derivative was made by US. President Nuon in 1972 when he announced that the rae of increase of lnlation was decessing. However, application in business and ‘Mathomalics for busines, finance ond economicsdecreasing). The second derivative testis used to Went the nature Of stationary points in functions ofa single variable: 1 If for pving f(x) = 01 I also the case that f(x} <0. then the x value produces 2 local maxima of fs). 2 IF rx giving fx) = Otis also true that (x) > 0, then the x value produces» local minimum off). 4 IPfor x giving f(x) = 01 aso true that f° investigation Is needed to determine the nature ofthe stationary point. ‘We will consider case 3 later ~ the point could be a maximum. & ‘minimum, o the function may iflect. 1a the vast majority of cases 1 or 2 applies and the second derivative test is decisive, Conster the quadratic Six) = 502-018? for which Sta) = 50-02" which is zero when x= 250. To establish whether x ~ 250 produces a ‘maximum or « minimum, consider the second derivative: Sa) = 0.2 Since the second derivative is negative regardless of x, any turning Point is a maximurm. Figure 5.6 shows the graph of the function and the first and second derivatives (a constant function atthe level ~0.2) ‘Now suppose a maximum is sought for y= 500—"— 20 Setting the frst derivative to zero gives ay en 2x- 20-0 which solves for x = —10, The second derivative s &y ee 5 ° ‘meaning that x= —10 produces a maximurm, at which point y = 600. ‘This example Htstrates the fact that there is mo guarante thatthe ‘xin producing value of x wil be positive. [Now find the maximusn of 40x - =? 500, ‘Setting the first derivative to zero gives ay ae 40-2x=0 :fg 2<0 ‘meaning that x= 20 produces @ maximum. At this point y= ~100, ‘This example ilustrates the fact that there is no guarrtee thatthe ‘maxiinum value of the function willbe positive. ‘Now consider the cue y= 2432 240420 : 31) for which = iz Mose 6x24 622) sod ert 65) ‘Methemacs for business, france ond economicsSetting (5.32) to 220 to identify the stationary values ofthe function, we have 3x + 6r-24=0 Dividing throughout by 3 2 421-8=0 (r+ aye -2)=0 $0 the two turning points of the function are at x = ~4 and x = 42. ‘As with all cubits the second derivative is linear. Inserting the values of r=-andr=2, ate=—4 ‘which by the second derivative test means a maximum. But when r=2 ay e so x= 2 procices a minimum. The function Is graphed in Figure 5.7. = +18 Pee 5.7 Note that (1) the local maximum here does not produce the highest value of the function — which is unlimited If: becomes arbitrarily large and positive, and (2) thatthe sign of ata turning point is usually Important in practice. These points wil be considered later. Now consider z = 15< +872- 100 i) Dachatves dd opsimiztionFigure 5.4 | Exercises 5.11 206 32-302 4.87 | ‘Setting J"(x) to zero produces only the complex roots | x=5421 and x= ai The absence ofa soation i real numbers means that this cubic has no turning points. It appears as graphed in Figure 5.8 Foe 1 Find the sttionary pont ofthe functions below and use the second derivative testo establish ithe point i © maximum or (y= 100x- 250 (i) y= 4x2 ~72n++ 100 2 Find the stationary points ofthe following functions ond ‘establish their haracte: (1) =05e - 2.25 {i Fla) = 1000 — 253 + 6x2 + 4B i) Fa) = x4 — 1248 + 280? (1 fi = 8 4 aes 3 “The stationary points of y= x! ~ Bx! + 22x? — 24x +100 ‘occur ot x= 1, x= 2 ond x = 3. Use the second dervaive testo establish the noire of each stationary point. (i) The function y = 6x! — 67 5x! — 320x3 +-2700x? +12000x +500 has stationary points at x= =2, x= 5 and x= 10, Use the second dosivaive test to establish the note of each sttionary point ‘Mahomatics for busines, finance and ecoromicsDerivative and optimization 4. Dothe following functions hove tuning point? Provide os ‘much information as possible in each case. (0. fix) = 3x8 — 18x? - 1053x+ 1000 i 83x24 154100 ~ 1x8 + 80x — 400 +20 The second derivative identifies points as maxima or minima in tie Immediate viinties but says nothing about which of the maxima gives the greatest value overall So, unless there is only one local maxizum, further work is required to identify the global or absolute maximum for which thece may be other possibilities). This may take the for of ‘enumeration ~ calculating the value ofthe function at each lal ‘maximum ~ quite an effient method with straightforward expreslons. In business of economic modelling meaningless outcomes need to be «excluded ~ for example negative output levels or these beyond the ‘maximum capacity of pant. The decision-maker expects the model to provide sensible values of the decision variables — and ideally those values which produce an optimum. Irelevant values can be excluded ina variety of ways; fr example: 1 Using a function for which extrema occur only fr realistic values of the decision variables. 2 Placing specie limits on the demain of the function. 3 Discarding extrema associated with unrealistic values ofthe decision variables. 4 tsk involved with approach 3 the assumption that among the associated x values there will he some within a reasonable range. this te mot so, then ether approach 2 must be used or the function mst be redefined. In approach 1 quadratic and quarties wih negative leading cxeficients (for maximization) and postive (for minimization) produce fiite maxima and minima respectively, With appropriately selected clients, the extrema can also be confined to the postive quad. For example, a quadratic profits function wl fllow roa a near demand curve and a linear or quakate cost Function. Suppose thatthe ‘monthly profit funti fra small em assembling a personal computer is ~1000 + 200-7? where the ~ 1000 term represents fixed costs and where the frst order condition for @ maximum ar = 200-2x=0208 Figure 5.9 {is satisfied within the positive quadrant for x = 100. The second ervative test confirms that the stationary valve is x maximum. As the one candidate local maximum, tis will also be the global maximum. We presume thatthe level of profit achieved, x = £9000 (cepresenting a margin of £90 per unit output) fs acceptable and thatthe output level is within the frm’s capacity. So in tems of a reasonable value, it happens that things have worked out will here. Now consider a quartic case. The ‘objective function to be maximized is a Sta) = 0.752" +72) 2108 4 2ae for which the first derivative is Sa) = 3? 4 21x 4284 24 and for which the second derivative is SG) = 92? + 42x42 When the first derivative is set to zero, the solutions obtained are x ‘and x Evaluating the second derivative at these x values shows that x = 1 and x= 4 proguce local maxima, while x = 2 gives a local minimam, The telobal maximum is found by evaluating f(z) at x= 1 and x= 4. The superior point is x= 4, which produces f(z) = 16, ia comparison to {f{2) =9.25 atx 1. This function is graphed in Figure 5.9. fy ‘The function itself can be used to rank local maxima, which involved the evaluation of two possbilies inthis case. Buta function may * pduce values greater than that for any stationary value. An obvicus ‘case is where the function increases without limit as x moves without Meshomats for busines, Snance ond economicsFigure 5.10 Derivatives ond optimization ‘restriction in one or other direction, This isso for all cubis, for ‘example with ay ge Gen OF — 901 +300 which, when revo. solves for x= § and x= 10. The second derivative is ay Gate 90 Which is negative at x= 5 and positive at x = 10, so there is a local, ‘maximum at x =5, producing y = 625. while the local minimum at 10 produces y = 300, The function appears as in gure 5.10, ut the value efx = 5 daes not give the global maximum ofthe function, and x = 10 does not correspond to the overal minimum of ‘The function is unbounded in ether direction. Other functions may take unlimited values at particular points in the domain. This is so for rational functions where the denominator is zero for certain x values. Consider 1 eri0 fee for which apates de (x~ 10) ‘This derivative is not ero for finite x. The function has no stationary value and is graphed in Figure 5.11. It can be seen that y becomes arbitrarily large and posite as x approaches 10 from sbove, and arbitrarily large and negative as x approaches 10 from below.210 Figure $.11 "take such cases into account, an exhaustive process for ‘entifing the global extremes of a function would need to include a ‘search for vertical asymptotes. There are ao more esoteric examples of {enctions for which the value ofthe expression escillates between ever larger extremes ~ both positive and negative — as some crucial value of 218 approach. Also, plec-wise defined functions can be given ‘exceptional properties at individual points. But these cases are not our ‘main interest, Rather, we will consider the principles of approach 2, ‘where explicit aecount is taken of the function's domain, Suppose a ‘maximum value is sought for y=5004-22.5%7 — 150%— 2 for which de which soles for x 45x— 150-322 <0 and x & ae which is positive for-x = 5 and negative for x = 10. $o x = 5 produces local minimum, while x = 10 gives a local maximum, The function is 5 — 6x ‘rephed in Figure 5.12. ‘Mathematics fr busines, finance ond acdnomicsFigure 5.13 Devivaiveg ond opimization [Now suppose the function represents a desirable factor such as net Income, 4 against the decision variable, x. For example, x may be the ‘output of a possible new product to be added to the existing range. so negative values of x would have no meaning, What isthe optimal ‘output for the new product? In the context of the model, the optimal decision is the value of within the domain x > G giving the highest value for y inspection of Figure 5.12 reveals this to be x= 0 (where 500) rather than atthe local maximum, where x = 10 (y = 250) ‘This is an example where the global optimum occurs at an end-polnt ‘of the domain ~ which means that the new product should not be made. ‘A maximum at an end-point isa possbilty that must be Investigated ‘when there isa restricted domain. The function should be evaluated at end-points as wel as at turning points in the domain. Consider the quartic illustrated in igure 5.13, There is a fixed lower end-point. L, “for the domain but there are three places where the upper end-point, U, might be sot: U;, U; and Us. The function itself increases without for values of x below Lor above U. The decision-maker seeks the tlobal maximum in a domain where Ls the lower end-point and where the upper end-point is at one of the U values. fis dear from Figure 5.13 that with the upper end-potnt atthe various U values the ‘overall maximum is as follows: m+ Uy~ the overall maximum is at the lower end-point x 3 Us~ the overall maximum is at the turning point where x = x9 + Us the overall maximum is at the upper end-point : = Uy {In addition to turning points and end-points, if the function is not a Polynomial. any values of x for which the function is not defined must bbe taken into account. AS an example, consider finding the global maximum of 4 = Wt ~124x" + 1380%" — 24008 +2000 with damain resrited 10 Firs. we need the turnitig points to locate the locat maxima. Thus a a ‘This cubic solves for x = 1,2 ~ 10 and x condition is 12x) ~ 372s? +2760% — 2400 = 0 0. The secondorder 6x? — 744 +-2760< 0 ‘he second derivative is postive at x= 1 and x= 20 and negative at = 10, which is therefore the only local maximum. Now consider the Position ofthe global maximum in the speciid domains (9) Since thereis no local maximum ta this interval the overall ‘maximum must be at one ofthe end-points. Checking the value of the fonction at these points, atx=0 yr 2000 ate=2 y=1776 0 the global maximum in this domain ts 2000 at x ~ 0. (WH) Again thee is no focal maximum in the domain. So the value of y ‘must be at a maxinium at one of the end-points. At x — 4, y= 7312, which isthe global high with this domain (ii) Ta this case the local maximum is in the domain so there are three points t which the function should be evaluated 10 and x= 12 22000, while at «= 12, y =19856, so this time ‘the overall maximum occurs at the turning point. : ‘Mathematics for busines, feance and economicsExercises 5.12 5.13.1 (@) Here the upper end-point of case (il) i raised. and the value ofthe fanction at x= 30 must now be compared with the figure 22000 at x= 10. Atx = 30, y = 254 000, so this is definitely the global (9) Is thie case the overall maximum occurs when = —10, where |g ~ 318000, Note how rapidly the function increases for negative x values since all terms will now be postive. 2 ‘We have seen that a restricted domain can aise because of the ‘nature of the independent variable. One instance is where the decision variable (x) is probability where the domain is 0 < x <1. The domain ‘may also be narrowed if there are other considerations ~ such a ‘minimum and maximus levels of operation of plant and equipment. 11 With he specified ening points, dent he global moximom for he flowing (1 fla 1000 ~ 3x4 + 5632 - 33617 + 768x fhuing points ot x = 2, x= 4, x Ha) = 250 + 12x ~ 10.5x2 + 78? 1.508 {taming pois ot x = 0.5, x= 1, x=2) Given wing eins ot x = 3, x = 6 and x = 12, find he global minimum offs) = x! — 283 + 25232 — Bb + 5000. Which of he folowing functions have finite glabol maximo? {_ Fle) = 100000 + 2500x — 0.0005? {il fl} 001%? - 5000x - 10000000 {i Fle) =0.01x2 ~ 1.000000%7 {i Fle) =75 + 20x + 300? 0.108 fa} {i fl = 4000x — x Find the globol maximum of f(x) in each ofthe following cose fle) = 1500 — 2 + 398 ~ 360% {wih domain restricted to 5 < x < 25) } Hs) = 1500 ~ x4 + 33x? ~ 360x {wih domain resricied to 2 < x < 19) {i Fle) = 1500 — 2 — 18? ~ 60x {wih domain restricted to: O < x <3) {i fle) = 28-4592 + 600x {wih domain restricted to 5 < x < 30) In the second derivative test we saw how the value taken by the second decivaive allowed local maxima to be distinguished from local minima, ‘The test can be regarded as distinguishing those stationary values at which the Fnction’s curvature (we use the term informally) makes it locally “hollow from below’, oF coneave, from those points where the CConcavity and convexity. function & leally ‘hallow from above’, or convex. Local concavity Desivatvenond optimization a3‘means that a stationary value willbe a local maximum, while local ‘onvery imps that he tating point produces local mise. Figure 5.14 illustrates this distinction for a cubic. Figure 5.04 A function is concave over an Interval of if for any twa pons in the interval the function lies on or above the straight line cesnecting the corresponding points on the graph. Ifthe Function is always above the straight line, i ls srictly concave over the interval. The function is convex over the interal ithe function lies on oF below a straight line “connecting the points on the graph corresponding to any two points in the interval. The function is strictly convex over the Interval fit always below the straight line, Figure 5.14 gives examples of concavity or comverity over ast interval. The function is concave between points a and ¢ because no matter how closely the end-points ofthe interval ace approached, the function lies above the straight line connecting those points. Hewzeet care is required. For instance, the function of Figure 5.14 cannes be said to be concave over the entire interval ae even though the function lies above the straight line connecting a and e, The rensow is ‘that points can be selected near to ¢ where this Is not the case. ‘The second derivative being negative (["(x) < 0) Is sullicent for strict ‘concavity. This corresponds to the slope of the function diminishing and the graph curving down. The second derivative being. positive (2) > 0) is sulicient for strict convexity. This corresponds to the slope ‘of the function increasing and the graph bending wp. Note that in 3 concave oF convex seeton the slope ofthe curve itself could be ether negative or positive. ‘Some functions, such as quadratcs, have the same curvature throughout, while others, such as cubics. change curvature as x varies. ‘function for which f"(x) <0 is globally concave (the curve always bends downwurds ~ where bends at all) is a concave funetioa. A function for which f"(z} > 0 is globally convex (the curve always hends - *_apwards ~ where it beads at all isa convex function. A linear function satisfies both ofthese conditions (since f(x) = 0) and so i 24 ‘Mathomatics for busines, finance ond economics5132 Fain of inflection Senatves end optimization both @ concave function and a convex fanction. But a function such as that of Figure 5.14 Is neither a concave function nor a convex function, {In matimiation-problems its very useful to know if function is a ‘onicave function. If this isso, a local maximum, if any, wil also be a slobel maximum, and all that is required for a global maximum at # isthe first order condition s@)=0 at rae ‘This i both necessary and sufficient for a global maximum of a ‘concave function. In the above, we are saying a’ rather than “the” because ofthe possibilty of linear sections in a function which is concave but not strictly concave. Ifthe function is strictly concave throughout, then x° produces the unique global maximum. In minimization problems itis of similar value to know that a function is conver over the whole domain. In such a case a necessary ‘and sufcient condition for & global minimam of the function at x=0is f@)=0 at r=? Here again, Ifthe function is strictly convex throughout, then x produces the unique global minimum. Three further points on concave and convex functions are worth noting: 1 Iff(a} tsa concave function g(x) = f(x) isa convex function. 2 The sum of convex (concave) functions fs a convex (concave) function. 3 Points on or below a concave function form a convex set. Points on or above a conver function form @ convex set. Point 2 means that in a function with several terms. ifthe terms each produce a concave function the overall function Is also concave. Where a function changes from Stic concavity to strict convexity (or vice versa) over an interval, there wil be a poiat in the interval where the second derivative is zero. Such a point is an example of a point of fnflection. io Figure 5.14 point dis an inflection point. A distinction is, 4raym between inflection points sach as ¢ where the function is changing in value and those points — stationary points of inflection ~ where the funtion Is static. and where the fst derivative I also zero Point d is therefore a non-stationary point of inflection. The usual ‘way in which a stationary point f inflection is discovered is if in the search fora maximum or minimum of a fonction a value of x is found Which produces (x) = 0 and for which /"C)is also ero. However, not all points where f"(x) = 0 are point of inflection. ‘Consider some examples. First ind the inflection point of fla) = -0.5x' + 15x + 20r +100 (5.35) as216 ‘Here we have the advantage of knowing that all cubics have a point of inllection. We shall now locate this point. The first derivative is, fe) Selting the second derivative to zero produces: 0 15e 430x420 igs eal which solves for x = 10. This Is 2 passible inflection point. It will be an Inllection poit ifthe second derivative also changes sign as it passes through x = 10, This possibilty can be-checked by finding the value of J"13) on ether side of x= 10 and close to this value. For example. teking & one-unit variation Bives "(x)= 3 while x=11 gives "(x)= 3 So in this case the function does change sign through x ~ 10, wie therefore produces a point of inllecton. Finally, substitution of x = 10 {nto J" produces @ non-zero result (170), so that x = 10 gives a non Stationary point of infletion, 779 understand the requirement that /"(x) change sign through the x value for which f"(x) is zero, recall that on one side ofthe point of Inflection the function is concave (("(x) < 0) while on the other side it ‘conve ("(x) > 0) I the third derivative is won-zero at the candidate Point of inflection, this is sulicent to ensure that the second derivative ‘changes sign. Such isthe case for (5.35), for which, Iay= 3 ‘The sign off"(x) does not matter ~ the important fact is that i is non: zero. However. the thled derivative could also be zero, and yet the point ‘could still be & point of inflection. Where f(x) is easily calculatd, this ‘sx quicker check than working out f*(x) ether side of the poi in question. ‘Now consider another example, Let See) =~ 60%? + 1200 + 10000 (536) or which é M2) = 32 — 1208-41200 and S'2)~ 6x 120 From tte equation of the second derivative to zero, the valine of = 20 emerges. The fact that the third derivative #0 ones that x= 20 gives a point of infection. In this case at x = 20 the value offs) is also ero, so a stationary point of inflection i= Jc) Masbemetic for brine, nance end economicsDervtives end atinizaton ‘produced. It s posible for @ function to inflect at a point even ithe ‘third derivative is zero. Tis is confirmed by the quintic Sej=e 637) ‘which inflects at x =0 (a stationary point of inflection). at which point all derivatives down to the fith are zero, These discussions wil lead to 4 comprehensive rue for sorting out the character ofthe turning and fnflecting points of functions. but frst consider whether the quartic Joy= hhas a point ofinlletion. The first derivative Is 25e — 10x! + 150%? ~ 1000 (538) = 302? + 30x ~ 1000 Ja) = 3x — 60x + 300 Setting f"(x) = 0 gives the equation 3x! ~ 60r+300=0, that s x 20x+100=0 which factors as (x- 10? =0 so there is a double root, and the second derivative is zero only at, x= 10, Checking the thie derivative at this point, IM) = 6x~ 60 =0 at x=10 ‘which does not resolve the sue. Trying f*(x) for one-unit departures from x = 10, setting r=9 gives J") = 3(81) - 6019) + 300 = 43 and, when x= 11 S%G2) = 31021) ~ 60401) + 300 = 43 s0 the second derivative dbes not change sign as x passes thraugh 10. It follows that x = 10 does not produce a point of inflection. Note in this case that JG@)=0 at x=10 so what kind of a stationary value is x = 10? In fact it produces ‘minimum of (5,38). This can be deduced from the following general rule fr establishing the nature of stationary values: 217 |all derivatives as far as J%2) are zero at x = 2° but then ifn i even, %z) < O means that the point isa local ‘maximum, while {"(x) > O implies a local minimum. If is a ‘umber, then x = 2° produces a point of inflection. Using this rule inthe case of (5.38) the fst non-zero derivative . Thus, since the fourth (even) derivate is postive, the value 10 produces # minimum. Using the rule on the aint (5.37) fist nonzero derivative at x = O's f= 120 Since tis the fs (oh derivative that isthe fst to be non-zero, we conchade that there bea point of infection at x = 0. Another way of findiog the natute ofa pint where several higher Aervattes are zero sto find out ix) changes sig as x increases through the pont in question. 1F 1 does the pont will be a maximum the change insignis fom postive to negate, ed @ minimum for 8 negative to positive change. (2) does not change in sgn as “point of inltion is identified. In the microeconomic theory of production and cost, @ cubic cost function is ote used forts plausible economic properties, For suppose that dally cots of a ear manufacturer ae given by Gls) = 0.12? 30%? + 3100x + 10000 (539) * where C(x) i the total cost of producing x cars per day. Marginal cost 1 the rate of change of total cost, C'(s), and is given by C(x) = 03x" — 60x + 3100 ‘The point of inflection of the total cos function (5.39) is the daily ‘output level producing minimum marginal cost. This is given by C(x) = 06x ~ 60=0 which solves for x = 100, Beyond this output marginal costs begin to rise ~ even though average costs continue to fll for some time. The ‘example illustrates the fact that to find a point of tfletion fs to find ‘the maximum or mibimum of the fist derivative. Exercises 5.13 1 Find the point oF inflection forthe fllowing: fix) = ¥000 -2.5x2 +. 60x? + 300x (ih Fx) = 4x0 — 4852 + 25x+ 100 é (il Fe) = 0.25x4 — 9x2 4 10842 + 20% (i fle) = 0.15 x8 — 075x432 + 15x + 300 2. Are the points of inflection for he following functions Sationary oF nonstationary (ld) = 20 — 18x2 + 108x + 100 (i) fh) = 33° ~ 2752 + 100x- 50 Gil fod = x4 — 14x8 + 60.2 — 503+. 100 218 : “Mathemotis for busines, nonce ond economics‘and opfinizaton 3 Do the following functions have points of inflection? (lx) = 0.25x4 ~ 5x3 437.5%? — 10x +50 fla) = O.5x4 ~— 3x? — 30x? + 5x +20 ie] = 3x5 — 1004 + 100007 29