MODULE 2

FUNCTIONS
Real number = Rational number + Irrational number

The set of rational numbers

(denoted by Q) consists of
elements which are either
positive integers or
negative integers or zero
or a fraction like a/b (where
b ≠ 0), where a and b are
integers.
A number which cannot be
expressed in the form of
p/q where p, q are integers
(prime to each other) and q ≠
0, is called irrational number.

DIY: (1) Is 2 a rational number?

(2) Is 2 + 3 a rational number?
 DIY: MAKE A MOOD BOARD
• Case study 1: Mr. Goel has planned on taking a vacation with his family on June, 2022. What are the
factors that might affect the decision?
• Case study 2: Ms.Kaur has planned to invest Rs.2,00,000 in the stock market. What are the factors
that might affect the decision?
• Case study 3: Arti has planned to invest in a health insurance. What are the factors that might affect
the decision?
• Case study 4: Ms. Suhani has decided to buy an EVM (Electric Vehicle Motor) for her family. What are
the factors that might affect the decision?
• Case study 5. Rohan is unsure whether he should buy a PS5 vs Xbox Series X. What are the factors
that might affect the decision?
• Case study 6. Ratul is planning on buying a new home. What are the factors that might affect the
decision?

(you could either make a ppt or a mood board at https://www.canva.com/create/mood-boards/)

 SO WHAT IS A FUNCTION?
• One variable is a function of another if the first variable depends upon the second.
• Eg: The area of a circle is a function of its radius (A=!" # ), where ! is the numerical
constant=3.14159...
• We can also claim a variable to be dependent on another using a table as follows:
Month January February March April May
Household
consumption (in Rs., 59 62 65 72 70
in ‘000 )
This table defines household consumption as a function of months

• Relationship between two variables can also be given by a graph. Eg: An American Economist, Arthur
Laffer, drew the “Laffer curve” showing the relationship between tax rate and tax revenue. What do
you think the curve says? The Laffer Curve is based on the economic idea that people will
adjust their behavior in the face of the incentives created by
income tax rates. Higher-income tax rates decrease the incentive
to work and invest compared to lower rates. If this effect is large
enough, it means that at some tax rate, and further increase in the
rate will actually lead to a decrease in total tax revenue.
 DEFINITION OF A FUNCTION AS A MAPPING
• Let A and B be two non-empty sets (which may be
equal) and x be a variable whose domain is A. Let
there exist a rule f which associates with each
element x of A a unique (one and only one) element
y in B.
• Then f is called a function of x over the set A or the
function f is defined over A or f maps A into B. A is
called the domain of definition of the function f and
B is the co-domain. The element y which
corresponds to a given x is written as a f(x) and is
called the image of x under the rule f.

A B
x y=f(x)
 FINDING THE DOMAIN
• GIVEN A FUNCTION WRITTEN IN EQUATION FORM, FIND THE DOMAIN.
Ø Identify the input values.
Ø Identify any restrictions on the input and exclude those values from the domain.
Ø Write the domain in interval form, if possible.

• GIVEN A FUNCTION WRITTEN IN AN EQUATION FORM THAT INCLUDES A FRACTION,

FIND THE DOMAIN.
Ø Identify the input values.
Ø Identify any restrictions on the input. If there is a denominator in the function’s formula, set the
denominator equal to zero and solve for x . If the function’s formula contains an even root, set
the radicand greater than or equal to 0, and then solve.
Ø Write the domain in interval form, making sure to exclude any restricted values from the
domain.
 FINDING THE DOMAIN
• GIVEN A FUNCTION WRITTEN IN EQUATION FORM INCLUDING AN EVEN
ROOT, FIND THE DOMAIN.
• Identify the input values.
• Since there is an even root, exclude any real numbers that result in a negative number in the
radicand. Set the radicand greater than or equal to zero and solve for x.
• The solution(s) are the domain of the function. If possible, write the answer in interval form.
 FUNCTION: AN INTRODUCTION

Input x Function of x Output y

Function of x
x=2 y=2
f(x)=4-x

Function of x
x=2 f(x)= 10+2*x y=14

Function of x
x=2 f(x)= x2-3 y=1
• A short video to get you started: https://www.youtube.com/watch?v=9w8VnZWr8tg
 Explicit Represented in terms of an independent variable, like y = 3x+1

Implicit Written in terms of both dependent and independent variables,

like y-3x2+2x+5 = 0

Single-valued For each x, has a unique value in the range, y. It is therefore one-
to-one or many-to-one. Eg: f(x)=x2

Multi-valued A function that assumes two or more distinct values in its

range for at least one point in its domain. Eg: f(x)= !
Types of functions
A constant function is a function whose value is the same for
Constant every input value. Eg, the function y(x) = 4 is a constant function
because the value of y(x) is 4 regardless of the input value x.

A polynomial function is a function such as a quadratic, a cubic, a

Polynomial quartic, and so on, involving only non-negative integer powers of
x. Eg: f(x)= 4x3- 3x2+2

An exponential function is a function of the form f(x)= abx where

Exponential b is a positive real number, and the argument x occurs as an
exponent.

Logarithmic A logarithmic function is of the form: y="#$%& which can be

converted into the exponential form as: ' ( = x
 SOME POINTERS TO KEEP IN MIND
&
• Common logarithm : log x= !"#$%
• Natural logarithm : ln x= !"#'& (where
e= e=2.718281828)
• A short video on Exponential and
logarithmic function:
https://www.youtube.com/watch?v=s9
My65z94xY
• DIY: Sketch the graph of the common
logarithm and the natural logarithm on
the same axis system.
 COST FUNCTION
• Cost is the total cost of
producing output
Cost

• Cost Function
• C(x) = F +V!
C = Total cost Variable costs Fixed costs
F = Fixed cost
V = Variable cost Per unit
! = No of units produced and sold
Variable cost varies with
output (the number of units Fixed costs normally do not
• It is called a linear cost produced). The total variable vary with output. In general
function. cost can be expressed as the these costs must be incurred
product of variable cost per whether the items are
unit and number of units produced or not.
produced. If more items are
produced cost is more.
 COST FUNCTION (LINEAR)

In the graph above, a is the fixed cost, b is the variable cost and Q is the
quantity of units sold/ produced.
 TOTAL REVENUE FUNCTION
• Revenue is the total payment received from selling a good or
performing a service. The revenue function, R(!), reflects the
revenue from selling “!” amount of output items at a price of
“p” per item.

• "(!) = #!
 PROFIT FUNCTION
• The Profit function P(!) is the difference between the revenue function R(x) and the total cost
function C(!). When the revenue earned from selling a product becomes greater than the cost of
production, we have profit!

• Thus, P(!) = R(!) – C(!)

• "#$%&'=()*)+,)−.$/'
• Profit = Revenue − Cost
• P=R−C
 EXAMPLE
• Assume that fixed costs is Rs. 850, variable cost per item is Rs.45, and selling price per unit is Rs.
65. What is the:
i. Cost function
ii. Revenue function
iii. Profit function

i. Cost Function = Variable cost + Fixed cost

= 45! + 850

ii. Revenue function = px

=65!

iii. Profit function = R(!) – TC(!)

= 65! – (45!+850)
= 20! – 850
 BREAK-EVEN ANALYSIS
• The total fixed costs in many businesses tend to be high in relation to total cost and therefore a business
must maintain a level of activity that not only contributes to covering fixed costs but provides an
acceptable, or target level of profit.
• We shall denote,
• C(x)= Cost function, where x= number of units produced
• R(x)= Revenue function, revenue obtained by selling x units of commodity
• P(x)= Profit function

• We know,
• !"#$%&='()(*+(−-#.&
• Thus, P(/) = R(/) – C(/)

Q: What happens when Revenue= Cost; i.e., R(x)=C(x)?

Ans: P(x)=0 when revenue equals cost.

There is NO profit or loss.
This value is called the break-even point.
 EXAMPLE
• You operate a lemonade stall that sells a cup of Break-even point is achieved when,
lemonade for $4. The cost to produce a cup of
R(!) =TC(!)
lemonade is $1. To legally operate a lemonade stall,
you had to purchase a permit for $600. How many TC(x) = F +V!
cups of lemonade do you need to sell to break
even? Then, R(!) = F +V!

"(!) = #!
Fixed Costs = (Price – Variable Cost) * Quantity
Now, #!= F +V!
$600 = ($4 - $1) * Quantity
à F=(p-V) !
$600 = $3 * Quantity
Quantity = 200

You will need to sell 200 cups of lemonade.

WHAT DO YOU UNDERSTAND BY SLOPE OF A CURVE?
 WHAT DO YOU UNDERSTAND BY SLOPE OF A CURVE?
ØA line is increasing if it goes up from left to right. The slope is positive.

ØA line is decreasing if it goes down from left to right. The slope is negative.

ØIf a line is horizontal the slope is zero. This is a constant function.

 THE LAW OF DEMAND
• The quantity consumers are willing to buy clearly depends on a number of different factors called
variables. Perhaps the most important of those variables is the item’s own price. In general,
economists believe that as the price of a good rises, buyers will choose to buy less of it, and as its
price falls, they buy more. This is such a ubiquitous observation that it has come to be called the law
of demand, although we shall see that it need not hold in all circumstances.
• Although a good’s own price is important in determining consumers’ willingness to purchase it, other
variables also have influence on that decision, such as consumers’ incomes, their tastes and
preferences, the prices of other goods that serve as substitutes or complements, and so on.
Economists attempt to capture all of these influences in a relationship called the demand function. (In
general, a function is a relationship that assigns a unique value to a dependent variable for any given
set of values of a group of independent variables.)
• !"# = % &" , (, &) , …
• The equation simply says: “Quantity demanded of good X depends on (is a function of) the price of good X,
consumers’ income, the price of good Y, and other variables”.
 DEMAND CURVE

• D=f(P)
• P=g(D) à Price is the inverse function of demand

• Slope of the curve: Negative

 THE SUPPLY FUNCTION
• The willingness and ability to sell a good or service is called supply. In general, producers are willing
to sell their product for a price as long as that price is at least as high as the cost to produce an
additional unit of the product. It follows that the willingness to supply, called the supply function,
depends on the price at which the good can be sold as well as the cost of production for an
additional unit of the good. The greater the difference between those two values, the greater is the
willingness of producers to supply the good.
• The supply function looks like: !"# = % &" , (, …
Can you name a few variables that may affect supply of a product?
• Price of the product X
• Wage rate of labour (W)
• Production technology
• Transportation cost
• Government policies
• Cost of production
SUPPLY CURVE
• S=f(P)
• P=g(S) à Price is the inverse
function of supply

• Slope of the curve: Positive

 DEMAND AND SUPPLY FUNCTION
• A demand equation or demand function expresses demand q (the number of
items demanded) as a function of the unit price p (the price per item).
• A supply equation or supply function expresses supply q (the number of items
a supplier is willing to bring to the market) as a function of the unit price p (the
price per item). It is usually the case that demand decreases and supply increases as
the unit price increases.
• Demand and supply are said to be in equilibrium when demand equals supply. The
corresponding values of p and q are called the equilibrium
price and equilibrium demand.
• To find the equilibrium price, determine the unit price p where the demand and
supply curves cross (sometimes we can determine this value analytically by setting
demand equal to supply and solving for p). To find the equilibrium demand, evaluate
the demand (or supply) function at the equilibrium price.
EQUILIBRIUM PRICE
 EXAMPLE
• If the demand for LV Boots is q = −4.5p + 4000 pairs sold per day and the supply is q = 50p − 1995 pairs per
week (see the graph below), then where is the equilibrium point?
• The equilibrium point is obtained when demand = supply:
−4.5p+4000 = 50p−1995
54.5p = 5995
giving p = 5995/54.5 = $110.
The equilibrium price is therefore $110 and the equilibrium demand is:
q = −4.5(110) + 4000 = 3505 pairs per week. What happens at prices other than the equilibrium price can be
seen in the following figure:

Below Equilibrium Price At Equilibrium Price Above Equilibrium Price