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International School of Business, UEH UEH, Vietnam September 21, 2022 1 / 202
Chapter R: Linear Equations and Non-linear Equations
Outline of the chapter: In this chapter, we will review some concepts in college
algebra. Knowing algebra is a fundamental prerequisite to success in higher
mathematics. The topic includes
Exponents
Radicals
Polynomials
Haeussler, Paul, and Wood: Introductory mathematical analysis for business, economics, and the life and social sciences,
International School of Business, UEH UEH, Vietnam September 21, 2022 2 / 202
Chapter R: Linear Equations and Non-linear Equations R.1. Algebraic expressions with one or more variables
Definition
An algebraic expression is simply a combination of letters, brackets and other
mathematical symbols such as +, −, ×, :, and so on. Letters used in algebraic
expressions represent variables/unknown.
Example
x
20 + x, , x + 2y , x 2 + 3(y − 5),
y
Algebra is a language, and you must be familiar with its rules to correctly
interpret algebraic statements. The following order of operations has been agreed
upon through centuries of usage: Brackets first (B) - Indices second (I) -
Division and Multiplication third (DM) - Addition and Subtraction fourth
(AS). This is sometimes remembered using the acronym BIDMAS!
International School of Business, UEH UEH, Vietnam September 21, 2022 3 / 202
Chapter R: Linear Equations and Non-linear Equations R.1. Algebraic expressions with one or more variables
Example
A company has a policy to reimburse employees for use of their cars for travel: for
the first 50 miles they may be able to claim 90 cents a mile, but this could fall to
60 cents a mile thereafter. If the distance, x miles, is no more than 50 miles, then
travel expenses, E (in dollars), could be worked out using the formula E = 0.9x.
If x exceeds 50 miles, the employee can claim $0.9 a mile for the first 50 miles
but only $0.6 a mile for the last (x − 50) miles. The total amount is
E (x) = 0.9 × 50 + 0.6(x − 50) = 15 + 0.6x.
Travel expenses can therefore be worked out using two separate expressions:
International School of Business, UEH UEH, Vietnam September 21, 2022 4 / 202
Chapter R: Linear Equations and Non-linear Equations R.2. Equations, Inequalities of one or more variable
Definition
An equation is a mathematical statement that consists two equal algebraic
expressions, one on each side of an ’equals’ sign.
Example
Net Income = Revenue – Expenses (net income equation)
Break-even Point = Fixed Costs / (Sales Price Per Unit – Variable Costs Per
Unit) [Use the break-even point formula to determine how many products
you need to sell during a period to break even.]
International School of Business, UEH UEH, Vietnam September 21, 2022 5 / 202
Chapter R: Linear Equations and Non-linear Equations R.2. Equations, Inequalities of one or more variable
Definition
Inequality identifies two algebraic expressions are not equal by means of
the symbols like ̸=, <, >, ≤, ≥.
Equations that are not falling in the above form are called non-linear
equations. For example: 2x 2 + 1 = 2, x + y 3 = 4.
International School of Business, UEH UEH, Vietnam September 21, 2022 7 / 202
Chapter R: Linear Equations and Non-linear Equations R.4. Real numbers
To represent real numbers, we draw a horizontal line which is called the real
number line. The point representing zero is call the origin.
International School of Business, UEH UEH, Vietnam September 21, 2022 8 / 202
Chapter R: Linear Equations and Non-linear Equations R.5. Exponents
Definition
Integer exponents. If n is a natural number, then an = a × a × a × · · · × a where
a appears as a factor n times and an is read as the nth exponent/power of a or a
raised to the nth exponent/power. By definition, we have that
Newton binomial formula. Let n ∈ IN and x, y ∈ IR. Newton binomial says that
√ √
Let n ∈ IN. The radical n
a is defined by n
a = a1/n and is read as the nth
root of a, where
the number a is the radicand,
International School of Business, UEH UEH, Vietnam September 21, 2022 10 / 202
Chapter R: Linear Equations and Non-linear Equations R.7. Polynomials
Definition
A polynomial is a term or a finite sum of terms in which all variables have whole
number exponents, and no variables appear in denominators. The degree is the
highest exponent.
Example
x 3 + 8 : polynomial of degree 3
x 2 y + xy 4 : polynomial of degree 5
2x + 5 : polynomial of degree 1
√
x 2 + 3 x + 1 + 8: not a polynomial due to the fractional exponent in the
second term.
International School of Business, UEH UEH, Vietnam September 21, 2022 11 / 202
Chapter 1. Mathematics of Finance
Savings - Loans.
Investment appraisal
International School of Business, UEH UEH, Vietnam September 21, 2022 12 / 202
Chapter 1. Mathematics of Finance 1.1. Percentages
The word percentage literally means per cent, i.e. per hundred or out of
100. It stands for a portion of a whole expressed as a number between 0
and 100 rather than as a fraction and it is represented by the symbol %
Example
20 students out of a total of 37 in the student list are female. What
percentage are female?
20
Answer. Our class has 37 × 100 ≈ 54.3% female students. [This does not
mean that there are more than 54 female students in the class.]
International School of Business, UEH UEH, Vietnam September 21, 2022 13 / 202
Chapter 1. Mathematics of Finance 1.1. Percentages
International School of Business, UEH UEH, Vietnam September 21, 2022 14 / 202
Chapter 1. Mathematics of Finance 1.1. Percentages
International School of Business, UEH UEH, Vietnam September 21, 2022 15 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
Suppose that Peter invests P0 dollars into a bank with the annual interest
rate of r %. How much will he receive?
r% t
Pt = P0 + INT = P0 + P0 × t × = P0 1 + r % ×
365 365
P1 = P0 + INT = P0 + P0 × r % = P0 (1 + r %)
where INT is the interest paid direct to the investor and it is called
the simple interest.
International School of Business, UEH UEH, Vietnam September 21, 2022 16 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
However after 1 year, Peter still lets that amount in his account, so at the
end of the second year, he will receive
P2 = P0 (1 + r %) + INT = P0 (1 + r %) + r % × P0 (1 + r %) = P0 (1 + r %)2
International School of Business, UEH UEH, Vietnam September 21, 2022 17 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
Example
If $10,000 invested at 5% interest compounded annually then the amount
the investor receives
5
after 216 days is P216 days = 10, 000 + 10, 000 × 100 × 216
365 ≈ 10, 295.89
International School of Business, UEH UEH, Vietnam September 21, 2022 18 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
It is worth noting that the interest are often compounded more frequently than a
year, so the periodic interest rates are required to be considered. The following is
the simple rule for periodic rates w.r.t. the annual rate r %:
International School of Business, UEH UEH, Vietnam September 21, 2022 19 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
However, r % is only nominal rate, because the interest rate that we actually
earn for a year if interest is compounded more than one time a year is higher.
This rate is called effective rate.
Generally, if r % is the nominal rate compounded m times per year then the
corresponding effective rate is
m
r%
re = 1 + −1
m
It’s clear that when m = 1 then r = re .
International School of Business, UEH UEH, Vietnam September 21, 2022 20 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
Example
A principal of $10 is invested at 12% interest for 1 year. The future value
if the interest is compounded
annually =
semiannually =
quarterly =
monthly =
weekly =
After calculating the future values above, we will see that the future value
rises as the frequency of compounding rises. However the rate of rise
appears to be slowing down, suggesting that numbers are converging to
some fixed value.
International School of Business, UEH UEH, Vietnam September 21, 2022 21 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
Indeed, if the interest is compounded in a smaller and smaller time periods (which
means m becomes very large) then the future value rises, however, after n years,
they appear to be approaching a fixed number
n×m " m/r % #n×r %
r% 1
Pn = lim P0 1 + = lim P0 1+ m = P0 e n×r %
m→∞ m m→∞
r%
Remember that the number of periods must be a whole number because the
interests are only added on at the end of each compounding period.
The number e is named after the Swiss mathematician Leonhard Euler and is
m x
e ≡ limm→∞ 1 + m1 . Euler then proved that limx→∞ 1 + x1 = e. Note that
m ∈ IN, x ∈ IR
International School of Business, UEH UEH, Vietnam September 21, 2022 22 / 202
Chapter 1. Mathematics of Finance 1.2. Simple interest - Compound interest
Pk = P0 (1 + rp %)k ,
Pn = P0 e n×r %
International School of Business, UEH UEH, Vietnam September 21, 2022 23 / 202
Chapter 1. Mathematics of Finance 1.3. Savings and loans
So, if b ̸= 1 then
1 − bk
1 + b + b 2 + · · · + b k−2 + b k−1 =
1−b
101
1
1 2
1 100
1−( 12 )
Example. 1 + 2 + 2 + ··· + 2 = 1− 21
We’ll make use of the Newton binomial formula in the two important
activities in Finance, such as savings and loans.
International School of Business, UEH UEH, Vietnam September 21, 2022 24 / 202
Chapter 1. Mathematics of Finance 1.3. Savings and loans
International School of Business, UEH UEH, Vietnam September 21, 2022 25 / 202
Chapter 1. Mathematics of Finance 1.3. Savings and loans
Suppose that each payment is made at the beginning of the periods and
every payment is an equal amount a. Then the accumulated amount, after
n periods, will be calculated by
(1 + r )n − 1
Vn = a(1 + r ) + a(1 + r )2 + · · · + a(1 + r )n = a(1 + r ) .
r
Caveat: A fixed amount of money has different values at a different point
in time, which refers to as the time value of money. Therefore, a golden
rule for financial mathematics is never compare or identify capitals
without transforming them into a common date.
International School of Business, UEH UEH, Vietnam September 21, 2022 26 / 202
Chapter 1. Mathematics of Finance 1.3. Savings and loans
Loans: one needs an amount of money right now and decides to borrow it
from a bank. The loan is promised to pay back by a series of repayments
(or, also called, an annuity) made at equal time intervals. Such an annuity
can be thought of as the opposite of a sinking fund!
Suppose that each repayment is made at the end of the periods, then the
actual value of a debt, after n repayments made, is
1 − (1 + r )−n
V0 = a(1 + r )−1 + a(1 + r )−2 + · · · + a(1 + r )−n = a ,
r
where a is the amount repaid equally at each period.
International School of Business, UEH UEH, Vietnam September 21, 2022 27 / 202
Chapter 1. Mathematics of Finance 1.3. Savings and loans
Example
[Savings] Suppose $1,000 is placed in a savings account on the 1st of
December 2016 and, from then on, $50 is deposited in the account on
the first of the next months. If the interest is at 4.3% compounded
monthly, how much is in the account on 1 Jan., 2019?
Just after the 16th repayment, the debtor would like to pay off the rest
of loan by only three quarter repayments at the interest rate of 4.5%
compounded quarterly. What is each quarterly repayment?
International School of Business, UEH UEH, Vietnam September 21, 2022 28 / 202
Chapter 1. Mathematics of Finance 1.4. Investment appraisal
−k
Present value: P0 = Pk (1 + rp %) . Let’s recall that
Example
Find the present value of $1,000 in 4 years’ time if the discount rate is 10%
compounded
(a) semiannually
(b) continuously ?
International School of Business, UEH UEH, Vietnam September 21, 2022 29 / 202
Chapter 1. Mathematics of Finance 1.4. Investment appraisal
Example. Suppose a $10,000 note due eight years from now is sold to a financial
institution for $4700. What is the nominal discount rate with quarterly
compounding?
International School of Business, UEH UEH, Vietnam September 21, 2022 30 / 202
Chapter 1. Mathematics of Finance 1.4. Investment appraisal
Example
A project requiring an initial outlay of $15,000 is guaranteed to produce a
return of $20,000 in 3 years’ time. Use the
Net Present Value
International School of Business, UEH UEH, Vietnam September 21, 2022 32 / 202
Chapter 1. Mathematics of Finance 1.4. Investment appraisal
International School of Business, UEH UEH, Vietnam September 21, 2022 33 / 202
Chapter 2: Functions
Notice that at the end of this chapter, you must be able to:
determine independent/dependent variables of issues mostly arising in
Business,
represent relationship between quantities using
equations/inequalities/functions,
recognize possible properties of a quantity based on other quantities,
find the domain of a function and sketch a function,
know how to compute exactly or approximately related quantities,
finally know how to fit data points by regression model.
International School of Business, UEH UEH, Vietnam September 21, 2022 34 / 202
Chapter 2: Functions
Mathematical modeling
There are many different types of functions that can be used to model
relationships observed in the real world. In what follows, we discuss the behavior
and graphs of these functions and give examples of situations appropriately
modeled by such functions.
International School of Business, UEH UEH, Vietnam September 21, 2022 35 / 202
Chapter 2: Functions 2.1. Linear functions
Furthermore, the slope of a horizontal line is 0, while the slope of a vertical line is
undefined.
Note that using similar triangles, it can be shown that the slope of a line is
independent of the choice of points on the line.
International School of Business, UEH UEH, Vietnam September 21, 2022 36 / 202
Chapter 2: Functions 2.1. Linear functions
Ax + By = C with A, B, C ∈ IR
y = m(x − xA ) + yA
y = mx + b
International School of Business, UEH UEH, Vietnam September 21, 2022 37 / 202
Chapter 2: Functions 2.1. Linear functions
calculate the coordinates of any two distinct points lying on the line. The
easiest thing (in terms of the amount of arithmetic involved) is to put x = 0
and find y and then to put y = 0 and find x.
plot these two points on graph paper and use a ruler to draw the line
passing through them.
International School of Business, UEH UEH, Vietnam September 21, 2022 38 / 202
Chapter 2: Functions 2.1. Linear functions
International School of Business, UEH UEH, Vietnam September 21, 2022 39 / 202
Chapter 2: Functions 2.1. Linear functions
Example 1. A car uses 6 liters of petrol for 100 km and 9 liters for 150 km. Find
the petrol usage equation, assuming it is linear. Find the amount of petrol used if
it traveled 30 km.
Find an equation to show the relationship between the time spend in study per
day, t, and the marks scored, S, by a student, assuming it is linear. Find the
marks scored by a student if he/she spent 5 hours per day in study.
International School of Business, UEH UEH, Vietnam September 21, 2022 40 / 202
Chapter 2: Functions 2.1. Linear functions
The least square line y = b1 + b0 x that gives the best fit to the data points
(x1 , y1 ), (x2 , y2 ), . . . , (xn , yn ) has slope b0 and y-intercept b1
P P P P P
n (xy ) − ( x)( y ) y − b0 x
b0 = P P ; b1 =
n (x 2 ) − ( x)2 n
International School of Business, UEH UEH, Vietnam September 21, 2022 41 / 202
Chapter 2: Functions 2.1. Linear functions
One measure of how well the original data fits a straight line is the correlation
coefficient developed by statistics pioneer Karl Pearson (1857—1936),
denoted by r , which can be calculated by the following formula.
P P P
n (xy ) − ( x) ( y )
r=p P P q p P P
n (x 2 ) − ( x)2 n (y 2 ) − ( y )2
Below are some scatterplots that correspond to values of r .
Note that if r is equal or close to zero, there is no linear correlation between the
data points (but some nonlinear function might provide an excellent fit for the
data). That is the reason why it is just as important to study non-linear
functions. Let’s move to the next topic.
International School of Business, UEH UEH, Vietnam September 21, 2022 42 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Special functions
Combinations of functions
Inverse functions
International School of Business, UEH UEH, Vietnam September 21, 2022 43 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Let X, Y be two sets (or also called, for example, two events in
probability). A function f : X → Y is a rule that assigns, to each element
x of X , at most one element y of Y , denoted f (x).
International School of Business, UEH UEH, Vietnam September 21, 2022 44 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Domain: the set of all inputs x allowable is called the domain of function
f and denoted D. Mathematically speaking,
D = {x|f (x) is well defined}
Range: If D is the domain of f then the set of all outputs f (x) is called
the image/range of f and denoted R. Briefly,
R = {f (x)|x ∈ D}
From now on, if no other specification is stated, D and R mean the
domain and the range of function of interest, respectively.
Example
Which following rule is a function? If it’s a function, find the domain and
range.
(a) x and f are related by f (x) = x1 .
Properties of function
Monotone: A function f is called increasing (resp. decreasing) on I ⊂ D
if, for all x1 , x2 ∈ I , x1 < x2 implies f (x1 ) ≤ f (x2 ) (resp. f (x1 ) ≥ f (x2 ))
by a table (numerically)
by a graph (graphically)
in words (verbally)
Notice that if a single function can be represented in all four ways, it’s
often useful to go from one representation to another to gain additional
insight into the function.
International School of Business, UEH UEH, Vietnam September 21, 2022 47 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Special functions
Case-defined functions (or called also piece-wise functions): functions defined
by more than a formula over different intervals
are called case-defined functions.
x if x ≥ 0
For example, the absolute-value function |x| =
−x otherwise.
Example. Let C be the cost of mailing an envelope with weight w . The rule that
the US Postal Service used as of 2010 is as follows: The cost is 88 cents for up to
1 oz, plus 17 cents for each additional ounce (or less). The mailing cost can be
given by a table as shown below
Write a general formula for the cost function and draw its graph.
International School of Business, UEH UEH, Vietnam September 21, 2022 48 / 202
Chapter 2: Functions 2.2. Nonlinear functions
International School of Business, UEH UEH, Vietnam September 21, 2022 49 / 202
Chapter 2: Functions 2.2. Nonlinear functions
International School of Business, UEH UEH, Vietnam September 21, 2022 50 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Example
The percentage, y , of households possessing refrigerators, t years after
they have been introduced in a developed country, is modeled by
y = 100 − 95e −0.15t .
1. Find the percentage of households that have refrigerators
(a) at their launch,
(b) after 1 year,
(c) after 10 years,
(d) after 20 years.
2. What is the market saturation level?
3. Sketch a graph of y against t and hence give a qualitative description
of the growth of refrigerator ownership over time.
International School of Business, UEH UEH, Vietnam September 21, 2022 51 / 202
Chapter 2: Functions 2.2. Nonlinear functions
Combinations of functions
For any functions f and g , we define the following operations:
Sum/Difference: (f ± g )(x) = f (x) ± g (x)
Example. Suppose that Greg Tobin, manager of a giant supermarket chain, has
studied the supply and demand for watermelons. He has noticed that the demand
increases as the price decreases. He has determined that the quantity (in
thousands) demanded weekly, q, and the price (in dollars) per watermelon, p, are
related by the function p = 9 − 0.75q. Find the quantity demanded at a price of
$5.25 per watermelon and at a price of $3.75 per watermelon?
Greg also noticed that the quantity of watermelons supplied decreased as the
price decreased. Price p and supply q are related by p = 0.75q. Find the quantity
supplied at a price of $5.25 per watermelon and at a price of $3.00 per
watermelon. Graph both functions on the same axes.
International School of Business, UEH UEH, Vietnam September 21, 2022 54 / 202
Chapter 2: Functions 2.3. Functions used in Business
The law of supply and demand says that in a competitive market environment,
supply tends to equal demand, and when this occurs, the market is said to be in
equilibrium. [Theory of Equilibrium points in N-person in-cooperative games were
studied by John Nash, 1950.]
When the market is not in equilibrium, it has a shortage when demand exceeds
supply [D(x) > S(x)] and a surplus when supply exceeds demand [S(x) > D(x)].
John Forbes Nash Jr. (June 13, 1928 – May 23, 2015) was an American mathematician who is the only person to be awarded
both the Nobel Memorial Prize in Economic Sciences in Game theory in 1994 and the Abel Prize in 2015. The movie ‘A
International School of Business, UEH UEH, Vietnam September 21, 2022 55 / 202
Chapter 2: Functions 2.3. Functions used in Business
Profit function denoted p(x) is the interest received after selling x units
of a commodity.
p(x) = r (x) − total cost
International School of Business, UEH UEH, Vietnam September 21, 2022 56 / 202
Chapter 2: Functions 2.3. Functions used in Business
Example. A firm producing poultry feed finds that the total cost C (x) in
dollars of producing and selling x units is given by
(c) How many units must be sold for the firm to break even?
International School of Business, UEH UEH, Vietnam September 21, 2022 57 / 202
Chapter 2: Functions 2.4. Transposition
International School of Business, UEH UEH, Vietnam September 21, 2022 58 / 202
Chapter 2: Functions 2.5. Transformation
International School of Business, UEH UEH, Vietnam September 21, 2022 59 / 202
Chapter 2: Functions 2.5. Transformation
For instance, the tax on gasoline could either be imposed on the buyer or the
supplier. It is imposed on the buyer if the buyer pays a price for the good and
then also pays the tax on top of that. Similarly, if the tax is imposed on the seller,
the price charged to the buyer includes the tax.
International School of Business, UEH UEH, Vietnam September 21, 2022 60 / 202
Chapter 2: Functions 2.5. Transformation
First, consider a tax imposed on the seller. At a given price p, and tax t,
each seller obtains p–t, and thus supplies the amount associated with this
net price. Taking the before-tax supply to be SBefore , the after-tax supply
is shifted up by the amount of the tax. This is the amount that covers the
marginal value of the last unit, plus providing for the tax.
International School of Business, UEH UEH, Vietnam September 21, 2022 61 / 202
Chapter 2: Functions 2.5. Transformation
International School of Business, UEH UEH, Vietnam September 21, 2022 62 / 202
Chapter 2: Functions 2.5. Transformation
International School of Business, UEH UEH, Vietnam September 21, 2022 63 / 202
Chapter 2: Functions 2.5. Transformation
Example
The demand and supply functions of a good are given by p = −2qd + 50
and p = 1/2qS + 25 where p, qD and qS denote the price, quantity
demanded and quantity supplied, respectively.
(a) Determine the equilibrium price and quantity.
International School of Business, UEH UEH, Vietnam September 21, 2022 64 / 202
Chapter 3. Differentiation
Continuity
Derivative of a function
Rules of differentiation
Elasticity
Marginal functions
International School of Business, UEH UEH, Vietnam September 21, 2022 66 / 202
Chapter 3. Differentiation 3.1. Limits
International School of Business, UEH UEH, Vietnam September 21, 2022 67 / 202
Chapter 3. Differentiation 3.1. Limits
Theorem
limx→a f (x) exists if and only if limx→a+ f (x) and limx→a− f (x) exist and
are equal. In that case limx→a f (x) = limx→a+ f (x) = limx→a− f (x)
Consequently, if limx→a+ f (x) ̸= limx→a− f (x) then limx→a f (x) does not
exist.
International School of Business, UEH UEH, Vietnam September 21, 2022 68 / 202
Chapter 3. Differentiation 3.1. Limits
if we can make f (x) arbitrarily big by taking x sufficiently close but not
equal to a.
International School of Business, UEH UEH, Vietnam September 21, 2022 69 / 202
Chapter 3. Differentiation 3.1. Limits
Definition
If the values of the function f (x) approach a number L as x increases
without bound, we write
limx→∞ f (x) = L
International School of Business, UEH UEH, Vietnam September 21, 2022 70 / 202
Chapter 3. Differentiation 3.1. Limits
Theorem
If c ∈ R then the constant function f (x) ≡ c is often denoted c itself.
And we have
lim c = c and lim x = a
x→a x→a
1 x
1
lim (1 + x) x = e and lim 1+ =e
x→0 x→∞ x
International School of Business, UEH UEH, Vietnam September 21, 2022 71 / 202
Chapter 3. Differentiation 3.1. Limits
Limit Laws
Theorem
If limx→a f (x) and limx→a g (x) exist then
(a) limx→a [f (x) ± g (x)] = limx→a f (x) ± limx→a g (x)
International School of Business, UEH UEH, Vietnam September 21, 2022 72 / 202
Chapter 3. Differentiation 3.1. Limits
Corollary
Let n be a positive integer. If limx→a f (x) exists then
(a) limx→a cf (x) = c limx→a f (x)
(b) limx→a x n = an
(c) limx→a (f (x))n = (limx→a f (x))n
√ √
(d) limx→a n x = n a
In the above formula if n is even we assume that a > 0
p p
(e) limx→a n f (x) = limx→a n f (a)
In the above formula if n is even we assume that limx→a f (x) > 0.
International School of Business, UEH UEH, Vietnam September 21, 2022 73 / 202
Chapter 3. Differentiation 3.1. Limits
International School of Business, UEH UEH, Vietnam September 21, 2022 74 / 202
Chapter 3. Differentiation 3.2. Continuity
International School of Business, UEH UEH, Vietnam September 21, 2022 75 / 202
Chapter 3. Differentiation 3.2. Continuity
International School of Business, UEH UEH, Vietnam September 21, 2022 77 / 202
Chapter 3. Differentiation 3.2. Continuity
One often says that a picture is worth more than thousand words. So in
order to understand the concepts of continuity, let do the example below.
Example
Let f be given by the graph in the figure below. Which intervals is f
continuous on?
International School of Business, UEH UEH, Vietnam September 21, 2022 78 / 202
Chapter 3. Differentiation 3.2. Continuity
Example
Suppose the long-distance rate for a telephone call from Hazleton,
Pennsylvania to Los Angeles, California, is $0.08 for the first minute or
fraction thereof and $0.04 for each additional minute or fraction thereof. If
y = f (t) is a function that indicates the total charge y for a call of t
minutes duration then
Formulate the charge function
International School of Business, UEH UEH, Vietnam September 21, 2022 79 / 202
Chapter 3. Differentiation 3.3. Tangent and Velocity Problems
International School of Business, UEH UEH, Vietnam September 21, 2022 80 / 202
Chapter 3. Differentiation 3.3. Tangent and Velocity Problems
Tangent problem. Find the slope of a tangent line at P(c, f (c)) on the
curve C of equation y = f (x).
International School of Business, UEH UEH, Vietnam September 21, 2022 81 / 202
Chapter 3. Differentiation 3.3. Tangent and Velocity Problems
International School of Business, UEH UEH, Vietnam September 21, 2022 82 / 202
Chapter 3. Differentiation 3.3. Tangent and Velocity Problems
International School of Business, UEH UEH, Vietnam September 21, 2022 83 / 202
Chapter 3. Differentiation 3.3. Tangent and Velocity Problems
f (a + h) − f (a)
v (a) = limh→0
h
Note that we are not concerned with the direction in which the movement
occurs, but displacement and velocity. The speed of the movement is
|velocity |.
International School of Business, UEH UEH, Vietnam September 21, 2022 84 / 202
Chapter 3. Differentiation 3.4. Derivative
International School of Business, UEH UEH, Vietnam September 21, 2022 85 / 202
Chapter 3. Differentiation 3.4. Derivative
Definition
Given y = f (x). The derivative of a function at the number a, denoted by
f ′ (x = a) (followed by Newton’s notation) which is read ’f dashed of x‘ or
denoted by dx df
(x = a) ≡ dy
dx (x = a) (followed by Leibnitz’s), is
f (a + h) − f (a) ∆f df
f ′ (a) = lim = lim = (x = a)
h→0 h ∆x→0 ∆x dx
if the limit exists and, in this case, f is said to be derivable (or also called
differentiable) at a.
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Chapter 3. Differentiation 3.4. Derivative
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Chapter 3. Differentiation 3.4. Derivative
Noting that not all functions are derivable. For example, function is not
continuous at a point then it is not derivable at that point, that is, the
graph at this point is broken into two pieces or has a hole.
Even continuous functions that whose graph has a sharp corner are also
not derivable.
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Chapter 3. Differentiation 3.5. Rules of Differentiation
Theorem
If f and g are derivable and c is a constant then
(f ± g )′ = f ′ ± g ′
(fg )′ = f ′ g + fg ′
f ′ g −fg ′
( gf )′ = g2
(cf )′ = cf ′
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Chapter 3. Differentiation 3.5. Rules of Differentiation
Example
Given two functions f , g whose graphs are shown below. Let
u(x) = f (g (x)), v (x) = g (f (x)), and w (x) = g (g (x))
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Chapter 3. Differentiation 3.5. Rules of Differentiation
The point at which f ′ = 0 and the curve changes from moving ups to
moving down or vice versa is called the turning point!
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Chapter 3. Differentiation 3.5. Rules of Differentiation
The point at which f ′ = 0 and the curve changes the concavity is called
the point of inflection.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Elasticity
Marginal analysis
Optimization in Business
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Rate of change
Example
An efficiency study of the morning shift [from 8:00 a.m. til 12:00 noon] at
a certain factory indicates that an average worker arriving on the job at
8:00 a.m. will have produced Q(t) = −t 3 + 8t 2 + 15t units t hours later.
At what time is the worker performing most efficiently? and least
efficiently?
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Example
A yearly rate of change of 500 individuals in a city whose total populations is 5
500
million yields a negligible relative (per capita) rate of change of 5,000,000 = 0.0001
or 0.01%, while the same rate of change in a town of 2,000 would yield a relative
500
rate of change 2,000 = 0.25 or 25%, which has enormous impact on the town.
∆f
The relative rate of change in f = f and the corresponding percentage rate of
change in f = 100f ∆f %.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Elasticity
For instance, the demand for products such as soap, flashlight batteries, or
salt will not be much affected by a small percentage change in unit price,
while a comparable percentage change in the price of airline tickets or
home loans can affect demand dramatically.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Demand is said to be
elastic if |E | > 1 ⇒ the percentage decrease in demand is greater than the
percentage increase in price that caused it, and thus, demand is relatively
sensitive to changes in price
unit elasticity if |E | = 1
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Example
The manager of a bookstore determines that when a certain new
paperback novel is priced at p dollars per copy, the daily demand will be
√
q = 300 − p 2 copies, where 0 ≤ p ≤ 300
(a) Determine where the demand is elastic, inelastic, and of unit elasticity
with respect to price.
(b) Interpret the results of part (a) in terms of the behavior of total
revenue as a function of price.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
The relationship between revenue and price is shown below. Note that the
revenue curve is rising where demand is inelastic, falling where demand is
elastic, and has a horizontal tangent line where the demand is of unit
elasticity.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
q = p 2 − 20p + 100
where p is the price per unit (in hundred dollars) and q is the quantity
demanded (in hundreds).
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
dp
(a) Find the value of dq when 150 units are demanded.
(b) Using the result in part (a), determine the point elasticity of demand
when 150 units are demanded. At this level, is demand elastic,
inelastic, or of unit elasticity?
(c) Use the result in part (b) to approximate the price per unit if demand
decreases from 150 to 140 units.
(d) If the current demand is 150 units, should the manufacturer increase
or decrease price in order to increase revenue?
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Marginal functions
The definition is analogously stated for the marginal revenue and marginal
profit.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
q = m(50 − m)
p = −0.05q + 10
3
Example 2. If AC = 0.03q + 1.2 + q is an average-cost function, find the
marginal cost when q = 100.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Example
Unit of output Total cost (in dollars) Marginal cost (in dollars)
1 5 5
2 9 4
3 12 3
4 16 4
5 21 5
6 29 8
Observe that the marginal cost curve decreases sharply with smaller
output and reaches a minimum. As production is expanded to a higher
level, it begins to rise at a rapid rate.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Exercise. A manufacturer has found that when m employees are working, the
number of units of product produced per day is
p
q = 10 m2 + 4900 − 700
8q + p 2 − 19, 300 = 0
where p is the selling price when the demand for the product is q units per day.
(b) Find the relative rate of change of revenue with respect to the number of
employees when m = 240.
(c) Suppose it would cost the manufacturer $400 more per day to hire an
additional employee. Would you advise the manufacturer to hire the 241st
employee? Why or why not?
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
The diminishing marginal productivity states that the increase in output due to
a 1-unit increase in labour will eventually decline. In other words, once the size of
the workforce has reached a certain threshold level, the marginal product of
labour will get smaller. It’s kind of like the more you eat egg rolls, the less you
enjoy them.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
q2
C= + 3q + 400
4
where C is the total cost of producing q units.
At what level of output will average cost per unit be a minimum? What is
this minimum?
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
(b) If, a regulatory device, the government imposes a tax of $22 per unit on the
monopolist, what is the new price for profit maximization?
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
On the one hand, if the company were to manufacture one large batch every year,
it would minimize setup costs but incur high warehouse costs. On the other hand,
if it were to make many small batches, this would increase setup costs.
Calculus can be used to find the number that should be manufactured in each
batch in order to minimize the total cost. This number is called the economic
lot size.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Figure below shows several possibilities for a product having an annual demand of
12,000 units.
The first graph shows the results if all 12,000 units are made in one batch
per year. In this case an average of 6000 units will be held in a warehouse.
If 3000 units are made in each batch, four batches will be made at equal
time intervals during the year, and the average number of units in the
warehouse falls to only 1500.
If 1000 units are made in each of twelve batches, an average of 500 units
will be in the warehouse.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
To solve the problem, we need to consider the variable q number of units in each
batch. In addition, we have the following constants:
So the total production cost is the sum of the manufacturing and storage costs
M q fM kq
TC (q) = f × +g ×M +k × = + gM +
q 2 q 2
q
and the lot size that minimizes total costs is q = 2fM
k .
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
For example. A paint company has a steady annual demand for 24,500
cans of automobile primer. The comptroller for the company says that it
costs $ 2 to store one can of paint for 1 year and $ 500 to set up the plant
for the production of the primer.
Find the number of cans of primer that should be produced in each batch,
as well as the number of batches per year, in order to minimize total
production costs.
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Chapter 3. Differentiation 3.6. Some applications of differentiation in Business
Unconstrained/constrained optimization
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Chapter 4. Partial Differentiation 4.1. Functions of several variables
Note that
Substitutes are products/services in different forms that have the same
functionality. For example, butter and margarine are substitute goods.
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Chapter 4. Partial Differentiation 4.1. Functions of several variables
First-order derivatives.
Definition
First-order partial derivative w.r.t. x:
∂f f (x0 +∆x,y0 )−f (x0 ,y0 )
∂x (x0 , y0 ) ≡ fx (x0 , y0 ) = lim∆x→0 ∆x
∂f
Accordingly to compute for example ∂x , we need only to differentiate
mathematical expressions with respect to x and let all remaining letters in
the mathematical expressions constants in disguise. It is the same for
other variables.
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Chapter 4. Partial Differentiation 4.1. Functions of several variables
Second-order derivatives.
∂2f
Second-order partial derivative w.r.t. x: ∂x 2
≡ fxx = (fx )x
∂2f
Second-order partial derivative w.r.t. y : ∂y 2
≡ fyy = (fy )y
∂2f
Second-order partial derivative w.r.t. x and y : ∂x∂y ≡ fxy = (fy )x
∂2f
Second-order partial derivative w.r.t. y and x: ∂x∂y ≡ fyx = (fx )y
Note that in general (fx )y ̸= (fy )x . In the scope of this course, we will
consider functions that satisfy (fx )y = (fy )x . [According to Weierstrass
theorem, (fx )y (x0 , y0 ) = (fy )x (x0 , y0 ) if the first order partial derivatives
are continuous at (x0 , y0 ).]
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Chapter 4. Partial Differentiation 4.1. Functions of several variables
∂f ∂f
∆z ≈ × ∆x + × ∆y
∂x ∂y
which is called the small increments formula. The differential form of the small
increments formula states that
∂f ∂f
dz = × dx + × dy
∂x ∂y
This formula is called the implicit differentiation and is a useful tool to compute
the derivative of an implicit function.
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Chapter 4. Partial Differentiation 4.1. Functions of several variables
z = x 2 y 4 − x 6 + 4y
when
(a) x increases from 1 to 1.1 and y remains fixed at 0;
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Chapter 4. Partial Differentiation 4.2. Optimization problems
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Chapter 4. Partial Differentiation 4.2. Optimization problems
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Chapter 4. Partial Differentiation 4.2. Optimization problems
Example
Graph of the function f (x, y ) = −x 2 − y 2 has the shape of a paraboloid
opened downwards
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Chapter 4. Partial Differentiation 4.2. Optimization problems
Example
Graph of the function f (x, y ) = x 2 − y 2 has the shape of a hyperbolic
paraboloid
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Chapter 4. Partial Differentiation 4.2. Optimization problems
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Chapter 4. Partial Differentiation 4.2. Optimization problems
(a) State the minimum value of TC in the case when there are no
constraints.
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Chapter 4. Partial Differentiation 4.2. Optimization problems
Elasticity of demand
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
Suppose D 1 (p1 , p2 ) units of the first commodity and D 2 (p1 , p2 ) of the second are
demanded when the unit prices of the commodities are p1 and p2 , respectively. It
is reasonable to expect demand to decrease with increasing price, so Dp11 < 0 and
Dp22 < 0.
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
For substitute commodities, the demand for each commodity increases with
respect to the price of the other, so Dp12 > 0 and Dp21 > 0.
However, for complementary commodities, the demand for each decreases with
respect to the price of the other, and Dp12 < 0 and Dp21 < 0.
Example
Suppose the demand function for flour in a certain community is given by
10
D 1 (p1 , p2 ) = 500 + − 5p2 ,
p1 + 2
while the corresponding demand for bread is given by
7
D 2 (p1 , p2 ) = 400 + − 2p1 ,
p2 + 3
where p1 is the dollar price of a pound of flour and p2 is the price of a loaf of
bread. Determine whether flour and bread are substitute or complementary
commodities or neither.
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
If the alternative good is substitutable then QPA > 0 and thus EPA > 0.
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
Utility. Consumers are faced with a choice of how many items of various goods to
buy and has a preference between options available. To analyze the behavior of
consumers quantitatively, we associate with each set of options a number, U,
called utility, which indicates the level of satisfaction. For instance,
A little more general, suppose that there are two goods, G1 and G2 , and that the
consumer buys x1 items of G1 and x2 items of G2 . The variable U is then a utility
function of x1 and x2 , which we write as U = U(x1 , x2 )
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
In this example, we will evidence that Ux1 x1 < 0 and Ux2 x2 < 0. This
illustrates the law of diminishing marginal utility, meaning the
consumption of good G1 or G2 increases, each additional item of G1 or G2
bought confers less utility than the previous item.
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
If fewer purchases are made of G1 , then the consumer has to compensate for this
by buying more of type G2 to maintain the same level of satisfaction.
Indifference/level curve is a curve that consists all points of the same utility:
C (U, U0 ) = {(x1 , x2 )|U(x1 , x2 ) = U0 }
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
√ √
Example. Given the utility function U = x1 x2 find a general
expression for MRCS in terms of x1 and x2 .
(a) Calculate the particular value of MRCS for the indifference curve that
passes through (300, 500).
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
Q = f (K , L)
Example
√
Given Q = 2LK + L. If the current level of K and L are 7 and 4,
respectively, estimate the increase in capital needed to maintain the
current level of output given a 1-unit decrease in labour.
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Chapter 4. Partial Differentiation 4.3. Partial elasticity and marginal functions
f (λK , λL) = λn f (K , L)
The special case n = 1 is worthy of note because the right-hand side of the
formula is then simply f (K , L), which is equal to the output, Q.
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Chapter 5. Integration
Indefinite integration
Definite integration
Applications in Business
Discounting
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Chapter 5. Integration 5.1. Indefinite integration
Definition
If F ′ (x) = f (x) for all x in an interval I then we say that F (x) is an
anti-derivative of f (x) on I .
Theorem
If F is an anti-derivative of f then all other anti-derivative have the form
F (x) + C where C is a real number.
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Chapter 5. Integration 5.1. Indefinite integration
Definition
If the function f has an anti-derivative then the integral of f denoted by
R R
f or f (x)dx is the collection of all anti-derivatives of f .
3 ′
x3 x
x 2 dx = = x 2.
R
Example. 3 + C because 3
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Chapter 5. Integration 5.2. Definite integration
To define the definite integral, let’s study the following area problem.
Problem. Find the area of the region S enclosed by the curve y = x 2 , the x-axis,
and the vertical lines x = 0 and x = 1.
One of the ways to find the area of this region is approximating each strip by a
small rectangle. As we have seen in the picture below, the more the number of
sub-intervals, the better the approximation.
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Chapter 5. Integration 5.2. Definite integration
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Chapter 5. Integration 5.2. Definite integration
2. Set
b−a
, ∀i = 1, 2, . . . , n
∆x ≡ xi − xi−1 =
n
3. We take any point xi∗ ∈ [xi−1 , xi ], ∀i = 1, . . . , n
4. Area of a rectangle of width ∆x and height f (xi∗ ) is f (xi∗ )∆x
5. Total areas of rectangles = ni=1 f (xi∗ )∆x [is called Riemann sum].
P
6. Exact area
Rb
= limn→∞ ni=1 f (xi∗ )∆x ≡ i=1
Pn=∞
f (xi∗ )∆x ≡ a f (x) dx
P
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Chapter 5. Integration 5.2. Definite integration
b−a ∗
where x0 = a, xi = a + i × ∆x, xn = b; ∆x = xi − xi−1 = ; xi ∈ [xi−1 , xi ]
n
Rb
[by theorem] a
f (x)dx = F (x)|ba = F (b) − F (a)
R1
Example. Let compute the integral 0 x 2 dx by both the Riemann sum and the
Fundamental theorem, and then compare results obtained.
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Chapter 5. Integration 5.3. Applications in Business
Probability that a random variable X takes a value in the open or close interval
[a, b] is given by the integral of a function called probability density function fX
Z b
P(a ≤ X ≤ b) = fX (x)dx and P(X = c) = 0 for any c ∈ [a, b]
a
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Chapter 5. Integration 5.3. Applications in Business
Consumers’ surplus.
Given a demand function P = f (Q). At Q = Q0 the price P = P0 .
P0 is the price that consumers are prepared to pay for the last unit that they buy,
which is the Q0 th good. For quantities up to Q0 they would actually be willing to
pay the higher price given by the demand curve. The consumer’s surplus is the
shaded area which represents the benefit to the consumer of paying the fixed
price of P0
Z Q0 Z Q0
CS = f (Q)dQ − P0 × Q0 = PdQ − P0 × Q0
0 0
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Chapter 5. Integration 5.3. Applications in Business
Producers’ surplus.
Given a supply function P = g (Q). Assuming that all goods are sold, the total
amount of money received is then Q0 P0 , where P0 is the price at which the
producer is prepared to supply the last unit, which is the Q0 th good. For
quantities up to Q0 they would actually be willing to accept the lower price given
by the supply curve.
The producer’s surplus is the shaded area representing the benefit to the
producer of selling at the fixed price of P0 :
Z Q0 Z Q0
PS = P0 × Q0 − g (Q)dQ = P0 × Q0 − PdQ
0 0
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Chapter 5. Integration 5.3. Applications in Business
Use the trapezoidal rule to estimate the producers’ surplus if the selling
price is $80.
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Chapter 5. Integration 5.3. Applications in Business
In an earlier chapter we looked at the concepts of present value and future value
when a lump sum of money is deposited in an account and allowed to accumulate
interest. In some situations, however, money flows into and out of an account
almost continuously over a period of time. Examples include income in a store,
bank receipts and payments, and highway tolls. Although the flow of money in
such cases is not exactly continuous, it can be treated as though it were
continuous, with useful results.
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Chapter 5. Integration 5.3. Applications in Business
If I (t) is the income at time t then the total income/money flow over [0, T ] is
n=∞
X n=∞
X Z T Z T
[I (ti ) − I (ti−1 )] = I ′ (ti−1 )×∆t = I ′ (t)dt ≡ I (T ) − I (0) = f (t)dt
i=1 i=1 0 0
where f (t) represent the rate of flow of money per unit of time.
Notice that this “total money flow” does not take into account the interest the
money could earn after it is received. It is simply the total income.
Example. The income from a soda machine is growing exponentially. When the
machine was first installed, it was producing income at a rate of $1000 per year.
By the end of the 1st year, it was producing income at a rate of $1020.2 per year.
Find the total income produced during its first 3 years of operation.
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Chapter 5. Integration 5.3. Applications in Business
Example. A company expects its rate of annual income during the next three
years to be given by f (t) = 75, 000t, 0 ≤ t ≤ 3. What is the present value of this
income over the 3-year period, assuming a discount rate of 8% compounded
continuously?
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Chapter 5. Integration 5.3. Applications in Business
This amount includes interest received on the money after it comes in.
Example
If money is flowing continuously at a constant rate of $2000 per year over
5 years at 6% interest compounded continuously. Find
a. The total money flow over the 5-year period.
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Chapter 6. Matrices
Matrix inverse
Cramer’s rule
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Chapter 6. Matrices 6.1. What is a matrix?
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Chapter 6. Matrices 6.1. What is a matrix?
In particular,
If m = 1 then A is also called row vector.
If n = 1 then A is called column vector.
If m = n then the matrix is said to be square and in this case, we call
A is the square matrix of order n.
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Chapter 6. Matrices 6.2. Matrix Operations
Equality.
A = B ⇔ aij = bij
Addition/Subtraction.
A ± B = [aij ± bij ]
k A = [k aij ]
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Chapter 6. Matrices 6.2. Matrix Operations
n
X
⟨a, b⟩ = ab T = a1 b1 + a2 b2 + · · · + an bn = ai bi
i=1
Example
a = (1 3 5), b = (−1 0 4) ⇒ ab T = 1 × (−1) + 3 × 0 + 5 × 4 = 19
a = (1 0), b = (0 1) ⇒ ab T = 0
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Chapter 6. Matrices 6.2. Matrix Operations
n
X
AB = [cij ] where cij = aik bkj
k=1
Note that we can only multiply two matrices when the number of columns
in the first matrix is equal to the number of rows in the second matrix.
" # " #
1 × 7 + 2 × 9 + 3 × 11 1 × 8 + 2 × 10 + 3 × 12 58 64
= =
4 × 7 + 5 × 9 + 6 × 11 4 × 8 + 5 × 10 + 6 × 12 139 154
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Chapter 6. Matrices 6.2. Matrix Operations
Observe that
" #" # " #
1 0 a11 a12 a11 a12
=
0 1 a21 a22 a21 a22
and
" #" # " #
a11 a12 1 0 a11 a12
=
a21 a22 0 1 a21 a22
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Chapter 6. Matrices 6.2. Matrix Operations
Tabulations are handy while storing the raw data as we will see in the
following examples.
Example
A firm orders 12, 30 and 25 items of goods G1, G2 and G3. The cost of
each item of G1, G2 and G3 is $8, $30 and $15, respectively.
(a) Write down suitable price and quantity vectors, and use matrix
multiplication to work out the total cost of the order.
(b) Write down the new price vector when the cost of G1 rises by 20%,
the cost of G2 falls by 10% and the cost of G3 is unaltered. Use
matrix multiplication to work out the new cost of the order and hence
find the overall percentage change in total cost.
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Chapter 6. Matrices 6.2. Matrix Operations
Example
A chain of sports shops, A, B and C , sells T-shirts, trainers and tennis racquets.
The weekly sales and profit per item are shown in the tables below:
The 3 × 3 matrices formed from the sales and profit tables are denoted by S and
P, respectively.
(a) If A = SP T , find the element a11 and give a brief interpretation of this
number.
(b) If B = S T P, find the element b33 and give a brief interpretation of this
number.
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Chapter 6. Matrices 6.3. Inverse Matrix
AB = In = BA
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Chapter 6. Matrices 6.3. Inverse Matrix
3.
Add a nonzero multiple ofone row to another row.
x + 2y = 1 x + 2y = 1
⇔
3x + 4y = −5 0x − 2y = −8
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Chapter 6. Matrices 6.3. Inverse Matrix
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Chapter 6. Matrices 6.3. Inverse Matrix
How to check a matrix invertible or not? one of the ways is finding its
determinant. If the determinant of a matrix is non-zero then the matrix is
invertible.
Matrix of order 2 × 2
a b
= ad − cb
c d
Matrix of 3 × 3:
a11 a12 a13
a21 a22 a23 =
a31 a32 a33
a
22 a23
a a23 a
21 a22
21
a11 - a12 + a13
a32 a33 a31 a33 a31 a32
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Chapter 6. Matrices 6.3. Inverse Matrix
where Mij is the determinant of the matrix formed by deleting the ith row
and the jth column of A.
where i ∈ 1, n.
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Chapter 6. Matrices 6.3. Inverse Matrix
2. Multiply each element in that row or column by its cofactor and add
the results
Note that
The value of a determinant will be the same no matter which row or column
is chosen.
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Chapter 6. Matrices 6.4. Cramer’s rule
Dx Dy
is given by x = ;y=
D D
a b1 c b a c
1 1 1 1 1
where D = ; Dx = Dy = ; and D ̸= 0
a2 b2 c2 b2 a2 c2
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Chapter 6. Matrices 6.4. Cramer’s rule
Dx Dy Dz
is given by x = ;y= ;z=
D D D
a1 b1 c1 d1 b1 c1 a1 d1 c1
where D = a2 b2 c2 ; Dx = d2 b2 c2 Dy = a2 d2 c2 ;
a3 b3 c3 d3 b3 c3 a3 d3 c3
a1 b1 d1
Dz = a2 b2 d2 ; and D ̸= 0
a3 b3 d3
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Chapter 6. Matrices 6.4. Cramer’s rule
D1 D2 Dn
x1 = , x2 = , . . . , xn =
D D D
provided that D ̸= 0.
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Chapter 6. Matrices 6.4. Cramer’s rule
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Chapter 6. Matrices 6.5. Some solvable methods for a system of linear equations
(2) For a system of n linear equations and n variables, we can possibly solve by
Using inverse matrix,
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Chapter 6. Matrices 6.5. Some solvable methods for a system of linear equations
M1 is available for 440 hours, M2 for 310 hours, and M3 for 560 hours.
Find how many units of each product should be produced to make use of
all available time on the machines.
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Chapter 6. Matrices 6.5. Some solvable methods for a system of linear equations
Suppose an investor wishes to purchase exactly 220 shares of stock A, 176 shares
of stock B, and 264 shares of stock C by buying units of the three funds.
(a) Determine those combinations of units of S, D, and G that will meet the
investor’s requirement exactly.
(b) Suppose the investor pays $ 300 for each unit of S, $ 400 for each unit of D,
and $ 600 for each unit of G. Which of the combination from part (a) will
minimize the total cost to the investor?
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Chapter 7. Linear Programming
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Chapter 7. Linear Programming 7.1. What is a linear programming?
Let’s begin this chapter with an example in order to better understand what a
linear programming is?
Machine shop 1 is available for 120 hours per month and machine shop 2 for 180
hours per month.
The manufacture of each bike of type B takes six hours in shop 1 and three hours
in shop 2. The corresponding times for C are 4 and 10 hours, respectively.
If the profit is $180 and $220 per bike of type B and C, respectively, how should
the manufacturer arrange production to maximize total profit?
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Chapter 7. Linear Programming 7.2. Standard form of a linear programming
where aij are constants, bi are non-negative constants, cj are constants for
all 1 ≤ i ≤ m, 1 ≤ j ≤ n, and x1 , x2 , . . . , xn ≥ 0.
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Chapter 7. Linear Programming 7.3. Geometric method
S2. Compare the value of Z at corners of the constraint set: the biggest
value is the optimal value of the max problem and the smallest value
is the optimal value of the min problem.
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Chapter 7. Linear Programming 7.3. Geometric method
The area shaded darkly in the figure is the set of all points (x, y ) satisfying
the inequality y ≤ x + 2
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Chapter 7. Linear Programming 7.3. Geometric method
The maximum number of meals that can be cooked in a week is 1200 and
the restaurant has a weekly cost budget of $3000. How many pasta and
pizza dishes should be cooked each week to maximize profit?
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Chapter 7. Linear Programming 7.3. Geometric method
The Caribbean consists of one part orange, six parts pineapple and one part apple.
Mr Fruity consists of two parts orange, three parts pineapple and one part apple.
The firm can buy up to 300 litres of orange juice, up to 1125 litres of pineapple
juice and up to 195 litres of apple juice each week at a cost of $0.72, $0.64 and
$0.48 per litre, respectively.
Find the number of cartons of ‘The Caribbean’ and ‘Mr Fruity’ that the firm
should produce to maximise profits. You may assume that non-alcoholic cocktails
are so popular that the firm can sell all that it produces.
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Chapter 7. Linear Programming 7.4. Simplex method for max problem
However, while the geometric method is used only for a linear programming of 2
variables, it is just as important to study methods for linear programmings
involving more than 2 variables.
The total time available for assembling, painting, and packaging is 36 hours, 60
hours and 66 hours, respectively. The profit per unit for each model is $3 (Model
A), $4 (Model B), and $5 (Model C). How many of each type should be
produced to obtain a maximum profit?
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Chapter 7. Linear Programming 7.4. Simplex method for max problem
In 1947, George B. Dantzig created a simplex algorithm to solve linear programmings for planning and decision-making in
large-scale enterprises. The algorithm’s success led to a vast array of specializations and generalizations that have dominated
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Chapter 7. Linear Programming 7.4. Simplex method for max problem
S2. If there is any negative indicator then choose a column w.r.t. the
biggest negative indicator as a pivot column.
S4. Create a new simplex table in which the common entry of the pivot
column and the pivot row above is transformed into 1 and other
entries in the pivot column zeros by using the elementary row
operations [executing with pivot row only!]
So far, all of our models have been static. In practice, economic variables take
time to vary.
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Chapter 8. Differential Equations [for your further reference] 8.2. Differential equations
When time is a continuous variable, we express this time dependence using the
usual function notation, P(t). It is appropriate to model the rate of change of P
with respect to t using the derivative, P ′ (t). Equations that involve the
derivatives of an unknown function are called differential equations.
Example. A bank pays 3.6 % interest on its certificate of deposit accounts, but
charges a $10 annual fee. Write an equation for the rate of change of the balance.
If the balance P(t) has a unit of dollars, the rate of change of the balance is
P ′ (t) which has a unit of dollars per year. Since the amount of increase in the
balance is 0.036P(t) dollars/year and the fee is 10 dollars/year, we obtain that
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Chapter 8. Differential Equations [for your further reference] 8.2. Differential equations
Example
A bank pays 3.6% interest each year, compounded continuously. If the
initial investment is 5, 000 dollars, the investment after t years can be
modeled by P ′ = 0.036P and therefore P = 5, 000e 0.036×t .
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Chapter 8. Differential Equations [for your further reference] 8.2. Differential equations
Logistic models
However, capital cannot increase at an equal rate endlessly, the more so if the
system is completely or partially closed. When growing in such a system, capital
exhausts the limited resources in its environment. In other words, it enters into
self – competition which diminishes its growth – the system gets ‘satiated’.
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Chapter 8. Differential Equations [for your further reference] 8.3. Solving differential equations
Separable equations
dP g (t)
= .
dt h(P)
We can use the Chain rule and the Fundamental theorem of Calculus to derive
R R
that h(P)dP = g (t)dt.
Example
Solve the following equation
dP t2
a. dt = P2 .
b. Find the solution of this equation that satisfies the initial condition
P(0) = 2.
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Chapter 8. Differential Equations [for your further reference] 8.3. Solving differential equations
To be continued ...
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