14.01.2022 Chap 3

Lecture notes on Mathematics for Business
Nguyen Thi Thu Van
International School of Business, UEH, Vietnam
November 17, 2022
International School of Business, UEH UEH, Vietnam November 17, 2022 1 / 200
Chapter 3. Di↵erentiation
Outline of the chapter:

Limits
Continuity
Tangent and velocity problems
Derivative of a function
Rules of di↵erentiation
Some applications of di↵erentiation in Business
Rates of change - Relative rate of change
Elasticity
Marginal functions
Optimization in Business: Economic lot size, Economic order quantity,

Diminishing point of returns
Chapter 3. Di↵erentiation 3.1. Limits
In mathematics, a limit is the value that a function (or sequence)

”approaches” as the input (or index) ”approaches” some value. Limits are
essential to calculus and are used to define continuity, derivatives, and
integrals.
Definition
Let f be a function defined in a neighborhood of a point a but not
necessarily at a. We say loosely that the limit of f when x goes to a is L,
and write limx!a f (x) = L if we can make f (x) arbitrarily close to L by
taking x sufficiently close but not equal to a.
Sometimes we also want to talk about limit from one side.

Definition
necessarily at a. We say that the limit of f when x goes to a on the right
(resp., on the left) is L, and write
limx!a+ f (x) = L (reps., limx!a f (x) = L)
if we can make f (x) arbitrarily close to L by taking x sufficiently close but

bigger than a (reps., smaller than a ).
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) 6= limx!a f (x) then limx!a f (x) does not
exist.
*
find him
that ?
eimftrlt-liqo.fm
RTO
-1
him for) doesn't exist

U -10
* a >0
In = 1 ein
k → ◦
+
F = 1
< 0
1- him
full -1
* U -1 =
=
u → o
-
1-
a) lim
FCK) = 1
n → 0
-1
-
b) limf (a) = O
n → 1
c) him f- (a) = 1
a→ 2
Caution :
f (1) = 1
a) him fall = -1
a → -1
¥70#
""°
a) b) him
him
u → -1
for)=1 ✗→ 0
for) doesn't exist because
{ him for)= -
is
no
-
b) him flat = 0 c) him fcn) = 1

kt 0 k→ 1
c) fin)=1
{ liam , , tim 7ᵗʰ) doesn't
link µ for)=O a → 1 exist
f- C-1) = O
f (1) = 1
him @ 5)( x 4)
a -5
2g ) him
¥
-
-
= =
N -34 Ln -11 ) ( n k→4 a -11

K2 -12k k( "+ 2)
-
4)
21 ) him = him = him a =-2
a -1-2 at 2 2-7-2 K -12 K -7-2

go )eim
( N 9) Get 9) CN 3) ( Nlt 9) -54
him
-
-
= =
N -13 ( at 3) ( at 5) a -33 R -15

the limit has the indeterminate
0 form .
°
eliminate the indeterminate
therefore , we
try to
FORM
K 1-
22) him
-
+ • N -
1
= Note : =/ 1- when x=1
A) 1N -1 a- ,
22-2-21 of him @ 2) Get 1)

0
him
-
23 ) = =
n→2 a- a
R→2 K -2
= him @ + 1) =3
A) 2
1-3-131-2 tht -13)

24) him
1- → 0 1-3-4+2
= him
1- → 0 tact a) -
=¥%¥=¥
25) him R -2
= 1
N -13
26) him t -12=4

1- → 2
277 him
✗→ -
a
¥
" 1
28 )
tinny [
& a -5
him lim
-111=8]
-
a -2=-2 him
21)
n→•Ñ=°
=
, a -10 n→cs2u
= him all -51k) =

him 1- 5in
N→csR(2+1 / a) ✗ → •
21-112
1+0 1
= =
2+0 -2
him 2- 41k 2-1=-1
= =
N -7A 0 -2
3)a- 2
We also want to talk about infinity as limit.

Definition
necessarily at a. We say that the limit of f when x goes to a is infinity,
and write
limx!a f (x) = 1
if we can make f (x) arbitrarily big by taking x sufficiently close but not
equal to a.
Definition
If the values of the function f (x) approach a number L as x increases
without bound, we write
limx!1 f (x) = L
Similarly, we write limx! 1 f (x) = M when the functional values of f

approach a number M as x decreases without bound.
Theorem
If c 2 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
It’d be worth introducing one of the important theorems of Euler:

✓ ◆x
1 1
lim (1 + x) x = e and lim 1+ =e
x!0 x!1 x
The number e is named after the Swiss mathematician Leonhard Euler

m
and is limm!1 1 + m1 .
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)
(b) limx!a f (x)g (x) = [limx!a f (x)][limx!a g (x)]
(c) limx!a gf (x)

(x) =
limx!a f (x)
limx!a g (x) if limx!a g (x) 6= 0.
The laws are still valid with the process x ! 1 instead of x ! a.
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
p p
(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.
Below are some remarks that are worth noting:

the limit of function f when x ! a can be thought of as the limiting
value of f as x is very close to a, that is,
lim f (x) = L , f (x) ⇡ L as x ⇡a

x!a
the limit of function if exists must be unique.
Finally in reality nothing is exactly one hundred percent, so limits are

essential and you should know how to compute/use them proficiently!
Chapter 3. Di↵erentiation 3.2. Continuity
In mathematics, a continuous function is a function that does not have

any abrupt changes in value. More precisely,
Definition
f is said to be continuous at a if limx!a f (x) = f (a)
which also means that sufficiently small changes in the input of a

continuous function result in arbitrarily small changes in its output. A
function that is not continuous is called a discontinuous function.
Let K : the
monthly sales of the salesperson
Then the monthly salary is :
Sfa) 800+10 i. k if a < 20,000
{
=
800 + aol.se -1500 if U ≥ 20,000
SGA
3300 ;•q•
- - - - - -
- -
2800 -
- -
- -
- -
I
800
¥
- - -
- - - -
I >
q
20000
8) = 0.08 (t= 2) = 0.08+0.04×1

Eg y( 1-
: = 0 .
y
1.
(1-
yct = 1) = 0.08
y
= 1.57=0.08+0.04×1
flt)= 0.08 -10.04ft 1) ift C- 2

y
-
{
=
0.08 + 0.04 Et]

in
if t ¢-7
integer
160.2
- - - -
. ._
0 ;
.
0.0¥
•i• ! ! , , I
1 2 34 5 6 7 8 9 10
2W -
- - - - - - - -
•
250 !
220
-
@•
-
- - - -
- - i - i
,
200 1
18 .•q
I
f
-
- - - - - . . _. .
.
150 i l
i:,
100
I 1 I
5080 -.•
- -
1
I
( t) 80+5011--1 ) if t c- Z
y=f
{
=
80 + 50 Eet ] ]
if t ¢ 2- 1 2 34 5
t 1
f (1) 80
•
= =
t 1.5
f- ( 1. 5) 130
'
= =
it = 5 f (5) = 280
Let a c- R
' 1
get
-
1) = ✗ ,
'
2) ( FR)
1
=
2 FR
Let 0< a ≠ 1
'
"
a) Can ) = a xena
a) Cea )
'
" "
= e × line = e
'
(Sind) = Cosa
Cosa)
'
=
-
sink
1- tank
'
4- an re) =
= 1-1
cos2h
loot MY
-1% a)
2
= =
-4 + cot
The definition of continuity of functions at a point is also extended to an

interval as follows.
Definition
A function f is continuous on an interval [a, b) if it is continuous at every
point in the interval and limx!a+ f (x) = f (a).
A function f is continuous on an interval (a, b] if it is continuous at every

point in the interval and limx!b f (x) = f (b).
Accordingly, a function f is continuous on an interval [a, b] if it is

continuous at every point in the interval and limx!a+ f (x) = f (a) and
limx!b f (x) = f (b).
Intuitively, a continuous function at a is a function that its graph has no
holes at a or is not broken into two pieces at a.
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?
Chapter 3. Di↵erentiation 3.3. Tangent and Velocity Problems
Recall that a linear function f (x) = mx + b changes at a constant rate m

w.r.t. x, that is, the rate of change of f (x) is the slope or the steepness of
the line y = mx + b.
However if a function f (x) is not linear, the rate of change is not a

constant but varies with x. In particular, when x = c, the rate is given by
the steepness of the graph of f (x) at the point P(c, f (c)), which can be
measured by the slope of the tangent line to the graph at P.
Tangent problem. Find the slope of a tangent line at P(c, f (c)) on the
curve C of equation y = f (x).
Strategy: consider a point Q(c + h, f (c + h)) nearby P (Q 6= P). The

slope of the secant line PQ is the di↵erence quotient:
rise change in f f (c + h) f (c)
mPQ = = =
run change in x h
Observe that if we let Q approach P by letting c + h approach c then the

pink lines PQ approach the blue line at P. In other words, the blue line is
considered as the limiting line of the pink lines. As a result, the slope of
the tangent line at P can be calculated as
f (c + h) f (c)
m = lim mPQ = lim
Q!P h!0 h
Eg: Tc(x) x =
+ 10 <fixed cost 12
Tcl increases at a constant
variable cost 10- Rate of 2
x 0:=
TC1 =
10
S
+ 2 I
x 1:TC1 124
=
=
+2
x 2:TC1
=
144
=
x 3:
=
TC1 =
1612 (the Rate
of change is 2:Steepest of the line
->
fixed eat tugen
Ega: TC2
=C+10 cost secant line:
variable cost · "tangent line: tiep tuyen'

x 0:=
TC2 10=
⑧
⑧
x 1:TC2
=
= 12
S
x 2: TC2 18
= =
Velocity problem. If an object is moving along a straight line according

to an equation s = f (t), where s is the displacement of the object from
the origin at time t, then the average velocity denoted va of the object
moving in the time interval from time a to time a + h is the following
di↵erence quotient
displacement f (a + h) f (a)
va = =
elapsed time h
If we consider the movement of the object in a shorter and shorter time

interval, the average velocity becomes the instantaneous velocity
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 |.
Chapter 3. Di↵erentiation 3.4. Derivative
Both problems lead to finding limit
f (a + h) f (a) f (a + x) f (a)
lim ⌘ lim .
h!0 h x!0 x
This limit arises actually not only in geometry and physics but in many
other practical situations, so it is given a special name: DERIVATIVE!
Italiaand
f(x) 2x+ =
1. Find
f'c) by definition
a t-R
7'ca tim
f(( + (x) -
f()a
Ax -> J
Ax
=tim
[a(a+xx + 1) [2 ++ 1)
-
=
Lim 2Dx=2 0(a + 1;(a)' a. =
In a
1x+ 0 Ax + O De
Al
f'(a)
=> =
2. If we replace by a then f'(x) a =

(sina) cose =
(cos)' =
-
sinc
Eg2: f(x) = x3. Find f'(x) by definition (tax) 1 =

+ tan (n 1
=
cos 'x
f(x)
f(x) timf(Δx
+ x)
-
Dx +0
Al
(Px+x)3 x= tim((x x)((Xx + x) x(Δx + x) a+]

tim + x + +
-
-
Ax -> 0 Ax xx + 0
AR
xx(Δx =
2xdxx +
+
Axxn + x + x4)
I tim + x +
xx + 0
AR
= lim xx+ 3x2 + 36xxx = 3x2

Ax +O
Let n EIN. Let f(x) x*. Find f'(a) by

=
the
definition
+ x) f(x) tim(Δx+x)" x
f(x) timf(Xx
-
xx - 0 xx -x - 0 Al
f
lim(Δx x x)[(x x) (Xx + x)n 2x+.... (xx + x)x 7)
- -
2
-
x
-
+ -
+ + + +
=
xx + 8
AU
x)+ 2x+...+
1
(Ax+ x)
-
lim
-
2 7
(Δx (Xx + x)x
-
-
= + + + x
Ax -> O
n 1
x x-x+....+ xxx-2 d7
-
=
+ + xxR
=
xn 1
-
Definition
Given y = f (x). The derivative of a function at the number a, denoted by
f 0 (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 0 (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
di↵erentiable) at a.
It turns out from the definition of the derivative that
f must be absolutely defined at a and about a if f 0 (a) exists
If f is derivable at every point in an interval (a, b) then f is said to be

derivable on (a, b)
If a number a is replaced by a variable x, the derivative of f is also a

function in terms of x that is also called a derived function!
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.
Chapter 3. Di↵erentiation 3.5. Rules of Di↵erentiation
Theorem
If f and g are derivable and c is a constant then
(f ± g )0 = f 0 ± g 0
(fg )0 = f 0 g + fg 0
f 0 g fg 0
( gf )0 = g2
(cf )0 = cf 0
Theorem (Chain rule)

If f and g are derivable then
(f (g (x)))0 = f 0 (g (x))g 0 (x)
>
Slide 88 :
U' (a) ))
'
=
f- (
gon ✗
g' (a)
'
(1)
' '
(1)
A (2,4)
u =
f (
ga ) ) ×
g
F' (3)
'
3) (1)
¥
•
B. ( 6 ; C- 3)
ca ;D = ✗
g
= ✗
• •
( 2; 4)
'
*
f (3) ? A
•
{B ( 6; 3)
D( 2; 0 ) 1
F' (3) MAB
4- 3 -
= = =
2- 6
4-
*
g' (1) me, = =
? =-3
( GCI) ) )
' ' '
g' [ fcn)] f (a)

'
(a) (1) = (1)
(a) g' (3) }
' '
g C- 3)
v w ✗ -2
= x =
g ✗
g =
✗
=
v' (1) f'(1)

'
=
g ( fer )) ×
f (1) doesn't
' '
(2) exist
=
g ✗
'
g (2) doesn't exist

*
>
slide 92 :
Iroduction Qlt ) = -1-3+81-2 -115T

function :
( o ≤ 1- ≤ 4) ( units)
Rate of producing :
Q' (t) =
-
31-2+161-+15
(t)
"
Q =
-
6T + 16=0 t = 2.67
Table variation Q' (t )

of of :
"
t 2.8%40 ¢2
Q' (t ) + O -
36.3
Q
"
(t) >
>
31
15
>
According to the table the worker
, perform most
efficiently at around 10:40 with Rate
36.3 units / hours and least at 8h with producing

of producing efficiently rate
of
15 units / hours
Based on the definition of derivative, we have that

If f 0 > 0 on a certain interval then the curve of f rises from the left to
the right of the interval and thus the function is said to be increasing.
If f 0 < 0, the curve of f drops and the function is decreasing.
The point at which f 0 = 0 and the curve changes from moving ups to
moving down or vice versa is called the turning point!
The second order is defined by f 00 (x) = (f 0 (x))0 . Moreover, the sign of f 00

enables us to identify the behavior of the function f . Precisely,
If f 00 > 0 on a certain interval then the curve of f bends upwards on
that interval and the function is said to be convex.
If f 00 < 0, the curve of f bends downwards and the function is said to

be concave.
The point at which f 0 = 0 and the curve changes the concavity is called
the point of inflection.
Chapter 3. Di↵erentiation 3.6. Some applications of di↵erentiation in Business
You may wonder what on earth di↵erentiation has to do with economics?

In fact we cannot get very far with economic theory without making use of
calculus. In this section, we focus on the following topics:
Rate of change - Relative rate of change - Percentage rate of change
Elasticity
Marginal analysis
Optimization in Business
Rate of change
The rate of change of f (x), i.e, the rate of increase/decrease at x is

defined by f 0 (x).
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?
Relative rate of change
In many practical situations, the rate of change of a quantity f is not as

significant as its relative rate of change, which is defined as change in f
size of f .
Example
The air ticket price increased by 25. If the price currently is 2,500, then the
change represents a 0.01% increase. But if the price currently is 25, then the
change is 100% increase, meaning the price is double.
f
The relative rate of change in f = f and the corresponding percentage rate of
change in f = 100f f %.
Elasticity
We are known that demand, in general, is a decreasing function, that is,

an increase in the unit price of a commodity will result in decreased
demand. However, the sensitivity or responsiveness of demand to a change
in price varies from one product to another.
For instance, the demand for products such as soap, flashlight batteries, or
salt will not be much a↵ected by a small percentage change in unit price,
while a comparable percentage change in the price of airline tickets or
home loans can a↵ect demand dramatically.
Economists use a quantity called elasticity of demand to measure the

sensitivity of the change.
Point elasticity of demand is defined, supposed that q is a demand function in

terms of unit price p (q0 = q(p0 )), by
q
" #
percentage rate of change in demand q p q p 1
E (p) = = p = ⇥ = ⇥ p
percentage rate of change in price p
q p q q
Therefore, when p ⇡ 0 and q ⇡ 0, we have that


p0 q p0 dq p0 0 p0 1
E (p0 ) = ⇥ lim = ⇥ (p0 ) ⌘ ⇥ q (p0 ) = ⇥ 0
q0 p!0 p q0 dp q0 q0 p (q0 )
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
inelastic if |E | < 1 ) demand is relatively insensitive to changes in price
unit elasticity if |E | = 1
% in demand
% demand %
E = E <1 in < in
price Lin elastic)
(E) % in
price { Demand
°
is insensitive to changes in price
%÷
P I F- I > 1
= % in demand 7 % in price ( elastic )
{
✗
a
Demand is sensitive to
changes in price
J
I F- 1=1 % in demand = % in price ( unit
elasticity )
slide 96 :
'
d9 2p
q = -
dp
2
-2132
¥
2 p
F- = ✗ C- 2 p ) = =
-
9 300 -
p2
/ El =
2p2
2
300 -
a) 1 El = 1
2p 2=300
-
p2
2
100
p =
When p = to : demand is unit elasticity p = 10
0 ≤ P 40 : demand is inelastic I F- 1=1

2000
10 so ≤ Boo : demand is elastic
d-
b) Revenue R ( 300 2) I# IEI > 1
=p q =p p
-
: ✗ ×
300 p 3 7
=
p
-
↳
3102=0
'
R 300 10 v 10
p
-
= =
p
-
Table of variation :
.
P -
10 0 10 FOO 10
'
-4%-1
R o -
R > 2000
o ◦
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
p
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.
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.
Example. Given a demand equation as
q = p2 20p + 100
where p is the price per unit (in hundred dollars) and q is the quantity
demanded (in hundreds).
(a) Find the point elasticity of demand for 500.
(b) If this change in price of 500 is increased by 2%, what is the

approximate change in demand?
Slide 98
a)
dᵈp9_
'
q = = Ip -
20
F-
Ig ( 2p 20)
-
=
✗
=
2p2 =
2 ( P2 _
10 )
2-
P Zop + yoo (P -
1012
F- (p = 5) = -2
%
change in demand
b) F- = -2 =
+ 2%
in demand
%
change = -4%
%
%
change in demand =
Dg = -4% ✗
go
= -4% ✗ (52-20×5+10)
= -1
Demand is decreased by 100 units
slide 99 :
P' =
0¥ = -13 13
b) 9=150 p = 50
Iq ᵈ¥q ¥ 1dg
F- = ✗ =
×
¥
.
=
¥0 ✗
É =÷g
11=-1 =
31g < 1
Demand is inelastic
c) Dq 140-150 d) Rn
9 150 1
F- = = =
-
DP 3g F- = 1
Phew -
50 ,
p
50
Phew 50 140-150 Ed
(
-
=
-
3g 180
P new =
50 150
/
I 1 >
p
d) The manufacture should increase the price in order 50 P
to increase the revenue because the demand is inelastic
at the price of 50
Gp2 -3132
9 '=
-
& 1500
gp
,
1500 3p2
-
Po 3 Po
F-
-
= × = 0.25
90
1500-3×102
F- = -0.25
Demand is decreased by 1.25% when
the
price is increased by 5%
501500 8.5
F- = =
-
(75-80)
80
Example. The demand equation for a manufacturer’s product is

p
p = 50(151 q)0.02 q+19
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?
Marginal functions
The additional cost incurred when the level of production is increased by q

units, from q0 to q0 + q is C = C (q0 + q) C (q0 )
It turns out that the average additional cost will be
C C (q0 + q) C (q0 )
=
q q
When q ⇡ 0 and C ⇡ 0, the average additional cost becomes
C C (q0 + q) C (q0 )
lim = lim = C 0 (q0 ) ⌘ MC (q0 )
q!0 q q!0 q
which is called the marginal cost.
The definition is analogously stated for the marginal revenue and marginal
profit.
Example 1. A manufacturer has determined that m employees will

produce a total of q units of product per day, where
q = m(50 m)
If the demand function is given by
p= 0.05q + 10
find the marginal-revenue product when m = 2.
3
Example 2. If AC = 0.03q + 1.2 + q is an average-cost function, find the
marginal cost when q = 100.
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.
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
The demand equation for the product is
8q + p 2 19, 300 = 0
where p is the selling price when the demand for the product is q units per day.
(a) Determine the manufacturer’s marginal-revenue product when m = 240.
(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?
Diminishing marginal productivity

The production function Q is simply defined as a function of labour L and capital
K . Moreover, in the short run the input K can be assumed to be fixed, so Q is
then only a function of one input L.
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.
A little more precisely, the marginal product of labour is

dQ
MQL = .
dL
When the values of MQL decline with increasing L, the production function
illustrates the law of diminishing marginal productivity (sometimes called the
law of diminishing returns).
Example. [Production defined as a function of time] 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 does the diminishing
returns occur?
Two general principles of marginal analysis
Derivatives can be used to optimize economic quantities. To find extreme

point of a quantity involving an other quantity, we can use the first order
derivative theorem or the second order derivative as follows.
[First order derivative (Fermat’s necessary condition)] If f 0 (a) = 0
and f 0 changes sign around a, a is an extreme point.
[Second order derivative (investigating the concavity of function)] If

f 0 (a) = 0 then
if f 00 (a) > 0 then f attains a minimum value at a. The curve will
bends up ward at x = a.
if f 00 (a) < 0 then f attains a maximum value at a. The curve will

bends down ward at x = a.
[Minimal average cost] Average cost is minimized at the level of

production where average cost equals marginal cost; that is, when
AC (q) = MC (q) followed by the first order derivative theorem.
Example. A manufacturer’s total-cost function if given by
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?
[Maximum profit criterion] The profit P(q) = R(q) C (q) is maximized at a

level of production q where marginal revenue equals marginal cost and the rate of
change of marginal cost exceeds the rate of change of marginal revenue; that is,
where
MR(q) = MC (q) and MR 0 (q) < MC 0 (q)
followed by the second order derivative theorem.
Example. Suppose that the demand equation for a monopolist’s product is

p = 400 2q (in dollars) and the average-cost function is
400
AC = 0.2q + 4 +
q
where q is the number of units.
(a) Determine the maximum profit
(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?
Economic lot size
Suppose that a company manufactures a constant number of units of a product

per year and that the product can be manufactured in several batches of equal
size throughout the year.
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.
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.
To solve the problem, we need to consider the variable q number of units in each
batch. In addition, we have the following constants:
k is cost of storing one unit of the product for one year;
f is fixed setup cost to manufacture the product;
g is cost of manufacturing a single unit of the product;
M is total number of units produced annually.
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 .
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.
Economic order quantity

We can extend our previous discussion to the problem of reordering an item that is
used at a constant rate throughout the year. Here, the company using a product
must decide how often to order and how many units to request each time an order
is placed; that is, it must identify the economic order quantity. In this case, q is
the number of units to order each time. We also have the following constants:
k is cost of storing one unit for one year;
f is fixed cost to place an order;
M is total units needed per year.
q
fM kq 2fM
So the cost is storage cost + reorder cost is q + 2 and then q = k .
For example. A large pharmacy has an annual need for 480 units of a certain
antibiotic. It costs 3 to store one unit for one year. The fixed cost of placing an
order (clerical time, mailing, and so on) amounts to 31. Find the number of units
to order each time, and how many times a year the antibiotic should be ordered.

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Lecture notes on Mathematics for Business

Nguyen Thi Thu Van

International School of Business, UEH, Vietnam

November 17, 2022

Outline of the chapter:

Tangent and velocity problems

Some applications of di↵erentiation in Business

Rates of change - Relative rate of change

Optimization in Business: Economic lot size, Economic order quantity,

In mathematics, a limit is the value that a function (or sequence)

Sometimes we also want to talk about limit from one side.

limx!a+ f (x) = L (reps., limx!a f (x) = L)

if we can make f (x) arbitrarily close to L by taking x sufficiently close but

him for) doesn't exist

b) him flat = 0 c) him fcn) = 1

link µ for)=O a → 1 exist

N -34 Ln -11 ) ( n k→4 a -11

a -1-2 at 2 2-7-2 K -12 K -7-2

N -13 ( at 3) ( at 5) a -33 R -15

22-2-21 of him @ 2) Get 1)

1-3-131-2 tht -13)

26) him t -12=4

= him all -51k) =

We also want to talk about infinity as limit.

Similarly, we write limx! 1 f (x) = M when the functional values of f

It’d be worth introducing one of the important theorems of Euler:

The number e is named after the Swiss mathematician Leonhard Euler

(b) limx!a f (x)g (x) = [limx!a f (x)][limx!a g (x)]

(c) limx!a gf (x)

The laws are still valid with the process x ! 1 instead of x ! a.

Below are some remarks that are worth noting:

lim f (x) = L , f (x) ⇡ L as x ⇡a

the limit of function if exists must be unique.

Finally in reality nothing is exactly one hundred percent, so limits are

In mathematics, a continuous function is a function that does not have

which also means that sufficiently small changes in the input of a

Sfa) 800+10 i. k if a < 20,000

800 + aol.se -1500 if U ≥ 20,000

8) = 0.08 (t= 2) = 0.08+0.04×1

flt)= 0.08 -10.04ft 1) ift C- 2

0.08 + 0.04 Et]

The definition of continuity of functions at a point is also extended to an

A function f is continuous on an interval (a, b] if it is continuous at every

Accordingly, a function f is continuous on an interval [a, b] if it is

Recall that a linear function f (x) = mx + b changes at a constant rate m

However if a function f (x) is not linear, the rate of change is not a

Strategy: consider a point Q(c + h, f (c + h)) nearby P (Q 6= P). The

Observe that if we let Q approach P by letting c + h approach c then the

variable cost 10- Rate of 2

variable cost · "tangent line: tiep tuyen'

Velocity problem. If an object is moving along a straight line according

If we consider the movement of the object in a shorter and shorter time

Both problems lead to finding limit

2. If we replace by a then f'(x) a =

Eg2: f(x) = x3. Find f'(x) by definition (tax) 1 =

(Px+x)3 x= tim((x x)((Xx + x) x(Δx + x) a+]

= lim xx+ 3x2 + 36xxx = 3x2

Let n EIN. Let f(x) x*. Find f'(a) by

It turns out from the definition of the derivative that

f must be absolutely defined at a and about a if f 0 (a) exists

If f is derivable at every point in an interval (a, b) then f is said to be

If a number a is replaced by a variable x, the derivative of f is also a

Theorem (Chain rule)