Chap 5 Intergration

Chapter 5.
Integration
Outline of the chapter:
Indefinite integration
Definite integration
Applications in Business
Probability [for your further reference]
Consumers’ surplus - Producers’ surplus
Continuous money flow
Discounting
International School of Business, UEH UEH, Vietnam November 17, 2022 143 / 200
Chapter 5. Integration 5.1. Indefinite integration
Definition
If F 0 (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.
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 .
If F is an anti-derivative of f then the integral of f is often written as

nguyén train Z
f (x)dx = F (x) + C
where C is any real number.
R ⇣ 3 ⌘0
x3 x
Example. x 2 dx = 3 + C because 3 = x 2.
✗ C- R x ≠ -1
;
1) 4) Jsinscdsc
Joe dx =
+ e =
-
Cosa te
a) JFC doe =
G- Fcs + c 5) Jcosadse = sink + e
f¥ In latte 6)
fak da arena
1-
3) Joc dx
-
= =
= + e
substitution method ! integration by changing variable )

df
Chain rule
[f- ( god) ) F'( gcu))
'
CRI Gc)
'
: =
✗
g
=
f-
da
If '(gcxDxghde= f- ( gon)) + c
symbolically df=fkx)dn
/ f-
'
( gcn ) ) ✗
dog =
f ( gcu)) to
Eg_1 : u = 2kt 1 du = Idk

£ du = DR
du
J 2×+1 dk =
£/ U =
2- ×
} us + e
1g
3
= × (2kt 1) + c
Sin (x2) dk
F-
g2 :
Joc ✗ = I
d( ✗ "
Int u = xt du = Zada dCn4=2xdx = Kdu
2
d CK "
I =
£ / sink du = _
f- cos u + e
I
=) sin CRY ✗
(d) (at)
2
cos -
cos
+ C C
= -
=
+
2 2
b
Integration by parts / FCK)dx by >
no
f- Gci ) ✗ DR S
Doc =
b- a
V' a) da
Hiv
i=1
+ Uxo
=
a
definition %=aⁿ
_
Definite integral sci = at Dkti
/ Odu + udv = uxv

an = b
newton
leibnitz Fcb) Fla)
-
/ udv = uxv -
/ Vdu formula
Eg1_
fxsinkdk-TP-utfu-xdv-sinxo.be{
:
du -_ du
V =
-
Cosa
I Xxl Wsu ) Cosa)dU

=
gc
-
-
-
=
-
k cosset sink + e
*
Ting ke-i-e.ae : 2 methods for integrating
substitution method
Integration by parts
chain Rule : Chen 1- céi du die
{ leak {
= u =
f- ( gon)) '=f4gcnD g'(a) ✗ = do D= .

. .
If '( gcxyg.ca)du=f( goes ) -1C

Judo UV
Jodie
-
If 'lg)dg=f( goes) -1C
÷
[ 0,1T into
1- Driving n sub equal intervals
; i
1- 0
l
' '
' DX =
n
=
NI
"
I
1 ! >
0C
Putting 98=0 ; 24 = kn ; .
.
.
; Ki-in; .
.
Hit
1-
12
f- (1) ✗ Dnt fly)xDRt . . .
+
fun )x Doe
=
[ ( In ) 't (3) 4 . .
. .
+
(1) 2) ✗
f-
12+22-1 + n2 ncn -11 )(2h -11) him
ncn + 1) (2^+1) 1
*
. . .
= = =
=-3
M3 6h3 n → D 6h3
Ig
n = 2 : A ≈
2×3×5
n 4 A 4×5×9
=
,
= : ≈
Dn=É°FEY /
^
6×8
6×64 him
i= ,
fail ×
i
.
✗ Dr
,
n → • =
= Jab f- Gilda
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.
Area between curves. Consider the region S enclosed by the curve

y = f (x) 0, the x-axis, and the vertical lines x = a and x = b, where
f (x) is continuous function over x 2 [a, b]
The area of the indicated region can be calculated by performing the

following steps (Rectangular Approximation Method, or RAM for short).
1. We first divide up [a, b] into n subintervals of equal length by n + 1
points
x 0 = a < x1 < x2 < · · · < xn = b
2. Set
b a
x ⌘ xi xi 1 = , 8i = 1, 2, . . . , n
n
3. We take any point xi⇤ 2 [xi 1 , xi ], 8i = 1, . . . , n
4. Area of a rectangle of width x and height f (xi⇤ ) is f (xi⇤ ) x
P
5. Total areas of rectangles = ni=1 f (xi⇤ ) x [is called Riemann sum].
6. Exact area
P P Rb
= limn!1 ni=1 f (xi⇤ ) x ⌘ n=1 ⇤
i=1 f (xi ) x ⌘ a f (x) dx
Theorem (Fundamental theorem of Calculus)

If f is continuous on [a, b] and F is an anti-derivative of f then
Z b
f (x)dx = F (x)|ba = F (b) F (a) [Newton-Leibnitz formula]
a
In summary, to compute a definite integral we can possibly use definition or

theorem.
Rb Pn=1
[by definition] a
f (x) dx = i=1 f (xi⇤ ) x
b a
where x0 = a, xi = a + i ⇥ x, xn = b; x = xi xi 1 = ; xi⇤ 2 [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.
Chapter 5. Integration 5.3. Applications in Business
Probability of a continuous random event

The probability density function or PDF of a continuous random variable gives
the relative likelihood of any outcome in a continuum occurring. Unlike the
case of discrete random variables, for a continuous random variable any single
outcome has probability zero of occurring.
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 2 [a, b]
a
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
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
Example 1. The demand equation for a product is q = 400 p 2 and the

supply equation is p = q/60 + 5. Find the producers’ surplus and
consumers’ surplus under the market equilibrium.
Example 2. The supply equation for a product is given by the following

table, where p is the price per unit (in dollars) at which q units are
supplied to the market.
Use the trapezoidal rule to estimate the producers’ surplus if the selling
price is 80.
⊖ Market equilibrium
demand =
supply
-
9=400 a)
{
-
^P L p
P= 400 -
g p =
fog +5 (2)
(2) v00 (1)
20 -
yes
9=400 -
(3%092+169+25)
-
ski Demand supply

↑ { 9=300
.
-1 10
p=
"
i > 9
460
300
30°
=) 5) du
'
D- Producers 10
surplus : IS -
K + -
_
750
300
surplus =)
'
Consumers CS
:
400 qdq 10×300=1667
-
np
1) Equilibrium point
{ 13=10-0.29 supply
10 - →
9
5
P =
-10.8g y demand
→
-
pE=9 i
{ 9E=5 5 150>9
CS =
{ ✗
5×(10-9)=2.5
IS -_
12×5×(9-5)=10
Equilibrium point :
100 292 92=25 9=5

{
P
{ 10=50
-
P = 25+92 { 13=50
↳ q= p
-
25
5
p
↓ (100-292) _dq
=
supply 5×50=166,67
'
150
-
IS =
250
25 = ≈ 83.33
P
-
100 -
25 3
75
-41, ,
50--1-1 ;
•
demand
25 -
I I 1
210 130 Is 40
• I
9
5 10 15 20
Equilibrium point :
24
9-6 9=10
{
=
0.29+4 4
p =
) ¢9
° 24
CS =
{ (
0.2g -14
-
40 = 8.67
IS = 40 -
§°( g- 6) dq = 50
Equilibrium point 1
:{ p9=500
=
CS =
1500
Pn
IS 80×40 A
Az Ae,
Az
- -
=
-
-
100 .
= 885
90 _
'
> supply
so - -
-7¥ - - - - - -
"
- -
-
I
to -111111.3in
"
:i" I
I
i
'
1
:
l
: : it
ii.
20 _
°
370
!
,
540
¥650 ! 7551
, i ! I
10 -
I 1 I /
'
' '
I
" 1 i 1 I 1 1! I t 1 I >
°
5 2025 30 45 50
9
10 15 35 40
Continuous money flow
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.
In this section, we introduce the following features:
Total money flow.
Present value of money flow.
Accumulated amount of money flow.
Total money flow
If I (t) is the income at time t then the total income/money flow over [0, T ] is
n=1
X n=1
X Z T Z T
[I (ti ) I (ti 1 )] = I 0 (ti 1 )⇥ t = I 0 (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.
Total income I =
13 fctdt where f- ( t) is the

unit of time
rate
of money flow
per
It
f- (t) Her
✗
=
°
eh
✗
= 0 : 1000 = A ✗ A = 1000
1- = 1 : 1020.2 = 1000 × eh ✗ ^
r =
0.02 = 2%
-02 1-
f- ( t) = 1000 ✗ eo
I =
J? 1000 ✗ e°°2ᵗ dt = 3091 83 .
Final exam :
chapter 3
, 4,5 ,
6
Total income =
[ f- ( t) dt =
§ I' ( t) dt =
§ MICH dt
Finance me
" rt
D- e-
It =
Io ✗ e
◦
=
It ✗
rt
lot =
[ I' Lt ) × Dt
] ✗ e-
Chap 3 → 3.6
4 → 42
Chap
BE
Chap 5 →
probability
chap 6 → Matrix
Present value of money flow

If f (t) represent the rate of the continuous flow at a discount rate r compounded
continuously for T years, the present value of a continuous money flow is
n=1
X n=1
X Z T
0 rti rti rt
P0 = [I (ti ) t] e = [f (ti ) t] e = f (t) ⇥ e dt
i=1 i=1 0
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?
Accumulated amount of money flow

If f (t) is the rate of money flow at an annual rate r at time t, the
accumulated amount of money flow at time T is
Z T
rT rt
A=e f (t)e dt.
0
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.
b. The accumulated amount of money flow, compounded continuously,

at time T = 5.
t
1,3175000 )
8% ✗
I = t ×
e- dt = 288063,8939
◦
a) Total income =
1,52000 dt = 10,000
5×152000
6% ✗ +
b)
✗
Aecium mutated amount : A =
-
✗
e- dt
0
= 11661.96
Discounting. To calculate the present value, P0 , when a single future

value, P, is discounted at r % interest continuously for t years, we can use
the following formula: P0 = Pe rt
If the fund is to provide a continuous revenue stream for n years at an

annual rate of P dollars per year, then the present value can be found by
Rn
evaluating the definite integral P0 = 0 Pe rt dt
Example. Calculate the present value of a continuous revenue stream of

1,000 a year for 5 years if the discount rate is 9%.
Chapter 6. Matrices
Outline of the chapter:

What is a matrix?
Basic matrix operations
Matrix inverse
Cramer’s rule
Chapter 6. Matrices 6.1. What is a matrix?
A rectangular table consisting of m rows and n columns

2 3
a11 a12 . . . a1n
6 7
6 a21 a22 . . . a2n 7
A=6 .6 7
. 7
4 . 5
am1 am2 . . . amn
is called a matrix of order m ⇥ n.
Rows of a matrix are horizontal, columns of a matrix are vertical.
Notation. Am⇥n = [aij ], i = 1, . . . , m, j = 1, . . . , n in which aij is called

the ij entry. The set of matrices of order m ⇥ n is denoted Mm⇥n .
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.
Identity matrix of order n: aii = 1 for i = 1, . . . , n and aij = 0 for

i 6= j, i, j = 1, . . . , n
2 3
1 0 ... 0
6 7
60 1 . . . 07
In = 6
6 ..
7⌘I
7
4. 5
0 0 ... 1
Chapter 6. Matrices 6.2. Matrix Operations
Let A = [aij ] and B = [bij ] be two matrices of order m ⇥ n, i.e.,

A, B 2 Mm⇥n .
Equality.
A = B , aij = bij
Addition/Subtraction.
A ± B = [aij ± bij ]
Scalar Multiplication. Let k be a real number.
k A = [k aij ]
Transposition. Let A = (aij ) be a matrix of order m ⇥ n. The transposition of A

denoted by AT is defined by symbolically AT = (aji ). This means that the first
row of AT is the first column of A, the second row of AT is the second column of
A, and so on. Thus A 2 Mm⇥n , while AT 2 Mn⇥m
Scalar/Dot/Inner product. Given a = (a1 a2 . . . an ) and

b = (b1 b2 . . . bn ). The scalar product of a and b is defined by
n
X
ha, bi = 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
Recall that the product of 2 vectors perpendicular to each other is 0. For

instance
a = (1 0), b = (0 1) ) ab T = 0
Matrix Multiplication. Let A be a matrix of order m ⇥ n and B be a

matrix of n ⇥ p. The product of A and B is
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
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
In general, we have that

AIn = A = In A
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.
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.
Chapter 6. Matrices 6.3. Inverse Matrix
By multiplication matrix operation, we can easily see that

2 32 3 2 3
a11 a12 . . . a1n x1 b1
6 76 7 6 7
6 a21 a22 . . . a2n 7 6x2 7 6 b2 7
6 . 76.7=6 . 7
6 . 76.7 6 . 7
4 . 54.5 4 . 5
am1 am2 . . . amn xn bm
8
>
> a11 x1 + a12 x2 + · · · + a1n xn = b1
>
>
>
>
<a21 x1 + a22 x2 + · · · + a2n xn = b2
, ..
>
> .
>
>
>
>
:a + am2 x2 + · · · + amn xn
m1 x1 = bm
This means that a system of linear equations can be written under a matrix
equation AX = B. We know that the ordinary equation ax = b has a solution
x =a 1
b if a 6= 0, where a 1
= 1a . Now, being seeking solution of the matrix
1
equation above, we will define A .
Let A be a matrix of order n ⇥ n. If there exists a matrix B such that
AB = In = BA
then A is said to be invertible and B is called the inverse matrix of A,

denoted by A 1 .
Example
# " " #
1 2 2 1
Let a matrix A = . Verify that is the inverse of A.
3 4 3/2 1/2
How to find an inverse matrix?

1. Write an augmented matrix consisting of A on the left side and the
identity matrix on the right side
2 3
a11 a12 . . . a1n | 1 0 . . . 0
6 7
6a21 a22 . . . a2n | 0 1 . . . 07
6 . 7
6 . 7
4 . 5
an1 an2 . . . ann | 0 0 . . . 1
2. Then we attempt to transform the augmented matrix by row
equivalent operations called Gaussian elimination method to one of
the form 2 3
1 0 . . . 0 | b11 b12 . . . b1n
6 7
60 1 . . . 0 | b21 b22 . . . b2n 7
6. 7
6. 7
4. 5
0 0 ... 1 | bn1 bn2 . . . bnn
Gaussian elimination method
1. Interchange any two rows

8 8
<3x + 4y = 5 <x + 2y = 1
,
:x + 2y = 1 :3x + 4y = 5
2. Multiply each entry in a row by the same nonzero constant

8 8
<x + 2y = 1 <2x + 4y = 2
,
:3x + 4y = 5 :3x + 4y = 5
3. 8
Add a nonzero multiple of8one row to another row.
<x + 2y = 1 <x + 2y = 1
,
:3x + 4y = 5 :0x 2y = 8
Example. Solve the following system

8
>
> x + 3y + 2z =9
>
<
x y + 3z = 16
>
>
>
:3x 4y + 2z = 28
(a) by the Gaussian elimination method,
(b) by the 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
a22 a23 a21 a23 a21 a22

a11 - a12 + a13
a32 a33 a31 a33 a31 a32
Now the determinant of matrix of order n ⇥ n is defined inductively as

follows
For a square matrix A = [aij ]. The cofactor Aij of an element aij is
Aij = ( 1)i+j Mij ,
where Mij is the determinant of the matrix formed by deleting the ith row
and the jth column of A.
The determinant of A of n ⇥ n is defined by

n
X
|A| = aij Aij ,
j=1
where i 2 1, n.
Steps to find determinant of a square matrix

For any square matrix A of order n ⇥ n (n > 1), we define the determinant
of A, denoted |A|, as follows:
1. Choose any row or column
2. Multiply each element in that row or column by its cofactor and add
the results
Note that
The determinant of a 1 ⇥ 1 matrix is simply the element of the matrix.
The value of a determinant will be the same no matter which row or column
is chosen.
Chapter 6. Matrices 6.4. Cramer’s rule
Solving systems of linear equations using determinants

Cramer’s rule for 2 ⇥ 2 systems
The solution of the system

8
<a x + b y = c
1 1 1
:a x + b y = c
2 2 2
Dx Dy
is given by x = ;y=
D D
a1 b1 c1 b 1 a 1 c1
where D = ; Dx = Dy = ; and D 6= 0
a2 b2 c2 b 2 a 2 c2
Cramer’s rule for 3 ⇥ 3 systems
The solution of the system

8
>
> a x + b1 y + c1 z = d 1
>
< 1
a2 x + b2 y + c2 z = d 2
>
>
>
: a3 x + b3 y + c3 z = d 3
Dx Dy Dz
is given by x = ;y= ;z=
D D D
a1 b1 c1 d 1 b1 c1 a1 d 1 c1
where D = a2 b2 c2 ; Dx = d2 b2 c2 Dy = a2 d2 c2 ;
a3 b3 c3 d 3 b3 c3 a3 d 3 c3
a1 b 1 d1
Dz = a2 b2 d2 ; and D 6= 0
a3 b 3 d3
As for n ⇥ n systems, we do the same. Cramer’s rule in general case

gives
D1 D2 Dn
x1 = , x2 = , . . . , xn =
D D D
provided that D 6= 0.
Example. Solve the following system

8
>
> x + 3y + 2z =9
>
<
x y + 3z = 16
>
>
>
:3x 4y + 2z = 28
by the Cramer rule.
Chapter 6. Matrices 6.5. Some solvable methods for a system of linear equations
Some solvable methods a system of linear equations
(1) We can solve a general system of m linear equations and n variables by

Gaussian elimination method,
Reducing matrix using elementary row operations to row echelon form.

For example,
(2) For a system of n linear equations and n variables, we can possibly solve by
Using inverse matrix,
Using Cramer rule.
Example. A firm produces 3 products A, B, and C that require processing

of 3 machines M1, M2, and M3. The time in hours required for processing
one unit of each product by the three machines is given by the following
table:
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.
Example. An investment company three types of pooled funds: Standard (S),

Deluxe (D), and Gold Star (G). Each unit of S contains 12 shares of stock A, 16
stocks B, and 8 of stock C. Each unit of D contains 20 shares of stock A, 12
stocks B, and 28 of stock C. Each unit of G contains 32 shares of stock A, 28
stocks B, and 36 of stock C.
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?
Chapter 7. Linear Programming
Outline of the chapter: In this chapter, we will introduce basically linear

programmings and methods for solving them.
What is a linear programming
Standard form of a linear programming
Geometric method for solving a linear programming of 2 variables
Simplex method for solving a linear programming
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?
Example. A manufacturer produces two models of racing bike, B and C, each of

which must be processed through two machine shops.
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?
Chapter 7. Linear Programming 7.2. Standard form of a linear programming
Standard form of a linear programming
A linear programming is a problem to maximize or minimize a linear

function Z = c1 x1 + c2 x2 + · · · + cn xn subject to the following conditions
8
>
> a11 x1 + a12 x2 + · · · + a1n xn  b1
>
>
>
>
<a21 x1 + a22 x2 + · · · + a2n xn  b2
> ..
>
> .
>
>
>
:a x + a x + · · · + a x  b
m1 1 m2 2 mn n m
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.
Chapter 7. Linear Programming 7.3. Geometric method
Geometric method for linear programming of 2 variables
One of the ways to conduct the optimization problem of 2 variables, for

instance, max Z = P(x, y ) = 180x + 220y subject to
8
>
>  120
>6x + 4y
<
3x + 10y  180
>
>
>
:x, y 0.
is to used the geometric method as follows.

S1. Sketch the constraint set on the xy plane.
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.
Sketching linear inequalities
Graphing linear inequalities is nearly similar to doing with linear equation.

The di↵erence is that the solution to the inequality is not the drawn line
but the area of the coordinate plane that satisfies the inequality. So you
need to do as follows:
draw a line of equation. This line divides the coordinate plane into
two halves and is called boundary line. One side of the boundary line
contains all solutions to the inequality.
choose a test point not lying on the boundary line. If coordinates of

the test point satisfy the inequality then the solution set of the
inequality is the part which consisting the point, otherwise choose
other part as the solution set. The boundary line is dashed for > and
< and solid for and .
The area shaded darkly in the figure is the set of all points (x, y ) satisfying
the inequality y  x + 2
Example. An Italian restaurant o↵ers a choice of pasta or pizza meals. It

costs 3 to make a pasta dish, which it sells for 13. The corresponding
figures for pizzas are 2 and 10, respectively.
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?
Example. A small firm manufactures and sells litre cartons of non-alcoholic

cocktails, ‘The Caribbean’ and ‘Mr Fruity’, which sell for 1 and 1.25,
respectively. Each is made by mixing fresh orange, pineapple and apple juices in
di↵erent proportions.
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.
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.
Example. A manufacturer produces three models of bicycles. The time (in

hours) required for assembling, painting, and packaging each model is as follows:
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?
Simplex method for max problem

Consider, for instance, the max problem of the function
Z = c1 x1 + c2 x2 + c3 x3 subject to
8
>
> a11 x1 + a12 x2 + a13 x3  b1
>
>
>
>
>
> a x + a22 x2 + a23 x3  b2
>
< 21 1
a31 x1 + a32 x2 + a33 x3  b3
>
>
>
>
>a41 x1 + a42 x2 + a43 x3
>  b4
>
>
>
:x1 , x2 , x3 0.
Note that b1 , b2 , b3 and b4 are supposed to be non-negative constants.
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
practical operations research for half a century later.

The latter system can be written as Z c 1 x1 c 2 x2 c3 x3 = 0 subject to

8
>
> a11 x1 + a12 x2 + a13 x3 +s1 = b1
>
>
>
>
<a x + a x + a x +s2 = b2
21 1 22 2 23 3
>
> a31 x1 + a32 x2 + a33 x3 +s3 = b3
>
>
>
>
:a41 x1 + a42 x2 + a43 x3 +s4 = b4 ,
where s1 , s2 , s3 and s4 are non-negative and called the slack variables. So
now we have a departing simplex table as follows.
Steps to find the optimal solution of the max problem:

S1. If all indicators are non-negative then STOP and Z has a maximum
with the current list of basic variables.
S2. If there is any negative indicator then choose a column w.r.t. the
biggest negative indicator as a pivot column.
S3. Divide each entry in R by the corresponding positive entry (Z and

negative entry are not included) in the pivot column and choose a
pivot row which has the smallest positive quotient.
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!]
S5. Turn back to S1.

Chapter 8. Di↵erential Equations [for your further reference] 8.1. Dynamics
So far, all of our models have been static. In practice, economic variables take
time to vary.
The incorporation of time into economic models is known as dynamics, and it

enables us to decide whether equilibrium values are actually achieved and, if so,
exactly how individual variables approach these values.
When t, is a discrete variable taking whole number values. This describes

the situation in which variables change only after fixed periods. For example,
the prices of certain agricultural products change from one season to the
next but are fixed throughout each season.
When time is a continuous variable taking all possible values in a certain

interval. This describes the situation in which variables change from one
moment to the next. For example, the prices of certain commodities, such as
oil, e↵ectively change instantaneously and are not fixed on a seasonal basis.
Chapter 8. Di↵erential Equations [for your further reference] 8.2. Di↵erential 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 0 (t). Equations that involve the
derivatives of an unknown function are called di↵erential 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 0 (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
P 0 (t) = 0.036P(t) 10.
Ideal growth models
As we have studied so far, if the interest is compounded continuously, the

compound amount after t years is P = P0 e rt . This is the solution of the
di↵erential equation:
P0 = r ⇥ P
under the initial condition P(t = 0) = P0 .
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 = 0.036P and therefore P = 5, 000e 0.036⇥t .
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’.
Therefore, the growth of capital will be described by the logistic function of

growth proposed by Pierre-François Verhulst in the 1840s:
✓ ◆
P
P0 = P 1 ⇥ lnr
Pm
where Pm is the maximum (marginal) capital value (potential capital).
Chapter 8. Di↵erential Equations [for your further reference] 8.3. Solving di↵erential equations
Separable equations
A separable equation is a first-order di↵erential equation in which the expression

for dP
dt can be factored as a function of t times a function of P. That is,
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.
Chapter 8. Di↵erential Equations [for your further reference] 8.3. Solving di↵erential equations
To be continued ...

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Chapter 5.

Outline of the chapter:

Probability [for your further reference]

Consumers’ surplus - Producers’ surplus

Continuous money flow

If F is an anti-derivative of f then the integral of f is often written as

where C is any real number.

G- Fcs + c 5) Jcosadse = sink + e

substitution method ! integration by changing variable )

Eg_1 : u = 2kt 1 du = Idk

Definite integral sci = at Dkti

/ Odu + udv = uxv

I Xxl Wsu ) Cosa)dU

f- ( gon)) '=f4gcnD g'(a) ✗ = do D= .

If '( gcxyg.ca)du=f( goes ) -1C

If 'lg)dg=f( goes) -1C

Area between curves. Consider the region S enclosed by the curve

The area of the indicated region can be calculated by performing the

Theorem (Fundamental theorem of Calculus)

In summary, to compute a definite integral we can possibly use definition or

Probability of a continuous random event

Example 1. The demand equation for a product is q = 400 p 2 and the

Example 2. The supply equation for a product is given by the following

(2) v00 (1)

ski Demand supply

100 292 92=25 9=5

Continuous money flow

In this section, we introduce the following features:

Total money flow.

Present value of money flow.

Accumulated amount of money flow.

Total money flow

13 fctdt where f- ( t) is the

Present value of money flow

Accumulated amount of money flow

b. The accumulated amount of money flow, compounded continuously,

Discounting. To calculate the present value, P0 , when a single future

If the fund is to provide a continuous revenue stream for n years at an

Example. Calculate the present value of a continuous revenue stream of

Outline of the chapter:

Basic matrix operations

A rectangular table consisting of m rows and n columns

is called a matrix of order m ⇥ n.

Rows of a matrix are horizontal, columns of a matrix are vertical.

Notation. Am⇥n = [aij ], i = 1, . . . , m, j = 1, . . . , n in which aij is called

Identity matrix of order n: aii = 1 for i = 1, . . . , n and aij = 0 for

Let A = [aij ] and B = [bij ] be two matrices of order m ⇥ n, i.e.,

Scalar Multiplication. Let k be a real number.

Transposition. Let A = (aij ) be a matrix of order m ⇥ n. The transposition of A

Scalar/Dot/Inner product. Given a = (a1 a2 . . . an ) and

Recall that the product of 2 vectors perpendicular to each other is 0. For

Matrix Multiplication. Let A be a matrix of order m ⇥ n and B be a

In general, we have that

By multiplication matrix operation, we can easily see that

Let A be a matrix of order n ⇥ n. If there exists a matrix B such that

then A is said to be invertible and B is called the inverse matrix of A,

How to find an inverse matrix?

Gaussian elimination method

1. Interchange any two rows

2. Multiply each entry in a row by the same nonzero constant

Example. Solve the following system

(a) by the Gaussian elimination method,

(b) by the inverse matrix.

a22 a23 a21 a23 a21 a22