ECN 2311

Mathematics for Economics

Unit 5: Integration

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 Introduction
• Recall that the concept of differential calculus was used to
measure the rate of change of functions.
• We know that differentiation is the process of finding the
derivative, which we denoted as 𝑓𝑥 or 𝑓′(𝑥), of a function 𝐹(𝑥).
• Now, there are times when we encounter a situation where the
rate of change of a function is known but the original function is
unknown.
• The process of finding the original function, or reversing
differentiation is called integration, or antidifferentiation.
• The original function 𝐹(𝑥) is called the integral, or antiderivative,
of 𝑓".

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• In Unit 5, we focus on the concept of integration starting with
indefinite integrals and further outline selected rules of integration
relevant for our purpose.
• Next, we describe definite integrals and demonstrate the
fundamental theorem of calculus used to evaluate definite integrals.
• We conclude the unit with a look at some applications of integration
in the field of economics

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Indefinite integral
• For simplicity, let us denote the derivative of a function as 𝑓(𝑥). The
integral of 𝑓(𝑥) is expressed mathematically as
න 𝑓 𝑥 𝑑𝑥 = 𝐹 𝑥 + 𝐶

• On the left-hand side, the symbol ∫ is called the integral sign, 𝑓(𝑥) is
known as the integrand (the function to be integrated) and the 𝑑𝑥
part simply tells us that the operation is performed with respect to
the variable 𝑥.
• Put another way, 𝑓(𝑥)𝑑𝑥 is the differential and the symbol ∫ is
viewed as an instruction to get back the original (or primitive)
function, 𝐹(𝑥), which is expressed on the right side of the equation.
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• Note that the presence of 𝐶 (known as the constant of integration) on
the right side indicates any constant term that is precluded from the
derivative by the rules of differentiation.
• The integral ∫ 𝑓(𝑥)𝑑𝑥 is known as an indefinite integral because it
has no definite numerical value.
• It varies with 𝑥 even if the constant is defined.

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Rules of integration
• The following are the basic rules of integration that we look at.
Rule 1: The integral of a constant 𝑘 is;

න 𝑘𝑑𝑥 = 𝑘𝑥 + 𝐶

Rule 2: The integral of 1, written simply as 𝑑𝑥, not 1𝑑𝑥, is;

න 𝑑𝑥 = 𝑥 + 𝐶

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Rule 3: The integral of a power function 𝑥 𝑛 , where 𝑛 ≠ −1, is given by
the power rule;
𝑛
1
න 𝑥 𝑑𝑥 = 𝑥 𝑛+1 + 𝐶
𝑛+1
Rule 4: The integral of a constant multiplied by a function is;
න 𝑘𝑓 𝑥 𝑑𝑥 = 𝑘 න 𝑓 𝑥 𝑑𝑥

Rule 5: The integral of the sum of two or more functions is;

න 𝑓 𝑥 + 𝑔(𝑥) 𝑑𝑥 = න 𝑓 𝑥 𝑑𝑥 + න 𝑔 𝑥 𝑑𝑥

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Rule 6: The integral of the difference of two or more functions is;
න 𝑓 𝑥 − 𝑔(𝑥) 𝑑𝑥 = න 𝑓 𝑥 𝑑𝑥 − න 𝑔 𝑥 𝑑𝑥

Rule 7: The integral of the negative of a function is;

න −𝑓 𝑥 𝑑𝑥 = − න 𝑓 𝑥 𝑑𝑥

Rule 8: The exponential rule

න 𝑒 𝑥 𝑑𝑥 = 𝑒 𝑥 + 𝐶

Rule 9: The logarithmic rule

1
න 𝑑𝑥 = 𝑙𝑛𝑥 + 𝐶
𝑥
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In-class exercise
Determine the following integrals. Ensure to indicate the rule(s) of
integration you have used to answer each question.
i. ∫ 3 𝑑𝑥
ii. ∫ 5𝑥 𝑑𝑥
iii. ∫ (3𝑥 2 − 𝑥 + 1) 𝑑𝑥
1
iv. ∫ + 𝑒 𝑥 𝑑𝑥
𝑥

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The substitution rule

• The integral of 𝑓(𝑢)(𝑑𝑢/𝑑𝑥) with respect to the variable x is the

integral of 𝑓(𝑢) with respect to the variable 𝑢:
𝑑𝑢
න𝑓 𝑢 𝑑𝑥 = න 𝑓 𝑢 𝑑𝑢 = 𝐹 𝑢 + 𝐶
𝑑𝑥
where the operation ∫ 𝑑𝑢 has been substituted for the operation ∫ 𝑑𝑥.
In-class exercise
Find
න 2𝑥 𝑥 2 + 1 𝑑𝑥

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Integration by parts
• The integral of 𝑣 with respect to 𝑢 is equal to 𝑢𝑣 less
the integral of 𝑢 with respect to 𝑣:

න 𝑣𝑑𝑢 = 𝑢𝑣 − න 𝑣𝑑𝑢

• The essence of this rule is to replace the operation 𝑑𝑢

by the operation 𝑑𝑣.
• The rationale behind this result is relatively simple.
• First, the product rule of differentials gives us
𝑑(𝑢𝑣) = 𝑣 𝑑𝑢 + 𝑢 𝑑𝑣
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• If we integrate both sides of the equation (i.e., integrate each
differential), we get a new equation
න 𝑑(𝑢𝑣) = න 𝑣𝑑𝑢 + න 𝑢𝑑𝑣

or
𝑢𝑣 = න 𝑣𝑑𝑢 + න 𝑢𝑑𝑣

• Then, by subtracting u dv from both sides, the previously stated result

emerges

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 Definite Integrals
• All the integrals we have discussed so far possesses no definite
numerical value.
• Now, for a given indefinite integral of a continuous function 𝑓(𝑥),
න 𝑓 𝑥 𝑑𝑥 = 𝐹(𝑥) + 𝐶

• Assume two values of 𝑥 , 𝑎 and 𝑏 (𝑎 < 𝑏), and substituting them

successively into the right side of the equation we get
[𝐹(𝑏) + 𝐶] − [𝐹(𝑎) + 𝐶] = 𝐹(𝑏) − 𝐹(𝑎)
• This yields a definite value which is the area under a curve as shown
below.

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 • The area from 𝑎 to 𝑏 can be
𝑦 expressed as a definite integral
of 𝑓(𝑥) over the interval 𝑎 to 𝑏.
• Mathematically, this is written
as
𝑏
𝑦 = f(x)
න 𝑓(𝑥) 𝑑𝑥
𝑎
• We refer to 𝑎 as the lower limit
of integration and to 𝑏 as the
upper limit of integration.
0 𝑎 𝑏
𝑥

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• Hence definite integrals will be evaluated as below:

𝑏 𝑏
න 𝑓(𝑥) 𝑑𝑥 = 𝐹(𝑥)ቚ = 𝐹 𝑏 − 𝐹 𝑎
𝑎 𝑎

In-class exercise
6
a. ∫0 5𝑥𝑑𝑥

10
b. ∫1 3𝑥 2 𝑑𝑥

3
c. ∫1 𝑥 3 + 𝑥 + 6 𝑑𝑥

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Properties of definite integrals
• Property I: The interchange of the limits of integration changes the
sign of the definite integral:
𝑎 𝑏
න 𝑓 𝑥 𝑑𝑥 = − න 𝑓(𝑥) 𝑑𝑥
𝑏 𝑎
Property II: A definite integral has a value of zero when the two limits
of integration are identical:
𝑎
න 𝑓(𝑥) 𝑑𝑥 = 𝐹 𝑎 − 𝐹 𝑎 = 0
𝑎

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• Property III: A definite integral can be expressed as a sum of
a finite number of definite sub integrals as follows:
𝑑 𝑏 𝑐 𝑑
න 𝑓(𝑥) 𝑑𝑥 = න 𝑓(𝑥) 𝑑𝑥 + න 𝑓(𝑥) 𝑑𝑥 + න 𝑓(𝑥) 𝑑𝑥
𝑎 𝑎 𝑏 𝑐

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 Economic Application of Integrals

• Integration is used in a number of economic applications which

include the following:
1. Estimating capital stock when net investment is known
2. Estimating total costs when marginal costs are known
3. Estimating total revenue when marginal revenue is known
4. Computing the Gini coefficient given the Lorenz curve
5. Measuring consumer and producer surplus given market demand and
supply conditions

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• For instance, we can use integration to infer the total
function from a given marginal function.

In-class exercise

• If the marginal cost (𝑀𝐶) of a firm is the following function

of output, 𝐶′(𝑄) = 2𝑒 0.2𝑄 , and if the fixed cost is 𝐶𝐹 = 90,
find the total-cost function 𝐶(𝑄).

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Consumer Surplus
• Economists are interested to study the effects of a price change on
consumers’ welfare using the concept of consumers’ surplus.
• Consumers’ surplus is the difference between the maximum amount
consumers are willing to pay for a unit of a good and the amount
consumers actually do pay for the product.
• Consider the inverse demand function 𝑃 = 𝑓(𝑄) shown below.
• The demand function represents the different prices consumers are
willing to pay for different quantities of the good.
• Suppose the initial equilibrium is at (𝑄1 , 𝑃1 ), then the consumers who
would be willing to pay more than 𝑃1 benefit.

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• Consumers’ surplus, when the price is 𝑃1 , will be the total benefit to
consumers represented by the triangular shaped area 𝐴.

• Mathematically, consumers’ surplus (𝐶𝑆1 ) when the price is 𝑃1 can be

computed using the following definite integral:

𝑄1 𝑄1
𝐶𝑆1 = න 𝑓 𝑄 𝑑𝑄 − 𝑄1 𝑃1 = 𝐹 𝑄 ቚ − 𝑄1 𝑃1
0 0

= 𝐹 𝑄1 − 𝐹 0 − 𝑄1 𝑃1

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• Suppose there is a price change from 𝑃1 to 𝑃2 leading to a new
equilibrium (𝑄2 , 𝑃2 ), then the consumers who would be willing to pay
more than 𝑃2 benefit. Consumers’ surplus, when the price changes to
𝑃2 will be the total benefit to consumers represented by the
triangular shaped area (𝐴 + 𝐵 + 𝐶).
• Mathematically, consumer surplus (𝐶𝑆2 ) when the price is 𝑃2 can be
computed using the following definite integral:
𝑄2 𝑄2
𝐶𝑆2 = න 𝑓 𝑄 𝑑𝑄 − 𝑄2 𝑃2 = 𝐹 𝑄 ቚ − 𝑄2 𝑃2
0 0
= 𝐹 𝑄2 − 𝐹 0 − 𝑄2 𝑃2

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P
• Economists are more interested
in measuring the welfare effects
of a price change on consumers
called change in consumers’
surplus.
A • Change in consumers’ surplus is
P1
defined as the net benefit that
B C consumers receive as a
P2
D (Q )
consequence of a price change.
• The net benefit to consumers is
positive when there is price
Q
Q 1
Q 2
reduction and negative when
Consumer surplus when price has fallen there is a price increase.

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• In our example, the net benefit to consumers is represented by the
trapezium shaped area (𝐵 + 𝐶).

• Mathematically, the change in consumers’ surplus (Δ𝐶𝑆) for a price

change from 𝑃1 to 𝑃2 can be computed by finding the difference
between the new consumers’ surplus and the initial consumers’
surplus:
Δ𝐶𝑆 = 𝐶𝑆2 − 𝐶𝑆1

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Producer Surplus
• Producer surplus is the difference between the amount that a firm
actually receives from selling a good in the marketplace and the
minimum amount the firm must receive in order to be willing to
supply the good in the marketplace.
• Consider the supply function 𝑃 = 𝑓(𝑄) shown below.
• The function represents the different prices producers are willing to
receive for different quantities of the good
• Suppose the initial equilibrium is at (𝑄1 , 𝑃1 ), the producers who
would supply at a lower price than𝑃1 benefit.

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• Producers’ surplus will be the total gain to producers represented by
the triangular shaped area𝐴.

• Mathematically, producers’ surplus (𝑃𝑆1 ) when the price is 𝑃1 can be

computed using the following definite integral:

𝑄1 𝑄1
𝑃𝑆1 = 𝑄1 𝑃1 − න 𝑓 𝑄 𝑑𝑄 = 𝑄1 𝑃1 − 𝐹 𝑄 ቚ
0 0

= 𝑄1 𝑃1 − 𝐹 𝑄1 − 𝐹 0

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• Suppose there is a price increase from 𝑃1 to 𝑃2 the new equilibrium
will shift to (𝑄2 , 𝑃2 ).
• Producers’ surplus will be the total benefit to producers represented
by the triangular shaped area ( (𝐴 + 𝐵 + 𝐶).
• Mathematically, producer surplus (𝑃𝑆2 ) when the price is 𝑃2 will be:
𝑄2 𝑄2
𝑃𝑆2 = 𝑄2 𝑃2 − න 𝑓 𝑄 𝑑𝑄 = 𝑄2 𝑃2 − 𝐹 𝑄 ቚ
0 0
= 𝑄2 𝑃2 − 𝐹 𝑄2 − 𝐹 0
• The change in producers’ surplus, represented by the trapezium
shaped area (𝐵 + 𝐶) is:
Δ𝑃𝑆 = 𝑃𝑆2 − 𝑃𝑆1

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P
S(Q)

P 2

B C
P 1

Q Q
1 Q 2

Producer surplus when the price increases

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In-class exercise
1. Consider the demand function 𝑃 = 42 − 5𝑄 − 𝑄 2 for a product
called 𝑄. Find the consumers’ surplus if the equilibrium price is 𝐾6
per unit of 𝑄. Quantity is measured in tens of thousands of units of
𝑄.
2. Consider the supply function 𝑃 = 2𝑄 + 1 for a product called 𝑄.
Find the producers’ surplus if the equilibrium price is 𝐾9 per unit of
𝑄. Quantity is measured in tens of thousands of units of 𝑄.

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 End of Lecture 5

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