BUS202: Business Mathematics

Dr. Md. Shahnewaz Bhuiyan

Associate Professor
Department of Mechanical and Production Engineering
Ahsanullah University of Science and Technology

Differentiation

BUS202: Business Mathematics 1

 Lesson objectives
Learning objective:
The objective of this lesson is to educate students the key concepts of
differentiation and gain proficiency in applying the differentiation techniques to
solve business problems

Learning outcomes:
At the end of the lesson, the students should be able to:
• Familiar with the differentiation of simple algebraic functions using the
rules of differentiation.
• Educate learners the difference between local maxima and minima, and
locate the position of stationary points
• Educate learners on how to use differentiation techniques in solving
business problems.

References
• Earl Bowen, Pritchett/Saber, Mathematics with application in Management and
Economics (seventh edition), IRWIN
• S. M. Shahidul Islam, Business Mathematics, Abir Publications

BUS202: Business Mathematics 1

 Concept of Differentiation
The mathematical relationship
𝑦 = 𝑚𝑥 + 𝑐

Consider the line represented by the equation

𝑦 = 3𝑥 + 1

The gradient (slope) of the

line is
𝑅𝑖𝑠𝑒 𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑦 3
= =
𝑅𝑢𝑛 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑥 1
=3

BUS202: Business Mathematics 3

 Concept of Differentiation
Consider the following graph:

The graph is increasing from

−∝ up to around -2, and
then it starts decreasing until
it gets to around 0 and then
it turns back around and
starts increasing.

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 Concept of Differentiation
• There are a couple of ways to imagine this curious idea of the “gradient at
a point on a curve”

• An ant, for example living on the curve would think is was straight.

• Think about the earth we live on! It is ellipsoidal in shape, yet we don’t
know that because we are so small in comparison to its size, we fail to
notice its curvature. It looks flat to use, unless we view it from outer
space

• So a curve has a number of point, to represent the gradient of the little

line at that point. This number represents the “instantaneous gradient” or
“ rate at which 𝒚 is changing at that point”. This is the underlying idea of
differential calculus.

BUS202: Business Mathematics 5

 Concept of Differentiation
• A tangent line with
positive gradient
Positive gradient indicates that the
curve is increasing
at that point

• A tangent line with

negative gradient
indicates that the
curve is decreasing
at that point

Negative gradient • A tangent line with

zero gradient
indicates that the
Zero gradient curve is not
changing at that
point
BUS202: Business Mathematics 6
 Concept of Differentiation
• At every point (𝑥, 𝑦) on the curve there is a tangent line
• The tangent line has a gradient with represents the local growth of
the curve at that point.
• Notation: we often replace “𝑦” with “𝑓(𝑥)” to indicate that 𝑦 is a
function of 𝑥 (i.e. different values of 𝑥 (input) lead to different
values of 𝑦 (output)
• We want to crate a new function, called the derivative (or gradient)
function where you input an 𝑥 value, and outcomes the gradient of
the tangent line at that point (𝑥, 𝑦)
• This process is known as Differentiation
There are two notations for the derivative function
𝑑𝑦
𝑜𝑟 𝑓 ′ (𝑥)
𝑑𝑥

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 Sample example
𝒙 𝒚 (= 𝒙𝟐 ) 𝜹𝒙 𝜹𝒚 𝜹𝒙
𝜹𝒚
5 25

5.1 26.01 0.1 1.01 10.1

5.01 25.1001 0.01 0.1001 10.01

5.001 25.01 0.001 0.01001 10.001

Observations:
(i) 𝛿y varies when 𝛿𝑥 varies
(ii) 𝛿𝑦 → 0 when 𝛿𝑥 → 0
𝜹𝒙
(iii) The ratio tends to a number which is 10.
𝜹𝒚
𝛿𝑦 𝑑𝑦
lim =
𝛿𝑥→0 𝛿𝑥 𝑑𝑥
BUS202: Business Mathematics 8
 Sample example
𝒙 𝒚 (= 𝒙𝟐 ) 𝜹𝒙 𝜹𝒚 𝜹𝒙
𝜹𝒚
5 25

5.1 26.01 0.1 1.01 10.1

5.01 25.1001 0.01 0.1001 10.01

5.001 25.01 0.001 0.01001 10.001

Observations:
(i) 𝛿y varies when 𝛿𝑥 varies
(ii) 𝛿𝑦 → 0 when 𝛿𝑥 → 0
𝜹𝒙
(iii) The ratio 𝜹𝒚 tends to a number which is 10.
𝛿𝑦 𝑑𝑦
lim =
𝛿𝑥→0 𝛿𝑥 𝑑𝑥
𝑑𝑦
𝑑𝑥
is called the derivative of y with respect to x

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 Rules of Differentiation
Derivative of a constant function
if 𝑓 has the constant value 𝑓 𝑥 = 𝑐 𝑑 𝑑
𝑑𝑓 𝑑 8 = 0; 𝜋 =0
𝑑𝑥 𝑑𝑥
= 𝑐 =0
𝑑𝑥 𝑑𝑥
Power rule for Positive integers
If 𝑛 is a positive integer, then 𝑑
𝑑 𝑛 3𝑥 5 = 3 × 5 × 𝑥 5−1 = 15𝑥 4
𝑑𝑥
𝑥 = 𝑛𝑥 𝑛−1
𝑑𝑥
Derivative Sum rule
𝑑 𝑑𝑢 𝑑𝑣 𝑦 = 𝑥 4 + 12𝑥
𝑢+𝑣 = + 𝑑𝑦 𝑑 4 𝑑 4 𝑑
𝑑𝑥 𝑑𝑥 𝑑𝑥
= 𝑥 + 12𝑥 = 𝑥 + 12𝑥
𝑑𝑥 𝑑𝑥 𝑑𝑥 𝑑𝑥
= 4𝑥 4−1 + 12 = 4𝑥 3 + 12

Derivative of Product Rule

𝑑 𝑑𝑣 𝑑𝑢
𝑢𝑣 = 𝑢 +𝑣
𝑑𝑥 𝑑𝑥 𝑑𝑥
BUS202: Business Mathematics
 Rules of Differentiation
Derivative Quotient Rule
𝑑𝑢 𝑑𝑣
𝑑 𝑢 𝑣 −𝑢
= 𝑑𝑥 2 𝑑𝑥
𝑑𝑥 𝑣 𝑣

Exponential functions Logarithmic Functions

𝑑 𝑥 𝑑 1
𝑒 = 𝑒𝑥 (ln 𝑥) = 𝑥>0
𝑑𝑥 𝑑𝑥 𝑥
𝑑 𝑥 𝑑 1 𝑑
𝑎 = 𝑎 𝑥 ln 𝑎 (ln 𝑔 𝑥 = (𝑔 𝑥 )
𝑑𝑥 𝑑𝑥 𝑔 𝑥 𝑑𝑥
𝑑 𝑔𝑥 𝑔 𝑥
𝑑 𝑑 1
𝑒 =𝑒 (𝑔 𝑥 ) 𝑙𝑜𝑔𝑎 𝑥 = 𝑥>0
𝑑𝑥 𝑑𝑥 𝑑𝑥 𝑥 ln 𝑎
𝑑 𝑔 𝑥 𝑔 𝑥
𝑑 𝑑 1 𝑑
𝑎 = ln 𝑎 𝑎 (𝑔𝑥) 𝑙𝑜𝑔𝑎 𝑔 𝑥 = (𝑔 𝑥 )
𝑑𝑥 𝑑𝑥 𝑑𝑥 𝑔 𝑥 𝑙𝑛𝑎 𝑑𝑥

BUS202: Business Mathematics

 Example problem: 11.1
Differentiate the following functions, with respect to 𝑥
𝑖 𝑦 = 𝑥; 𝑖𝑖 𝑦 = 8𝑥 −5 ; 𝑖𝑖𝑖 𝑦 = 3𝑥 3 − 6𝑥 2 + 2𝑥 − 8
5 𝑥 5
𝑖𝑣 𝑦 = 4𝑥 7 𝑣 𝑦 = 3 𝑣𝑖 𝑦 = 3
𝑥 𝑥

BUS202: Business Mathematics 12

 Example problem: 11.2
Differentiate the following function, with respect to 𝑥
𝑖 𝑦 = 3𝑥 2 + 5𝑥 3 − 7𝑥 7
3
𝑖𝑖 𝑦 = 3𝑥 2 − 2𝑥 + 5 2
1 4𝑥
𝑖𝑖𝑖 𝑦 = 4𝑥 4 + 2𝑥 + 1 3 − 𝑒
4
50
𝑖𝑣 𝑦 =
0.2𝑥 + 5

BUS202: Business Mathematics 13

 Example problem: 11.3
Differentiate the following function, with respect to 𝑥
𝑎𝑥 2+𝑏𝑥+𝑐
𝑦=𝑒 + ln 𝑥 5

BUS202: Business Mathematics 14

 Maxima, Minima, and Stationary points
y = f(x) The point A is local maxima and
the point B is local minima. At
each of these points
(𝐴, 𝐵, 𝑎𝑛𝑑 𝐶) the tangent to the
curve is parallel to the 𝑥-axis so
the derivative function is zero
𝑑𝑦
( = 0).
𝑑𝑥
All of these points are therefore
stationary points of the function.

Any point at which the tangent to the graph is horizontal is called a stationary
point.
𝑑𝑦
We can locate stationary points by looking for point at which =0
𝑑𝑥

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 Distinguishing Maximum points from Minimum points

• The point A is local maxima and the point B is local minima.

• At each of these points (𝐴, 𝑎𝑛𝑑 𝐵) the tangent to the curve is parallel to the 𝑥-axis
𝑑𝑦
so the derivative function is zero (𝑑𝑥 = 0).
• All of these points are therefore stationary points of the function.

BUS202: Business Mathematics 16

 Local minima
𝑑𝑦
• To the left of the minimum point,
𝑑𝑥
is negative because the tangent has
negative gradient.
𝑑𝑦
• At the minimum point, = 0.
𝑑𝑥
• To the right of the minimum point, ,
𝑑𝑦
is positive because the tangent
𝑑𝑥
has positive gradient
𝑑𝑦 𝑑𝑦
• goes from negative, to zero, to positive as 𝑥 increases. In other words, must
𝑑𝑥 𝑑𝑥
increase as 𝑥 increases.
𝑑𝑦
• If is increasing near the stationary point then that point must be minimum. If
𝑑𝑥
𝑑𝑦 𝑑𝑦
the derivative of is positive then we will know that is increasing, indicating
𝑑𝑥 𝑑𝑥
that the stationary point is a minimum.

𝑑𝑦 𝑑2 𝑦
If = 0 at a point and if > 0 there, then the point must be a minimum
𝑑𝑥 𝑑𝑥 2

BUS202: Business Mathematics 17

 Local maxima
𝑑𝑦
• To the left of the maximum point, , is
𝑑𝑥
positive because the tangent has positive
gradient
𝑑𝑦
• At the maximum point, = 0.
𝑑𝑥
𝑑𝑦
• To the right of the maximum point, is
𝑑𝑥
negative because the tangent has negative
gradient.
𝑑𝑦 𝑑𝑦
• goes from positive, to zero, to negative as 𝑥 increases. In other words, must
𝑑𝑥 𝑑𝑥
decrease as 𝑥 increases.
𝑑𝑦
• If is decreasing near the stationary point then that point must be maximum. If
𝑑𝑥
𝑑𝑦 𝑑𝑦
the derivative of is negative then we will know that is decreasing, indicating
𝑑𝑥 𝑑𝑥
that the stationary point is a maximum.
𝑑𝑦 𝑑2 𝑦
If = 0 at a point and if < 0 there, then the point must be a maximum
𝑑𝑥 𝑑𝑥 2

BUS202: Business Mathematics 18

 Condition for maxima and minima

At the point (𝒂, 𝒃)

𝑑𝑦 𝑑𝑦
If = 0 If = 0
𝑑𝑥 𝑑𝑥
𝑑2𝑦 𝑑2𝑦
and < 0 and > 0
𝑑𝑥 2 𝑑𝑥 2

Then the point (𝑎, 𝑏) is a Then the point (𝑎, 𝑏) is a

Local maximum Local minimum

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 Point of Inflection

𝑑2 𝑦
• The point x is said to be a point of inflection if =0
𝑑𝑥 2
• In other words, the function 𝑓(𝑥) is going to take neither a maximum value nor
a minimum value.

𝑑𝑦 𝑑2 𝑦
If = 0 at a point and if < 0 there, then the point must be a maximum
𝑑𝑥 𝑑𝑥 2

BUS202: Business Mathematics 20

 Example problem: 11.4
Find the minimum and maximum values of
𝑥3
𝑦= − 𝑥 2 − 3𝑥 + 7
3

BUS202: Business Mathematics 21

 Example problem: 11.5
Find the minimum and maximum values of
𝑦 = 2𝑥 3 − 3𝑥 2 − 36𝑥 + 10

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 Business application of Differentiation
Cost Function: 𝐶 𝑥 = 𝐹 + 𝑉(𝑥)
Revenue function: 𝑅 𝑥 = 𝑥 × 𝑝(𝑥)
Profit Function: 𝑃 𝑥 = 𝑅 𝑥 − 𝐶(𝑥)

Profit Maximizing output:

𝑑 𝑝𝑟𝑜𝑓𝑖𝑡 𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛
Profit Maximizing output=
𝑑𝑥
𝑑𝑃 𝑑2𝑃
Condition: = 0 and < 0 (negative)
𝑑𝑥 𝑑𝑥 2

Cost minimizing output:

𝑑 𝐶𝑜𝑠𝑡 𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛
Cost minimizing output=
𝑑𝑥
𝑑𝐶 𝑑2𝐶
Condition: = 0 and > 0 (positive)
𝑑𝑥 𝑑𝑥 2

BUS202: Business Mathematics 23

 Business application of Differentiation
Marginal Cost (MC): is the extra cost for producing one additional unit
when total cost at certain level of output is known. Hence, it is the rate of
change in total cost with respect to the level of output at the point where
total cost is known.
𝑑𝐶 𝑥
𝑀𝐶 = where 𝐶(𝑥) is a function of 𝑥, level of output.
𝑑𝑥

Marginal production (MP): is the incremental production, i.e., the

additional production added to the total production

Marginal Revenue (MR): is the change in the total revenue for the sale of
an extra unit. Hence, it is the rate of change of total revenue with respect
to the quantity demanded at the point where total revenue is known.
𝑑𝑅(𝑥)
𝑀𝑅 = where 𝑅(𝑥) is the total revenue and is a function of 𝑥, the
𝑑𝑥
quantity demanded

BUS202: Business Mathematics 24

 Example problem: 11.6
A study has shown that the cost of producing pencils of a manufacturing
concern is given by 𝑐 𝑥 = 30 + 1.5𝑥 + 0.008𝑥 2 . What is the marginal cost
at 𝑥 = 1000 units?. If the pencils are sold for Tk.5 each for what values of 𝑥
does marginal cost equal to marginal revenue?

BUS202: Business Mathematics 25

 Example problem: 11.7
The cost of manufacturing a certain article is given by 𝐶 = 𝑄2 − 4𝑄 +
100, where 𝑄 is the number of articles manufactured. Find the
minimum value of 𝐶

BUS202: Business Mathematics 26

 Example problem: 11.8
5
Total cost of producing x units is 𝑥 2 + 175𝑥 + 125 and the price at which each
4
5
unit can be sold for 250 − 𝑥. What should be the output for a maximum profit?
2

BUS202: Business Mathematics 27

 Example problem: 11.9
The total cost function of a product is given by
2
615𝑥
𝐶 𝑥 = 𝑥3 − + 15750𝑥 + 18000
2
where 𝑥 is the number of unit produced. Determine the number of units that
must be produced to minimize the total cost.

BUS202: Business Mathematics 28

 Example problem: 11.10
The cost function for x units of a product produced and sold by a company is
𝐶 𝑥 = 250 + 0.005𝑥 2 and the total revenue is given as 𝑅 𝑥 = 4𝑥. Find how
many items should be produced to maximize the profit? What is the maximum
profit?

BUS202: Business Mathematics 29

 Example problem: 11.11
The profit function of a company can be represented by 𝑃 𝑥 = 𝑥 − 0.0001𝑥 2 ,
where 𝑥 is units sold. Find the optimal sales volume and the amount of profit to
be expected at that volume.

BUS202: Business Mathematics 30

 Example problem: 11.12
When 𝑥 gallons of alcohol are produced, the average cost per gallon is 𝐴(𝑥)
dollars, where
200
𝐴 𝑥 = + 0.05𝑥 𝑥 > 0
0.1𝑥 + 5
(i) Find the value of 𝑥 where 𝐴(𝑥) has a stationary point
(ii) Prove that this value of 𝑥 occurs at a local minimum of 𝐴(𝑥)
(iii) Compute the minimum average cost per gallon

BUS202: Business Mathematics 31

 Example problem: 11.13
When 𝑦 gallons of alcohol are produced, the average cost per gallon is 𝐴(𝑦)
dollars, where
2500
𝐴 𝑦 = + 0.16𝑦 𝑦 > 0
0.04𝑦 + 9
(i) Find the value of 𝑦 that minimizes average cost per gallon.
(ii) Compute the minimum average cost per gallon

BUS202: Business Mathematics 32

 Example problem: 11.14
When 𝑥 gallons of alcohol are produced, the average cost per gallon is 𝐴(𝑥)
dollars, where
4000
𝐴 𝑥 = + 0.25𝑥 𝑥 > 0
0.1𝑥 + 20
(i) Find the value of x that minimizes average cost per gallon.
(ii) Compute the minimum average cost per gallon

BUS202: Business Mathematics 33

Dr. Md. Shahnewaz Bhuiyan BUS202: Business Mathematics 34