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UKEQ 1013

Quantitative Techniques I

Topic 1
Mathematical Techniques
Basic Arithmetic
 Real Numbers
In algebra, we work with the set of real numbers, which we
can model using a number line.

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10

Real numbers describe real-world quantities such as


amounts, distances, age, temperature, and so on. A real
number can be an integer, a fraction, or a decimal.

They can also be either rational or irrational.


Source: http://www.math.com/school/subject2/lessons/S2U1L1DP.html

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Basic Arithmetic (Cont…)
 Rational Numbers
A number that can be expressed as the ratio of two
integers.
Examples of rational numbers:
 The fraction ½ is the ratio of 1 to 2.

 Since three can be expressed as three over one,

or the ratio of 3 to one, it is also a rational number.


 The number "0.57" is also a rational number, as it can
be written as a fraction.
 Irrational Numbers
A number that cannot be expressed as the ratio of two integers.
Example: square roots of non-perfect “squares” 17  4.1231...
e 1  2.718281...

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Basic Arithmetic (Cont…)


 The most common forms of number manipulation
are 4 basic arithmetic operations of:-


Additional, + Example: 2 + 2 = 4

Subtraction, − 2–2=0

Multiplication, x 2x2=4

Division, ÷ 2÷2=1

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Basic Arithmetic (Cont…)
 When different operations occur in the same
mathematical expression:-

 Multiply and divide before addition and subtracting.

 Use brackets to change the order:-


 The operation inside the brackets should be

performed before those outside.

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Basic Arithmetic (Cont…)
Examples:
2 10  6 (20)  6
Without Brackets :  7
2 2
2  (10  6) 2(4)
With Brackets :  4
2 2

Without Brackets : 6  9  4  3  15  7  8
With Brackets : 6  [9  (4  3)]  6  (9  1)  6  8  14

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Question 2
8  2 7 ( 4  1 )
2
When expressions have more than one
operation, we have to follow rules for the order 8  2  7  (4  1)
of operations:
1.First do all operations that lie inside
2
brackets .
2.Next, do any work with exponents or
 8  2  7  (5)
radicals.
3.Working from left to right, do all multiplication  8  4  7  (5)
and division.
4.Finally, working from left to right, do all
addition and subtraction.  32  35
 67

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Be careful: different calculators may give you different answers.

6
1
2(1  2)
6
(1  2)  9
2

23/5/28 Template copyright 2005 www.brainybetty.com 8


Basic Arithmetic (Cont…)
Negative Numbers
 Subtracting a negative number is the same as adding
 5 - -10 = 5 + 10 = 15

 Multiplying or dividing a positive number by a negative number


gives a negative number
 2 x -5 = -10 and 5 ÷ -10 = -0.5
 Multiplying or dividing a negative number by a positive number
gives a negative number
 -2 x 5 = -10 and -5 ÷ 10 = -0.5
 Multiplying or dividing negative number by a negative number gives
positive number
 -2 x -5 = +10 and -5 ÷ -10 = +0.5

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Polynomials
 A polynomial is a mathematical expression involving a sum of
powers in one or more variables multiplied by coefficients. A
polynomial in one variable (i.e., a univariate polynomial) with
constant coefficients is given by

n 2
a n x  ...  a 2 x  a1 x  a 0

Source: http://mathworld.wolfram.com/Polynomial.html

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Polynomials (Cont…)
 Sum of two polynomials: adding together the coefficients
sharing the same powers of variables:
(a2 x 2  a1 x  a0 )  (b1 x  b0 )  a2 x 2  (a1  b1 ) x  (a0  b0 )

Example:
(4x5 + 3x3 + 4x) + ( 8x – 5x3 - 5 )
= 4x5 + 3x3 – 5x3 + 4x + 8x – 5
= 4x5 – 2x3 + 12x – 5

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Polynomials (Cont…)
 Product of two polynomials: multiplying term by term and
combining the results:

(a 2 x 2  a1 x  a0 )(b1 x  b0 )
 a 2 x 2 (b1 x  b0 )  a1 x(b1 x  b0 )  a0 (b1 x  b0 )
 a 2 b1 x 3  (a 2 b0  a1b1 ) x 2  (a1b0  a0 b1 ) x  a0 b0

Example:
(x – 1) (2x + 3) = 2x2 + 3x – 2x – 3
= 2x2 + x – 3

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Polynomials (Cont…)
 The special names given to polynomials of low orders
Polynomial
Polynomial name Example
order
0 constant 10

1 Linear 8x + 10

2 Quadratic 5x2 + 8x + 10

3 Cubic 3x3 + 5x2 + 8x + 10

4 Quartic 4x4 + 3x3 + 5x2 + 8x + 10

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Factoring Polynomials
 Common Factors
 take out a common factor
ab  ac  a (b  c) a = common
factor
4 x 5  12 x 4  8x 3  4x 3 ( x 2  3x  2)
4x3 = common
factor

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Factoring Polynomials
Example: Factor 2y3 + 4y2 – 16y

Step 1: take out a common factor


2y3 + 4y2 – 16y = 2y (y2 + 2y – 8) 2y = common factor

Step 2: Factoring for y2 + 2y – 8


y 4 y2 = y(y)
y –2 8 = 8×1 or 4×2 and vice versa
4y – 2y = 2y – 8: – ve means one positive and one
negative values
2y3 + 4y2 – 16y = 2y(y2 + 2y – 8) = 2y(y + 4)(y – 2)

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Factoring Polynomials
 Grouping
 split the polynomial in two pieces and take out common
factors in each of them

5 x 3  10 x 2  3 x  6
 5 x 2 ( x  2)  3( x  2)
2
 (5 x  3)( x  2)

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Factoring Polynomials
Example: Factor 5y3 + 3y2 + 10y + 6

5y3 + 10y + 3y2 + 6


= 5y (y2 + 2) + 3(y2 + 2)
= (5y + 3)(y2 + 2)

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Factoring Polynomials (Cont…)
 General Quadratics
 Difference of Squares

A2  B 2  ( A  B)( A  B)
x 2  9  ( x  3)( x  3)
 Perfect Squares

A2  2 AB  B 2  ( A  B) 2
A2  2 AB  B 2  ( A  B) 2
x 2  14 x  49  ( x  7) 2

Source: http://tutorial.math.lamar.edu/Classes/Alg/Factoring.aspx

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Question
2
Multiply : ( x  1)( x  5 x  6)
Polynomial: (x +1)(x
(x22+5x+6)
+5x+6)
Distribute:
Multiply: x3+5x2+6x+x2+5x+6
Add Common Terms: x3 +6x
+5x2 +6x+11x
+x2 +5x+6
Standard Form: x3+6x2+11x+6
Rational Expressions
 A rational expression is an algebraic expression of the form:

P( z )
R( z ) 
Q( z )
where P(z) and Q(z) are simpler expressions (usually
polynomials), and the denominator Q(z) is not zero.

Example: 2 xy  y 2
2
2x 1
Source: http://www.sparknotes.com/math/algebra2/rationalexpressions/section1.html

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Numerator a
Fractions  
Denominator b
 Quotient of “a” and “b”, or fraction “a” over “b”
 The rule governing the use of algebraic fractions are identical to
those used for ordinary fractions.
ac a a c
   ad  bc
bc b b d
a c ac a c ad  bc
   
b b b b d bd
a c ac a c a d
    
b d bd b d b c
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Fractions (Cont…)
1. Simplification of algebraic fractions
• Fractions may be simplified by moving a common factor
from numerator and denominator.
• Examples:

14ax 2 x(7 a ) 2 x
2
  ("7 a" is a common factor)
21a 3a (7 a ) 3a

a 2  2a  24 (a  6)(a  4) a  4 WRONG !!! IF


  (a  6)  a  4
5a  30 5(a  6) 5
5(a  6)
CORRECT
(a  6)  a  4 2a  2
 22
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5(a  6) 5(a  6)
Fractions (Cont…)
2. Additional and subtraction of algebraic fractions
Fractions have to have a common denominator they can

be added or subtracted.
x y x y
i) 
2 3
MUST have common denominators
3( x  y ) 2( x  y )
  ( lowest common denominato r )
6 6
5x  y

6 3a  2b 3b  a WRONG ! ! !
ii )  3 a  2b 3b  a
ab b2 
a 2  2b 2 ab b2

ab 2

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Fractions (Cont…)
3. Multiplication and division of fractions

x 2  1 3x  6 ab 1
 2 2

2
x  2x 4x  4 a b a b
( x  1)( x  1) 3( x  2) ab a b
   
x( x  2) 4( x  1) ( a  b)(a  b) 1
3( x  1)( x  1)( x  2) ab
 
4 x( x  2)( x  1) ab
3( x  1) WRONG !!! IF

4x ab a b
 
(a  b)(a  b) 1

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Fractions (Cont…) ( A  B )( A  B )
 A 2  AB  AB  B 2
4. Simplification and complex fractions  A2  B 2

a2  b2
2 2
b  a  b ab

ab b 3
3 (a  b)(a  b) 3 WRONG !!! IF
  (a  b)(a  b) 3
b ab  
b ab
3(a  b)

b

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Fractions (Cont…)
5. The three signs of a fraction
• The sign of the numerator
• The sign of denominator
• The sign of the fraction proper

8 8
   ( 4)  4   ( 4)  4
2 2

8 8
   (4)  4   (4)  4
2 2
8
  (4)  4
2

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Ratios
 A ratio is a different way of expressing a fraction.
 A fraction is the ratio of a numerator to a denominator.

Numerator
Fraction 
Denominator

Ratio = Numerator : Denominator

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Percentages
 A percentage is a fraction with a denominator of 100:

Numerator
Percentage(%) 
100
r
r% 
100
 Example: what is 12% of RM80
12
RM 80   RM 9.60
100

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Percentages (cont…)
Application of percentages
 In business and management:-
 Sales manager

 Personnel staff
 Accountant
 Economists

 A percentage added to the value (quantity) – mark up.

 A percentage subtracted from the value (quantity) – mark


down.

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Percentages (cont…)
Markups
 If the percentages increase is r % then

r
final value  original value  (1  )
100

r
where (1  ) is called the scale factor for an r % increase.
100

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Percentages (cont…)
Markups: Applications
A bank gives 4% interest at the end of each year on any sum left in a
deposit account for a whole year. If Mr. Smith opens such a deposit
account with RM20,000.
a) Calculate the interest gained by Mr. Smith.
b) What is the balance in the account at the end of 1 year?

Interest gained = 4
RM 20,000   RM 800
100
End of year balance = 4
RM 20,000  (1  )  RM 20,800
100
With bank accounts the original deposit is called the principle while
the percentage markup is called the interest rate.

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Percentages (cont…)
Marking Down
 Used to calculate discounts.
 If the percentages decrease is r % then

r
final value  original value  (1  )
100

r
where (1  100 ) is called the scale factor for an r %
decrease.

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Percentages (cont…)
Marking Down: Applications
The normal retail price of a product sold in a shop is RM5, but
will be reduced by 10% for cash purchase.
a) Calculate how much the 10% discount given on the retail
price?
b) What price does the consumer pay for cash?

10
Discount = RM 5   RM 0.50
100
10
Cash price paid = RM 5  (1  )  RM 4.50
100

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Percentages (cont…)
Marking Down: Applications

 Deduction in taxes (e.g. income or profit tax) for conversion of


gross into net amounts.
Example: a gross income of RM20,000 becomes
RM14,000 net after income tax of 30% is deducted.

 Reducing balance depreciation


Example: a machine valued this year at RM10,000 has an
accounting book value of RM9,800 next years after
depreciation of 2% per annum.

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Power and Root
A power function has the form:
n
M a
a is known as the base, while n is called the power or
exponent, and the power function means that a is
multiplied by itself n times:
M(3)= 53
M(n)  = an =(5)(5)(5)
 =  a·a·········a   =125
n times   a is raised to the
power n
3
5 is pronounced as "five raised to the third power" or "five to the third“ or "five cubed". 

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Power and Root
n
M a
 Definition: if n is any integer, then the n th root of a is
defined as 1
a n

 Notation: 1
a  a
n n

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Power and Root (cont…)
Rule applying to powers:
m n mn m n mn
a a  a a a  a
m n mn
(a )  a m
(ab)  a b m m

0
a 1 m 1
a  m
m a
n m
a a n

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Power and Root (cont…) CAUTION!
Rule applying to powers: a m  a n  a mn
Rule 1 : Product rule :
a m  a n  a mn
When power functions with the same base are multiplied
together, am·an, that base is multiplied by itself m times, and then
again by n times, which is equivalent to adding their exponents:

am·an  =  (a·a·····a) · (a·a·····a)


m times n times Example:
 =  (a·a·····a) · (a·a·····a) 24·23  =  (2·2·2·2)·(2·2·2)
m+n times  =  27
 = am+n Noted 2 7  2 43
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Power and Root (cont…) CAUTION!
Rule applying to powers: a m  a n  a mn
Rule 2 : Quotient rule :
a m  a n  a mn
When power functions with the same base are dividing each
other, am/an, that base is multiplied by itself m times, and then
divided by the base multiplied by itself n times, which is
equivalent to subtracting their exponents:
am/an  =  (a·a·····a) / (a·a·····a)
Example:
m times n times
24/23  =  (2·2·2·2)/(2·2·2)
 =  (a·a·····a) / (a·a·····a)
 =  2
m-n times
 = am-n Noted 21  2 43
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Power and Root (cont…)
Rule applying to powers:
Rule 3 : Raising a power to a power :
( a m )n  a mn
If a power function is itself a base of another power, (am)n, the base
a is multiplied by itself m times, and the result is then multiplied
together n times, which is equivalent to multiplying their exponents:
(am)n  =  (a·a·····a) · (a·a·····a) · (a·a·····a)
m times m times m times Example:
n times
 =  (a·a·············a·a) (23)3  =  (2·2·2)·(2·2·2)·(2·2·2)
m·n times (8)3  =  29
512 = 512
 = am·n
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Power and Root (cont…) CAUTION!
( a  b )m  a m  b m
Rule applying to powers:
Rule 4 : Raising a product to a power :
m m m
( ab )  a b
If the base of a power function is a product of two numbers,
(a·b)m, multiplying out and rearranging the terms tells us that the
result can be expressed as the product of two powers:
(a·b)m   =  (a·b·a·b·····a·b) Example:
m times (2·3)2  =  22·32
  =  (a·a·····a) · (b·b·····b) = (2·2)·(3·3)
m times m times 62  =  4·9
  = am·bm 36  =  36
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Power and Root (cont…)
Rule applying to powers:

Rule 5 : Zero exponent rule :


0
a 1
The exponent of 0 means that there are no multiplications of the
base at all
Another way to see that a0 is equal to 1 is to divide any power
function by itself:
Example:
a /a  =  a
x x x–x
3/3  =  30
1  =  a0
1  =  1

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Power and Root (cont…)
Rule applying to powers:
Rule 6 : Rational exponent :
Power
m
n m
a a n root

any base a raised to a rational exponent can be expressed as an


nth root of a raised to an integer power

Example:
3
2 3
2 2 2

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Power and Root (cont…)
Rule applying to powers:
Rule 7 : Negative exponent rule :
m 1
a  m
a
A power of some number with a negative (integer) exponent is
defined as negative exponent is 1 divided by the base raised to
the positive exponent:
Example:
a0 1 a–1  =  a0–1
0-m  
 =  a0/a1
a -m
a
 = = am =  (a·a·····a) m times  =  1/a
 
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     44
Power and Root (cont…)
Rule applying to powers:

Rule 8 : One exponent rule :


1
a a
Any number raised to the power 1 is the number itself

Example:
51  =  5

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Power and Root (cont…)
Properties of nth roots
n
a a
n
ab  a b
n n n

b n
b
m n
a  mn a

n n
n n
a  a if n is odd a  a if n is even
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Power and Root (cont…)
Properties of nth roots

Rule 1 : Product rule : (ab) m  a mb m


1 1 1
n
ab  a b
n n
(ab)  a b
n n n

Example: 3
n
ab  a b
n n

32  8.4
3

 8 4 3 3

23 4
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Power and Root (cont…)
Properties of nth roots
Rule 2 : Quotient rule :
n
n a a

b n
b

Example:
81 2
81
2 2
100 100
9 2
92 9
 
10 2
100 2 10
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Power and Root (cont…)
Properties of nth roots
m n mn
th
Rule 3 : m root of an n root th (a )  a
1 1 1
mn
m n
a mn
a (a )  a
m n

m n
a  mn a
Example:
2 2
81  4 81
3 3

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Power and Root (cont…)
3
5  3
 125  5
3 3
 5 
3
 3  125  5

n n
a  a if n is odd

If the n term is odd, there is only one answer

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Power and Root (cont…)
if x  5 also, if x  5
2 2
x  25 x  25
if reverse the problem
2
x  25
x?

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Power and Root (cont…)
We have seen that :
5  2
 25  5  5 
2
 25  5
so 5  5, 5 5

n n If the n term is even, you


a  a if n is even will always get the +ve, or
absolute value of a

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Question
1.) Simplify (y-4/5)1/3.

2.) Multiply –3a-4/9(2a1/9 – a2).


Solution
1.) Simplify (y -4/5)1/3.
1
y  4 5 1 3
y  4 5 1 3 
y  4 15

y 4 15

2.) Multiply –3a -4/9(2a1/9 – a2).


 4 9  1 9   4 9  2 3 9 14 9 6 14 9
 6a  3a  6a  3a   1 3  3a
a
Logarithms
How many of one number do we multiply to get another
number?

How many 2s need to be multiplied to get 8?


2 × 2 × 2 = 8, so we needed to multiply 3 of the 2s to get 8

So the logarithm is 3
log2(8) = 3
•"the logarithm of 8 with base 2 is 3"
•or "log base 2 of 8 is 3"
•or "the base-2 log of 8 is 3"

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Logarithms tell you what the exponent is!

So this:

is also this:

The exponent of a number says how many times to use the


number in a multiplication.
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Examples of Logarithms
Exponential Form Logarithmic Form
23  8 log 2 8  3
2   16
1 4
log 16  4
1
2

51  5 log5 5  1
4   1
3 0
log 1  0
3
4

Example Solvelog 4 x  32 .
Solution log 4 x  32
x4
3
2

x8
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Logarithms
General rules for the use of logarithms
i. The general expression of a logarithms
If Y = ax  loga Y = loga ax
 loga Y = x loga a
 loga Y = x In general: If ax = Y,
then logaY = x.

* Two special cases are:-


loga1 = 0 (a0 = 1)
logaa = 1 (a1 = a)
logee = 1 (e1 = e) = ln e =1

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Logarithms (cont…)
ii. Laws governing the use of logarithms
a. The logarithm of a product:
log a MN  log a M  log a N
log a (2  3)  log a 2  log a 3

These properties are related to properties of the exponents mentioned


in the previous slide
am x an = am+n
loga(m · n) = loga (m) + loga (n)

CAUTION! log a ( 2  3 )  log a 2  log a 3

23/5/28 59
Logarithms (cont…)
ii. Laws governing the use of logarithms
b. The logarithm of a quotient:
M
log a  log a M  log a N
N am  an = am-n
5 loga(m  n) = loga (m) - loga (n)
log  log 5  log 3
3

CAUTION!
M loga M loga M
loga   loga M  loga N
N loga N loga N
loga M  N   loga M  loga N
23/5/28 60
Y  a x ........log a Y  x
Logarithms (cont…)
The logarithm of a power:
c. Y  a loga Y
log a Y p  p log a Y and raise both sides to the p power:

 
log a Y p
p
2
log 10 100  2 log 10 100 Y  a
 a 
 2 log 10 ( 10 )2 p log a Y
Yp
 2( 2 ) log 10 10
 2( 2 ) log both sides
4  
log a Y p  log a a p loga Y  p log a Y
CAUTION! log a 3 x 2  log a 3  2 log a x
loga 3 x 2  2 loga 3 x
3x
loga 3 x2
 x  2 loga 3 log a 3 x  2  log a 2  log a 3 x  log a 3 2
3
23/5/28 61
Logarithms (cont…)
d. The change of base in a logarithm:
log c b  log a b  log c a
log10 5  log10 5  log10 10
Changing the base of logarithm:

log c b Set y  log a b, so a y  b .


log a b 
log c a then log c a y   log c b 
that is y log c a  log cb
log10 20
log 5 20  log cb log c b
log10 5 y  log a b 
log c a log c a

23/5/28 62
Inequalities
1. Definitions

a > b means “a is greater than b”


a < b means “a is smaller than b”
a ≥ b means “a is greater than, or equal to b”
a ≤ b means “a is smaller than, or equal to b”

23/5/28 63
Inequalities (cont…)
2. Rules for the use of inequalities
i. An inequality will still hold after each side has been
increased, diminished, multiplied or divided by the
same positive quantity.

Example:
if a > b, then, provided c > 0 If 7 > 3, c = 2
 (a + c) > (b + c) (7 + 2) > (3 + 2)
 (a – c) > (b – c) (7 – 2) > (3 – 2)
7X2>3X2
 ac > bc
 a b 7 3
 
c c 2 2
23/5/28 64
Inequalities (cont…)
ii. Any increase in an equality may be moved from one
side to the other provided that its sign is changed.

Example:
if a–c>b 53 1
a>b+c
5  1 3
iii. If the sides of an inequality are interchanged then the
sign must also be changed.

Example: switched sides and


if a>b
5 1 turned the ``>'' into a
then b<a 1 5 ``<''

23/5/28 65
Inequalities (cont…)
iv. If both sides of an inequality are multiplied or divided
by the same negative quantity then the sign of the
inequality must be reversed.

Example:
if a > b , and p < 0
then pa < pb
5  2, p  1
and a b 5  2, p  1 5 2
 
p p 5(1)  2(1) 1 1
 5  2  5  2

23/5/28 66
Inequalities (cont…)

v. If the two sides of an inequality, each having the same sign,


are inverted (i.e. turned upside down) then the sign must be
reversed.

Example:
If a b
 a If b
4 2 25
c d  then
then 5 3
1 1 1 1
5 3  
c d  2 5
 4 2 a b
a b
23/5/28 67
Question
1 1

1.) Factor x 2
x 2

1
x
x x2
2.) Simplify 
2  x 1 2
x
 3 4  3 0.6 5
3.) Evaluate: log 5 8  log 2 4  ln    ( e  log10 5 )
 5 

4.) Solve the inequality:  3 x  7  13


Question
1 1 The smallest of the two

1.) Factor x 2
x 2 exponents is -1/2.
1  x
x-1/2 + x1/2 = x -1/2 (1+x1/2-(-1/2) ) = x -1/2 (1+x) or 12
x
Original Exponent
exponent factored out
2.) Simplify
1 1
x x
x  2  x x  x x2
x     
2  x 1 2  x 2 x  x  1 2
x
x 2
x 1 x2  2x
 
x( 2  x ) x2
x2  1  x  x2  2x
  
x( 2  x )  x  2  x
x2  1  x3  2 x2

x( 2  x )
3 2 3 2 2
 x  3x  1 ( x  3 x  1) (( x  3) x  1)
 or  or 
x2  x  x2  x  x2  x 
3.) Evaluate:
 3 4  3 0.6 5
log 5 8  log 2 4  ln   (e  log10 5)
 5 
log10 8 log10 4  12 
   ln   (e 30.65  log10 5)
log10 5 log10 2 5
 14.0723
4.) Solve the inequality:  3 x  7  13

 3 x  7  13
 3x  6
x  2

Flip the sign after


dividing by the -3!

23/5/28 72
Linear and Simultaneous Equations
 Equations:
 A mathematical statement setting two algebraic expressions
equal to each other.
 The degree of an equation is determined by the highest power
(or exponent) of the unknown present in the equation.
i. ax + b = 0 (first degree or linear equation)
ii. ax2 + bx + c = 0 (second degree or quadratic
equation)
iii. ax3 + bx2 + c = 0 (third degree or cubic
equation)
iv. xn = 0 (equation of the nth degree)

73
Linear and Simultaneous Equations (cont…)
 Linear equations:

 The graph of a function of the first degree will always be a straight-line.

 The general equation :

y = mx + c

74
Linear and Simultaneous Equations (cont…)
 Linear equations:
 In graphing a function such as f(x),

 Independent variable, x is place on the horizontal


axis.
 Dependent variable, y is place on the vertical axis.
 The graph of a linear function is a straight line.
y
 The slope of a line measures the Δy divided by a Δx.
 The slope indicates the steepness and direction of
line. y
y m
x
x

05/28/23 75
Linear and Simultaneous Equations (cont…)
 Linear equations:
 In graphing a function such as f(x),

 The greater the absolute value of the slope, the steeper


the line.
 A positively slope line moves up from left to right.
y

m = -4
m = +3

m = -1/4

x
m = - 4 means strong negative relationship between x
and y and when x increases by 1, y decreases by 4.
m = 3 means weak positive relationship between x and y
05/28/23
and when x increases76by 1, y increases by 3.
Linear and Simultaneous Equations (cont…)
 Linear equations:
 A negatively slope moves down.

 The slope of a horizontal line, for which Δy =


0, is zero.
 The slope of a vertical line, for which Δx = 0,
y Δx = 0
is undefined, i.e. does not exist because
division by zero is impossible.
m = negative
Δy = 0

05/28/23 77
Linear and Simultaneous Equations (cont…)
 Linear equations:
y y intercept

x intercept

x
 The y intercept is the point where the graph
crosses the y axis; it occurs when x = 0.
 The x intercept is the point where the line
intersects the x axis; its occurs when y = 0.

05/28/23 78
Linear and Simultaneous Equations (cont…)
 To plot the graph:- plot two or preferably, three points.
Example: Y
Sketch the line y = 100 – 2x
100 (0, 100)
when x = 0, y = 100
y = 0, x = 50

y
The slope of the line (m)  (50, 0)
x
100  0 x
  2 50
0  50

79
Linear and Simultaneous Equations (cont…)
Example:
Find the equation of the line that passes through points (2, 3) and (-1, 4)

y 3 4 1
Method 1: m  
x 2  (1) 3
y
For intercept on the y axis (0, c)
(-1, 4) .11 m
y

c4

1 y  mx  c
-
3 x 0  (1) 3 1 11
y  x
.(2, 3) c4 
1
3
3 3
3 y   x  11
x 1  1  12 11
-1 2 c  4 
3 3 3 3 y  x  11  0
05/28/23 80
Example:
Find the equation of the line that passes through points (2, 3) and (-1, 4)

Method 2:
Formula:

y  y1 y2  y1 y 3 43
 
x  x1 x2  x1 x  2 1  2
Step 1: y 3 1
(2, 3) is (x1, y1)  
(-1, 4) is (x2, y2) x  2 3
or vice versa
 3 y  9  x  2
Step 2: substitutes x1, y1, x2,  3 y  x  11
y2 into the formula.
 3 y  x  11  0
UBEQ1013 Lecture 01 Jan 2015 trimester 81
Linear and Simultaneous Equations (cont…)
 Solution quadratic equations
i. By taking the square root
Example: (x - 2)2 = 9

 x  2   9  x  2  3
 x – 2 = +3 or x – 2 = – 3
 x = 5 or x=–1

ii. By factoring
Example: 3x2 – 2x – 5 = 0 3x -5
 (3x – 5)(x + 1) =0 x 1
 3x = 5 or x = – 1 3x – 5x = -2x
 x = 5/3 or x = – 1

82
Linear and Simultaneous Equations (cont…)
iii. By formula
If, ax2 + bx +c = 0
Then

b b 2  4ac
x
2a

if b2 – 4ac > 0, a quadratic function will have two real solutions.


if b2 – 4ac = 0, a quadratic function will have one real solution.
if b2 – 4ac < 0, a quadratic function will have no real solutions.
There are 2 complex number solutions.

05/28/23 83
Linear and Simultaneous Equations (cont…)
Example: 2
b b  4ac
3x2 + 5x = 2 x
3x2 + 5x – 2 = 0
2a
a = 3, b = 5, c = -2

2
b2 (25)> 4ac(-24),
 5  5  4(3)(2) quadratic function will
x have two solutions.
2(3)
 5  49  5  7
x 
6 6
1
x  2 or
3
84
Linear and Simultaneous Equations (cont…)
Example: 2
b b  4ac
-4x2 + 5x – 2 = 0 x
a = -4, b = 5, c = -2
2a

5  52  4(4)(2) b2 – 4ac is -7 < 0. Thus, the quadratic function


x has two complex number solutions.
2(4)
 5  7 5  7 i
x  Note : i  1
8 8
5 7 5 7
x  i x  i
8 8 8 8

UBEQ1013 Lecture 01 Jan 2015 trimester 85


Linear and Simultaneous Equations (cont…)
Graphing a quadratic function
 The graph of quadratic function is an U-shaped or a parabola.
 Either opens upward, U or opens downwards,∩.
y = ax2 + bx + c
 Hints for sketching the graph:
Specify the values of a, b and c
i. If a < 0, the parabola opens down “∩”; if a > 0, the
parabola opens up “U”.
ii. Determine the y intercept, by substituting x = 0. thus, y = c.
iii. Determine the x intercept by solving the quadratics
function. When y = 0, ax2 + bx + c = 0

Determine the vertex, b 4ac  b 2


iv.
x ,y
86
2a 4a
Determine the vertex (max or min point)
There are 2 ways: 1) differentiation. 2) formula.
y will be at max or min value when dy/dx = 0
y = ax2 + bx + c
dy b
 2ax  b  0  x 
dx 2a
Substitute x = -b/2a into y = ax2 + bx + c
2
 b   b   b2   b2 
y  a   b   c  y  a 2      c
 2a   2a   4a   2a 
b2 b2 b2 2b 2 4a
 y   c y    c 2
4a 2a 4 a 4a 4a b 4ac  b
x ,y
b2 2b2 4ac
 y    y
4ac  b 2 2a 4a
4 a 4 a 4a 4a 87
Linear and Simultaneous Equations (cont…)
y = x2 + 6x – 7
Graphing a quadratic function
y
Example: y = x2 + 6x – 7
x| | x| x
a = 1, b = 6, c= -7
-7 -3 1
i. a =1 > 0, parabola open up.
ii. x = 0, y = c = -7. (0,-7)
-7 –
x
2
iii. y = 0, x   b  b  4ac
2a
 6  6 2  4(1)(7) x -16 –
x  7 or 1
2(1) Minimum Point (-3,-16)
2 2
x=  b  6 ( 4 ac  b ) ( 4(1)( 7 )  6 )
iv.
  3, y    16
2a 2(1) 4a 4(1)

88
Question: Sketch the function y = -x2 - 2x + 8
Maximum point y a = –1, b = -2, c = 8
(-1,9) i. a = – 1 < 0, parabola open down
x 9–
8x

“∩”.
ii. x = 0, y = c =8.
iii. y = 0,  b  b 2  4ac
x
2a
 ( 2)  (2) 2  4( 1)(8)
x
2(1)
x| | x| x  2 or  4
-4 -1 2 iv. x   b   (2)  1
2a 2(1)
f(x) = –x2 - 2x + 8 4ac  b 2 4(1)(8)  (2) 2
y  9
89
4a 4(1)
Linear and Simultaneous Equations (cont…)
Simultaneous equations
 To solve a system of 2 or more equation
simultaneously, the equation must be

i. Consistent

ii. Independent (not multiples of each other)

iii. They must be as many consistent and


independent equations as variables.

90
Linear and Simultaneous Equations (cont…)
Simultaneous equations
 Pairs of the linear equations may be:
i. Inconsistent, e.g.
xy2
x–y=2
y  -2-x
x–y=5
x  y5
y  -5- x
Linear and Simultaneous Equations (cont…)
Simultaneous equations x y
 Pairs of the linear equations may be: 0 2
1 1.3333
ii. Dependent, e.g. 2 0.6667
2x + 3y = 6 3 0
6x + 9y = 18 …etc

2x  3y  6 6x  9y  18
3y  6 - 2x 9y  18 - 6x
2 2
y  2- x y  2- x
3 3

92
Linear and Simultaneous Equations (cont…)
Simultaneous equations
 Pairs of the linear equations may be:

iii. Independent and consistent, e.g.


x+y=5
x–y=1 Solutions can only be
found for sets of
equations which are
both independent and
consistent.

93
Linear and Simultaneous Equations (cont…)

Simultaneous equations
 A system of simultaneous linear equation can be
solved by:-
i. Substitution method
ii. Elimination method

94
Linear and Simultaneous Equations (cont…)
Substitution method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]
I. Solve one of the equations for one variable in terms of
the other.
From [2]: b = 7m – 19
II. Substitute the value of that term in the other equation, in
[1], and solve for m.
8b – 3m = 7
8(7m – 19) = 7
56m – 152 – 3m = 7
53m = 159
m=3
95
Linear and Simultaneous Equations (cont…)
Substitution method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]

III. Then substitute m = 3 in either [1] or [2] to find b.


8b – 3(3) = 7
8b = 16
b=2

96
Linear and Simultaneous Equations (cont…)
Elimination Method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]
I. Multiply [1] by coefficient of b (or m) in [2] and [2] by the
coefficient of b (or m) in [1]. Picking m, we get:
From [1]: 7(8b – 3m = 7)  56b – 21m = 49 [3]
From [2]: -3 (-b + 7m = 19) 3b – 21m = -57 [4]
II. Subtract [3] and [4] to eliminate the selected variable.
53b = 106
b=2

97
Linear and Simultaneous Equations (cont…)
Elimination Method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]

III. Substitute b = 2 in [3] or [4] to find m.


8 (2) – 3m = 7
3m = 16 – 7
m=3

98
E.g. 3x + 4y = 26 (1) “Solve simultaneously”
7x - y = 9 (2) Make either coefficient of x or y
‘same size’
(3)=(2)x4 28x - 4y = 36
(1) 3x + 4y = 26 3x + 4y = 26
When x = 2
(1)+(3) 31x -4y + 4y = 62 32 + 4y = 26
6 + 4y = 26
(1)+(3) 31x = 62
4y = 20
x = 2 y=5
Question:
Find the x and y for the following 2 equations
 4x + 3y = 11 (eq.1)
 2x + y = 5 (eq.2)

Express both equations in terms of the same value of x (or y)


 4x = 11 - 3y (eq.1’)
 4x = 10 - 2y (eq.2’)

Hence
 11 - 3y = 10 - 2y

Collect terms
 11 – 10 = -2y + 3y
 y=1

Compute x
 4x = 10 - 2y
 4x = 10 – 2 = 8
 x=2
The Derivative and the Rules of
Differentiation
The slope of a straight line is defined to be the change in y
divided by the corresponding change in x.
y
 In notation, slope, m
x
y y
 If the slope is positive,
the line is upward sloping.
 If the slope is negative, x
x
the line is downward sloping. y
 If the slope is zero,
the line is horizontal.
x
 To calculate the slope we can use differentiation approach.

101
The Derivative and the Rules of
Differentiation (cont…)
y

Tangent
at x = a y = f (x)

x
a
 When a function given, y = f(x), is non-linear, we need the
idea of a tangent instead of slope/ gradient.
 Tangent = a straight line which passes through a point on a
curve and which just touches the curve at this point.
 To calculate f ’ (a) exactly using graph is difficult and
inaccurate.
 Apply differentiation
102
The Derivative and the Rules of
Differentiation (cont…)
y

Tangent
at x = a y = f (x)

x
a’ a a’’
 The slope/ gradient of a straight line is fixed.
 The slope of a curve varies as we move along with x.
 The tangent at x = a of a function f is represented by f ’ (a).
 The slope function f ’ (x) corresponding to each value of x is
also referred as derived function, alternative notation: dy
dx
103
The Derivative and the Rules of
Differentiation (cont…)
dy
The derivative of a function f, denoted
dx = f ’(x), measures

how fast the function is changing as x changes.


 f ’(x) is the slope of f (x).
 The second derivative, f ’’(x), measures how fast the first
derivative is changing.

104
The Derivative and the Rules of Differentiation
(cont…)
Rules of Differentiation
i. The Constant Function Rule
ii. The Linear Function Rule

iii. The Power Function Rule

iv. The Rules for Sum and Differences.

v. The Product Rule

vi. The Quotient Rule

vii. The Generalized Power Function Rule

viii. The Chain Rule

105
i. The Constant Function Rule
f(x) = k, where k is a constant

The derivative of a constant function is zero.

f ’(x) = 0

Example f(x) = 8
f ’(x) = 0
dTFC
If TFC  c, then  0 where TFC is total fixed costs
dQ
Fixed cost don' t change when a change in output.

05/28/23 106
ii. The Linear Function Rule
f(x) = mx + k
When x is to the power of 1, the derivative of x is
1. Therefore, derivative of mx is the constant
slope m.

f ’(x) = m
Example
f(x) = 7x +2
f ’(x) = 7
05/28/23 107
iii. The Power Function Rule
f(x) = kxn where n is any nonzero real number
The derivative of a constant times a function is the constant
times the derivative of the function. That is,

f ’(x) = k.n.xn-1
2
Example: given f ( x )  5x , which is the case where k  5
n2
and , we obtain
f ' ( x )  2 5x
2 1
 10 x

05/28/23 108
iv. The Rules for Sum and Differences
f(x) = g(x) ± h(x)

The derivative of a sum (or difference) of two functions is


the sum (or difference) of the derivatives of the two
functions

f ’(x) = g’(x) ± h’(x) 3 2


C  Q  4Q  10Q  75
Example
dC d 3 d 2 d d
f(x) = 12x5-4x4  Q  4Q  10Q  75
dQ dQ dQ dQ dQ
dC
f ’(x) = (5)12x5-1- (4)4x4-1  3Q 2  8Q  10
dQ
= 60x4-16x3
109
v. The Product Rule
f(x) = g(x). h(x)

The derivative of the product of two functions is = first


function times the derivative of the second + second
function times the derivative of the first

f ’(x) = g(x). h’(x) + h(x). g’(x)


Example f(x) = 3x4(2x-5)

let g(x) = 3 x4 h(x)= 2x-5 f ’(x) = 3x4(2)+ (2x-5)(12x3)


g’(x) = 12 x3 h’(x)= 2 = 6x4+24x4-60x3
= 30x4-60x3
= 30x3(x-2)
05/28/23 110
vi. The Quotient Rule
f(x) = g(x) ÷ h(x)
The derivative of the quotient of two functions is equal to the
denominator times the derivative of the numerator minus the
numerator times the derivative of the denominator, all divided by
the square of the denominator.
hx g x   g x hx 
f ’(x) =
hx 2

3 f ’(x) = (4x+3) (15x2) - 5x3 (4)


Example: f ( x)  5 x (4x+3)2
4x  3 = (60x3+45x2-20x3)
(4x+3)2
g(x) = 5x3 h(x) = 4x+3 = 40x3+45x2
g’(x) = 15x2 h’(x) = 4 (4x+3)2
= 5x2(8x+9)
05/28/23
(4x+3)2 111
vii. The Generalized Power Function Rule
f(x) = [g(x)]n
where g(x) is a differentiable function and n is any real number.

The derivative of a function raised to the power n is equal


to the power n times the function raised to the power
n‐1, all multiplied by the derivative of the function.
f ’(x) = n[g(x)]n-1. g’(x)
Find the derivative of y = (x3 + 2) 5.
Example f(x) = (x3 + 6)5
g(x) = x3 + 2 , g’(x) = 3x2
g(x) = x3+6 , g’(x) = 3x2
y ’(x) = 5 (x3 + 2)4 (3x2)
f ’(x) =5(x3+6)5-1 (3x2)
=15x2(x3+ 6)4 y ’(x) = 15x2 (x3 + 2)4
05/28/23 112
viii. The Chain Rule
Given, y = f(u) and u = g(x)
If y is a differentiable function of u, y = f(u), and u is differentiable
function of x, u = g(x), then the derivative of y with respect to x
equals of the derivative of y with respect to u times the derivative
of u with respect to x.
dy dy du Substitute
  f ’(u) . g’(x) dy
dx du dx  4u 3 10 x   40 xu 3
 2
Example y  5 x  3
4
 dx
2
Substitute u  5 x  3
4 2
let y  u and u  5 x  3
dy
Then
dy
 4u 3
and
du
 10 x
dx
2

 40 x 5 x  3
3

du dx
05/28/23 113
Question: 2 x x  3 2 x  6 x 2

Differentiate y   1 The Rules for Sum


x x 2
The Quotient Rule
 2
y  2x  6x x  1
2

3 1
h( x).g ( x)  g ( x).h( x)  2x 2
 6x 2
y' 

h x 
2
  3 1 2   1 1 2 
1
1
x .(4 x  6)  [(2 x .  6 x) x
2 2

1
2

]  y  2 x   6 x 
 2 
 2  2 
 2 1 1
 x 2 
1
 3 x 3 x2 2
 
3 1 3 1 3 3( x  1)
4 x  6 x  [ x  3x ]
2 2 2 2 3 x  or
 x x
x
1 1

 3x  3x
2 2

114
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
i. Increasing and decreasing function.
f ’(a) > 0: increasing function at x = a
f ’(a) < 0: decreasing function at x = a
y y
f ’ (a) < 0

f ’ (a) > 0

0 a x 0 a x
Slope > 0 Slope < 0
Increasing function at x = a Decreasing function at x = a

05/28/23 115
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
ii. Concavity and convexity
f ’’(a) > 0: f (x) is convex at x = a

y y

0 a x 0 a x

f ’ (a) > 0 f ’ (a) < 0


f ’’ (a) > 0 f ’’ (a) > 0

116
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
ii. Concavity and convexity
f ’’(a) < 0: f (x) is concave at x = a
y y

0 a x 0 a x

f ’ (a) > 0 f ’ (a) < 0


f ’’ (a) < 0 f ’’ (a) < 0

117
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
iii. Relative extreme (maximum or minimum)
 A point at which a function is at a relative maximum or
minimum at a point a.
 The function must be relatively plateau, i.e. neither
increasing nor decreasing at a → the first derivative of
the function at a must = 0 or be undefined (critical point
or value).

118
The Derivative and the Rules of
Differentiation (cont…) To distinguish mathematically between
a relative maximum & minimum, the 2nd
Application of derivatives derivative test is used. f ’ (a) = 0

relative minimum at x = a relative maximum at x = a


y y

0 a x 0 a x

f ’ (a) = 0 f ’ (a) = 0
f ’’ (a) > 0 f ’’ (a) < 0

119
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
iv. Inflection Point
 f ’’ (a) = 0 or is undefined
 Concavity change at x = a
 Graph crosses it tangent line at x = a

y y
Inflection point at x = a
f ’ (a) = 0 f ’ (a) = 0
f ’’ (a) = 0 f ’’ (a) = 0

0 a x 0 a x

120
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
y y
Inflection point at x = a

0 a x 0 a x
f ’ (a) < 0 f ’ (a) > 0
f ’’ (a) = 0 f ’’ (a) = 0

f ’’ (a) = 0 is a necessary but not a sufficient condition for a


point of inflection at x = a.

121
The Derivative & Rules of Differentiation
(con’t)
Application of derivatives
 Therefore to use the successive-derivative test (if f ’’ (a) = 0) :
 If the first nonzero value of a higher-order derivative
(evaluated at critical point), is odd-numbered derivative
then the function is an inflection point.

 If the first nonzero value of a higher-order derivative


(evaluated at critical point), is an even-numbered
derivative, a negative value of the derivative indicating
that the function is concave and at relative maximum. A
positive value signifying the function is convex and at
relative minimum.

122
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives
v. Optimizing of functions
 The process of finding the relative maximum or
minimum of a function.
 Given a differentiable function,
1. Find the first-order condition (necessary
condition), set it equal zero and solve for the
critical point(s).
2. Take the second-order condition (sufficient
condition) and evaluate it at the critical point(s) and
check for the sign(s). f ’’ (a) < 0 , max
f ’’ (a) > 0, min
123
The Derivative and the Rules of
Differentiation (cont…)
Application of derivatives

3. If the function is strictly concave (convex), there will


be only one maximum (minimum) called a global
maximum (minimum).

Relative maximum Relative minimum


f ’ (a) = 0 f ’ (a) = 0
f ’’ (a) < 0 f ’’ (a) > 0

124
Question: Optimize f(Q) = 2Q 3
- 30Q 2
+ 126Q + 59.
a) Find the Critical points by taking FOC, set =0 and solve for Q
Q’ = 6Q2 -60Q +126
Let Q’ = 6Q2 -60Q+126 = 0
6(Q-3)(Q-7) = 0
Critical value
Q=3 Q=7
b) Test for concavity by taking SOC; evaluating it at the critical
values, and checking the signs to distinguish between a relative
max or min.
Q’’ = 12Q - 60
When Q = 3, f’’(3) = 12(3) - 60 = - 24 < 0 concave, relative
maximum
When
So thisQfunction
= 7, f’’(3)
is =maximized
12(7) - 60 at
= Q=3
24 and
> 0 minimized
convex, relative
at minimum
Q=7.
Integration
 The opposite process to differentiation.

 Rule of integration:
 To increase the power of x by 1,  b+1
 To divide the function by b+1, and
 To add an arbitrary constant.
a b 1
 ax dx  b  1 x  C
b

Where C is an arbitrary constant

126
Integration (cont…) axn 1

 ax dx  n  1  c
n

Example:

 (6 x 2
 x)dx
6 21 x11
 x  C
2 1 11
6 3 1 2
 x  x C
3 2
1 2
 2x  x  C
3

2
127
Integration (cont…)
Example:
dy
If = 5x2 and y = 10 when x = 0, find y in terms of x.
dx
5 3
y   5 x dx  x  C
2

3
5 3
When x = 0, y = 10  (0)  C  10  C = 10
3
5 3
Thus, y  x  10
3

128
Question:
( 1 ) 2 x( x  1 )dx
2

5x2  6x
(2)Integrate 3
with respect to x
x

129
Solution:
2 4 2 2
 
2 3
( 1 ) 2 x( x  1 )dx  ( 2 x  2 x )dx  x  x  c
4 2
4
x 2
 x c
2

5x2  6x
(2)Integrate 3
with respect to x
x

130
5x2  6 x
(2)Integrate 3
with respect to x
x
2
5x  6x
 
1

 3 x dx   5 x  6 x x  3 dx
2 

5 2
  5 x 3
 6 x 3
dx
8 5
5x 6x
3 3
  c
8 5
3 3
8 5
15 x 18 x
3 3
  c
8 5
23/5/28 131
Marginal Function in Economics
 Marginal analysis is the study of the rate of change of
economic quantities.
 For example, an economist is not merely concerned with
the value of an economy’s gross domestic product
(GDP) at a given time but is equally concerned with the
rate at which it is growing or declining.
 A manufacturer is not only interested in the total cost
corresponding to a certain level of production of a
commodity but also is interested in the rate of change of
the total cost with respect to the level of production.

132
Cost, Revenue and Profit Function
Cost Functions
 Fixed (or set-up) costs
 Costs associated with the purchase, rent or lease of
equipment and fixed overheads.
 All those costs that need to be borne before the begin of
production. Thus, independent of the number of items to be
produced.
 Variable costs
 Costs associated with the supply of the raw materials and
overheads necessary to manufacture each product.
 Special costs
 Optional costs relating to storage, maintenance or
deterioration. The effects of this type of cost would only be
significant for large production.

133
Cost, Revenue and Profit Function
(cont…)
Cost Functions
 Total Cost = Total Fixed Cost + Total Variable Cost
TC = TFC + TVC or TC = FC + VC(Q)
Revenue Functions
 The money received for selling the output of some
process. TR = P X Q

Profit Functions
 The difference between the revenue and cost functions.
 = TR – TC

134
Marginal Function in Economics (Cost Functions)
 Total cost (TC) – the cost of producing a particular amount of
product.
 Average cost (AC) – obtained by dividing the total production
cost by the number of units produced (Q or x). TC
 Marginal cost (MC) AC 
– the cost of producing one extra unit.
Q
– marginal cost of a given output is the rate at which total cost
is changing at that output.
– differentiate the total cost function
if y  TC
to get marginal cost function. dy
 MC
– this relationship hold for revenue function. dQ

135
Marginal Function in Economics (Revenue
Functions) TR  PQ
 Total revenue (TR) – the value of a firm’s sales. It is calculated as
the price of the good (P) multiplied by the quantity sold (Q or x).
 Average revenue (AR) – obtained by dividing TR
the total revenue by the the quantity sold (Q or x). AR 
 Marginal revenue (MR)
Q
– the change in total revenue that results from a one unit increase
in the quantity sold.
– It is calculated as the change in total revenue divided by the
change in quantity sold. if y  TR
– differentiate the total revenue function to
get marginal revenue function. dy
 MR
dQ
136
Marginal Function in Economics
(cont…)
Optimizing Economic Function
 The business decision maker and economist are interest in
finding the maximum value of certain relationship for:-
 Profit

 Sales revenue

 Welfare

 Minimum value for


 Cost functions

 This can be done with the use of the derivative technique

137
Marginal Function in Economics
(cont…)
Optimizing Economic Function
Example:
If a firm has
Total Revenue: TR = 40Q – 8Q2
Total Cost: TC = 8 +16Q – Q2
Where Q = thousand of units of product, then its profit function
(Π) will be the difference between its total revenue and total
cost:   TR  TC
 (40Q  8Q 2 )  (8  16Q  Q 2 )
 40Q  8Q 2  8  16Q  Q 2
 8  24Q  7Q 2

138
Marginal Function in Economics
(cont…)
Example (cont…)
If we wish to find where maximum profits occurs, we differentiate to give:
 First order condition:
  8  24Q  7Q 2
(set F.O.C = 0)

 Second order condition:

d
 24  14Q  0
dQ
24
Q  1.714
14
d2 
2
 14  0 (maximum)
dQ

Maximum profit at an output of Q = 1.714, since x is measured


in thousands, this is 1,714 units. Profit = $12,571.43.
2
  8  24( 1.714 139
)  7( 1.714 )  12.57143
Marginal Function in Economics
Total Revenue: TR = 40Q – 8Q2
(cont…)
Example (cont…)
If the firm wishes to maximize its revenue (i.e. TR), we have
TR = 40Q – 8Q2
dTR
 First order condition:  40  16 x  0
dQ
(set F.O.C = 0)
40
Q  2.5
16
d 2TR
 Second order condition: 2
 16  0 (maximum)
dQ
Maximum sales revenue at an output of Q = 2,500 units,
total revenue = $50,000.00 and profit = $8,250.00
TR  40( 2.5 )  8( 2.5 )2  50   8  24( 2.5 )  7( 2.5 )2  8.25
140
Marginal Function in Economics
(cont…)
Relationship among total, marginal, and average concepts

Divide by AVERAGE Multiple by


Quantity Quantity
TOTAL

Integrate Differentiate
MARGINAL

141
Past Year
Question
Past Year Question
TR= f(Q)=PQ= 6 Q2 + 3Q

dTR
MR   12Q  3
dQ

5
TC  f (Q)   MCdQ   5Q  6dQ  Q 2  6Q  c
25
Given that there is no FC, t/f TC  Q 2  6Q
2

5 2
Q  6Q
TC 2 5
AC    Q6
Q Q 2
5 2  7 2
(v) the total profit ( )   TR  TC  6Q 2
 3Q    Q  6Q   Q  3Q
2  2

UBEQ 1013 QT 1, 15 Sept 2010


Past Year Question:

UBEQ 1013 20 Dec 2010


UBEQ 1013 20 Dec 2010
f(x) = –2 Q2 + 96Q

a = – 2, b = 96, c = 0
i. a = – 2 < 0, parabola open down
“∩”.
ii. Q = 0, y = TR =0.
TR (24,1152) iii. TR = 0, Q=0 or 48
x
(RM)
iv.
b  96
Q   24
2a 2(2)
4ac  b 2 4(2)(0)  (96) 2
TR    1152
4a 4(2)

|x | x| Q
0 24 48 (units)
f(x) = –2 Q2 + 96Q
UBEQ 1013 20 Dec 2010
-12
End of Topic 1

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