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Differentiation and Optimization in Business Math

This document covers Chapter 4 on Differentiation and Chapter 5 on Partial Differentiation in a Math for Business course. It includes definitions, rules of differentiation, marginal functions, elasticity, and optimization of economic functions. The content is structured with examples and explanations relevant to business applications of calculus.

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Nguyễn Ngọc PAnh
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24 views14 pages

Differentiation and Optimization in Business Math

This document covers Chapter 4 on Differentiation and Chapter 5 on Partial Differentiation in a Math for Business course. It includes definitions, rules of differentiation, marginal functions, elasticity, and optimization of economic functions. The content is structured with examples and explanations relevant to business applications of calculus.

Uploaded by

Nguyễn Ngọc PAnh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

International**

University* * Math%for%Business%
"

FINAL*REVISION*
Chapter*4:*Differentiation*
4.1:$The$derivative$of$a$function$
∆"
• Slope"=" "
∆#
• Tangent:" A" straight" line" which" passes" through" a" point" on" a" curve" and"
which"just"touches"the"curve"at"this"point."
• 𝑓 % (𝑎):"f"dashed"of"a:"the"slope"of"the"graph"of"a"function"f"at"𝑥 = 𝑎."
+"
• Derived"function:" "
+#
+"
• 𝑓 𝑥 = 𝑥 , "then"𝑓 𝑥 = 𝑛𝑥 ,./ "or"𝑦 = 𝑥 , "then"+# = 𝑛𝑥 ,./ "
%

• Differentiation:"the"process"of"finding"derived"function"symbolically."
Ex:"1,6"page"257"
4.2:$Rules$of$differentiation$
• The"constant"rule:"differentiate"the"function"and"multiply"by"the"constant."
─ Constant"differentiate"to"zero."
• The"sum"rule:"differentiate"each"function"separately"and"add."
• The"difference"rule:"differentiate"each"function"separately"and"subtract."
+4"
• 𝑓 %% 𝑥 1𝑜𝑟1 ":"second-order"derivative."
+# 4
• Convex:"upward"curve."
• Concave:"downward"curve.""

"

"

"

"

"

"
5
• 𝑓 𝑥 = 𝑎𝑥 + 𝑏𝑥 + 𝑐"
─ If"𝑎 > 0"then"𝑓′′(𝑥) > 0"so"the"parabola"is"convex.""
─ If"𝑎 < 0"then"𝑓 %% 𝑥 < 0"so"the"parabola"is"concave.""
Ex:"6"page"268"

1"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%
4.3:$Marginal$functions$
• Marginal"revenue:"the"derivative"of"total"revenue"with"respect"to"demand"
+(?@)
─ 𝑀𝑅 = "
+A
─ ∆(𝑇𝑅) ≅ 𝑀𝑅×∆𝑄 ":"change"in"total"revenue"="marginal"revenue"x"change"
in"demand."
• Monopolist:" 𝑃 = 𝑎𝑄 + 𝑏" ," 𝑎 < 0, 𝑏 > 0:" a" single" firm" or" a" cartel" is"
assumed"to"be"the"only"supplier"of"a"product"and"has"controlled"over"the"
market."Price"raises,"demand"falls."
─ 𝑇𝑅 = 𝑎𝑄 5 + 𝑏𝑄"
?@
─ 𝐴𝑅 = = 𝑃"
A

"
• Perfect"competition:"𝑃 = 𝑏:"a"large"number"of"firms"all"selling"a"product,"
no"barriers"to"entry"to"the"industry."
─ 𝑇𝑅 = 𝑏𝑄""

"
• Marginal"cost:"the"derivative"of"total"cost"with"respect"to"output"
+(?J)
─ 𝑀𝐶 = "
+A

2"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%
─ ∆(𝑇𝐶) ≅ 𝑀𝐶 ×∆𝑄 "
• Marginal"product"of"labor:"the"derivative"of"output"with"respect"to"labor."
+A
─ 𝑀𝑃K = "
+K
─ Law"of"diminishing"returns:"the"increase"in"output"due"to"a"1"unit"increase"
in"labor"will"eventually"decline."
+J
• Marginal" propensity" to" consume:" 1𝑀𝑃𝐶 = :" the" derivative" of"
+L
consumption"with"respect"to"income."
+N
• Marginal" propensity" to" save:" 1𝑀𝑃𝑆 = :" the" derivative" of" savings" with"
+L
respect"to"income."
─ 𝑀𝑃𝐶 + 𝑀𝑃𝑆 = 1"
4.4:$Further$rules$of$differentiation$
• The" chain" rule:" differentiate" the" outer" function" and" multiply" by" the"
derivative"of"the"inner"function."
+" +" +P
─ = × "
+# +P +#
• The"product"rule:"multiply"each"function"by"the"derivative"of"the"other"and"
add."
+" +S +P
─ If"𝑦 = 𝑢𝑣"then" =𝑢 +𝑣 "
+# +# +#
• The" quotient" rule:" bottom" times" derivative" of" top," minus" top" times"
derivative"of"bottom,"all"over"bottom"squared."
TUV VUT
P +" .
UW UW
─ If"𝑦 = S "then" = S4
"
+#
Ex:"1abgf,"2c,"3c"page"292,"1a,"2a,"3a,"4b"page"293."
4.5:$Elasticity$
YZ[\Z,]1\^_,`Z1a,1+Zb_,+
• Price"elasticity"of"demand:"𝐸 = YZ[\Z,]1\^_,`Z1a,1Y[a\Z
"

• Demand"is"said"to"be:"
─ Elastic"if" 𝐸 > 1"
─ Unit"elastic"if" 𝐸 = 1"
─ Inelastic"if" 𝐸 < 1"
• Arc"elasticity"(2"points):"
c ∆A cd ec4 Ad eA4
𝐸= × "where"𝑃 = ","𝑄 =
5
"
A ∆c 5

3"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%

• Point"elasticity"(1"point):"
𝑃 𝑑𝑄
𝐸= × "
𝑄 𝑑𝑃
+A
**Note:" → 𝑄 = 𝑓(𝑃)"
+c
YZ[\Z,]1\^_,`Z1a,1hPYYi"
• Price"elasticity"of"supply:"𝐸 = "
YZ[\Z,]1\^_,`Z1a,1Y[a\Z
/
• 𝑀𝑅 = 𝑃(1 + )"
j
c
─ In" monopoly," 𝐸 = →" Elasticity" is" therefore" independent" of" the"
c.k
slope"of"linear"demand"curves."
"

" "
4.6:$Optimization$of$economic$functions$
𝑓 𝑥 = 𝑎𝑥 5 + 𝑏𝑥 + 𝑐"
• At" stationary" point:" 𝑓 % 𝑥 = 0" ," include" local" maximum/minimum" and"
stationary"point"of"inflection."
─ If"𝑓"(𝑥) > 0"then"𝑓(𝑥)"has"a"minimum"point"at"𝑥 = 𝑎."
─ If"𝑓"(𝑥) < 0"then"𝑓(𝑥)"has"a"maximum"point"at"𝑥 = 𝑎."
─ If" 𝑓"(𝑥) = 0" then" the" point" can" not" be" classified" using" the" available"
information."
A
• Average"product"of"labor"(labor"productivity):"𝐴𝑃K = "
K
─ Marginal"product"of"labor"="average"product"of"labor."(𝑀𝑃K = 𝐴𝑃K )"

4"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%
─ Marginal"revenue"="marginal"cost."
Ex:"3,"5,"7,"8"page"325,"326"
4.7:$Optimization$of$economic$functions$

• If"a"firm"maximizes"profit"then"𝑀𝑅 = 𝑀𝐶."
• If"a"firm"maximizes"average"product"of"labor"then"𝑀𝑃K = 𝐴𝑃K ."
• Economic"order"quantity"(skip)."
Ex:"1"page"339."
4.8:$The$derivative$of$the$exponential$and$natural$logarithm$functions$

"
+"
If"𝑦 = 𝑒 b# "then" = 𝑚𝑒 b# "
+#
+" /
If"𝑦 = ln 𝑚𝑥"then" = "
+# #

Chapter*5:*Partial*Differentiation*
5.1:$Functions$of$several$variables$
z=$f(x,y)=$𝒙𝟐 𝒚𝟑 + 𝒙𝟑 + 𝒚 + 𝟒$
𝝏𝒛 𝝏𝟐 𝒛 𝝏𝟐 𝒛 𝝏𝟐 𝒛
fx$=$$ = 𝟐𝒙𝒚𝟑 + 𝟑𝒙𝟐 $ fxx$=$ 𝝏𝒙𝟐 = 𝟐𝒚𝟑 + 𝟔𝒙$$ fxy$=$fyx$=$ = 𝝏𝒚𝝏𝒙 = 𝟔𝒙𝒚𝟐 $
𝝏𝒙 𝝏𝒙𝝏𝒚

𝝏𝒛 𝝏𝟐 𝒛
fy$=$ = 𝟑𝒙𝟐 𝒚𝟐 + 𝟏$$$ fyy$=$ 𝝏𝒚𝟐 = 𝟔𝒙𝟐 𝒚$
𝝏𝒚

5"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%

$
Implicit$differentiation$

$
Ex:"9/370,"12/371,"3/370"
5.2:$Partial$elasticity$and$marginal$functions$
1.$Elasticity$$
Q$=$f$(P,$PA,$Y)$
c 𝝏𝑸 c| 𝝏𝑸 L 𝝏𝑸
Ep"=" × """ "Epa"=" × """ " EY"=" × ""
A 𝝏𝑷 A 𝝏𝑷𝑨 A 𝝏𝒀

l"Epl"<"1:"inelastic" Epa">"0:"substitutable" EY"<0:"inferior"goods"


l"Epl">"1:"elastic"" Epa<0:"complementary" EY">0:"normal"goods"
l"Epl"<"1:"unit"elastic" EY">1:"superior"goods"
"
Ex:"2/384"
2.$Ultility$
U$=$U(x1,$x2)$$
𝝏𝑼 𝝏𝑼
Marginal$ultilities:$ "," "
𝝏𝒙𝟏 𝝏𝒙𝟐

Indifference$curve$level$at$(xo,$yo):$Uo$=$U(xo,$yo)""
€#51 𝝏𝑼 𝝏𝑼
MRCS$=$-$ $=$ %:1 $
€#/1 𝝏𝒙𝟏 𝝏𝒙𝟐

$
3.$Production$
Q$=$f(K,L)$
6"
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International**
University* * Math%for%Business%
𝝏𝑸 𝝏𝑸
MPL$=$ %%% % MPK$=$ %$
𝝏𝑳 𝝏𝑲

$
𝑴𝑷𝑳
MRTS$=$ $
𝑴𝑷𝑲

Ex:"3,6,7/384-385"
5.3$Optimisation$of$f(x,y)$
1.$Unconstrained$
Step"1:"Solve"fx$="$fy$="0"->"get"(xo,"yo)"
Step"2:"Verify""
∆=$fxx$fyy$-"fxy 2$at"(xo,"yo)"
If"∆1< 0 => 1𝑠𝑎𝑑𝑑𝑙𝑒1𝑝𝑜𝑖𝑛𝑡"
If"∆1> 0 =>1fxx"<"0"->"max"
fxx">0"->"min"
2.$Constrained$to$$𝝋 𝒙, 𝒚 = 1𝑴1$
1.$If$𝝋$is$simple$(ax+by=M)$
𝑴.1𝒃𝒚
=>$x$=$ $$->$replace$x$to$f(x,y)$->$F(x)$
𝒂

F’(x)$=$0$=>$xo$=>$yo$$
2.$Using$Larrange$function$

$
7"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%
Ex:"3,7/412-413"
4,5/414"
4,5/425"
9/439"

Chapter*7:*Matrices*
7.1:$Basic$matrix$operations$
• A"rectangular"array"of"numbers"surrounded"by"a"pair"of"brackets"is"called"
a"matrix."Each"number"is"an"entry"or"element."
**Note:"Square"brackets."
• A"𝑚×𝑛"matrix"has"𝑚"rows"and"𝑛"columns."
• Row"vector:" 1 2 3 "
4
• Column"vector:" 5 "
6
• A"3"x"3"matrix"is"written:"

𝑎// 𝑎/5 𝑎/‘


𝐴 = 𝑎5/ 𝑎55 𝑎5‘ "
𝑎‘/ 𝑎‘5 𝑎‘‘

𝑎// 𝑎5/ 𝑎‘/


• Transposition:"𝐴 = 𝐵 = 𝑎/5
? 𝑎55 𝑎‘5 "
𝑎/‘ 𝑎5‘ 𝑎‘‘

• Zero"matrix"= 1 0 = 0"
• Addition"and"subtraction:"only"for"matrices"with"same"rows"and"columns."
─ Adding"and"subtracting"each"of"the"entries."
• Scalar"multiplication:"multiply"each"of"the"entries"by"the"scalar."
─ Have"the"same"rules"with"ordinary"arithmetic."
• Matrix"multiplication:""

**Note:"Row$x$Column,$Multiply$→$Plus$

8"
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International**
University* * Math%for%Business%

"

"
─ Have" the" same" rules" with" ordinary" arithmetic" EXCEPT" 𝑨𝑩 = 𝑩𝑨" (not"
always"true)."
Ex:"1,"3,"5"page"490-491,"2,"6"page"492-493""
7.2:$Matrix$inversion$

2*x*2*
1 0
• In"a"2"x"2"matrix"𝐴𝐼 = 𝐴"where"𝐼 = "
0 1
𝑎 𝑏 / 𝑑 −𝑏
• If"𝐴 = "then"𝐴./ = "
𝑐 𝑑 _+.k\ −𝑐 𝑎
𝑎 𝑏
Determinant"of"A"= 𝑑𝑒𝑡(𝐴) = 𝐴 = = 𝑎𝑑 − 𝑏𝑐 ≠ 0:"non-singular."
𝑐 𝑑

─ Remember"to"double"check"if"𝐴𝐴./ = 𝐼1𝑎𝑛𝑑1𝐴./ 𝐴 = 𝐼."


• To"solve"a"system"of"linear"equations:"

𝑎𝑥 + 𝑏𝑦 = 𝑒
"
𝑐𝑥 + 𝑑𝑦 = 𝑓

─ Can"be"written"as"𝐴𝑥 = 𝑏"

𝑎 𝑏 # Z
where"𝐴 = ","𝑥 = "
","𝑏 = —
"
𝑐 𝑑

9"
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International**
University* * Math%for%Business%
• Then"𝐱 = 𝐀.𝟏 𝐛"

3*x*3*

1 0 0
𝐼= 0 1 0 "
0 0 1

• The" cofactor," 𝐴a› ," is" defined" to" be" the" determinant" of" the" 2" ×" 2" matrix"
obtained"by"deleting"row"𝑖"and"column"𝑗"of"𝐴,"prefixed"by"a"‘+’"or"‘–’"sign"
according"to"the"following"pattern:"

+ − +
− + − "
+ − +
𝑎// 𝑎/5 𝑎/‘
• For"example"with"a"matrix"𝐴 = 𝑎5/ 𝑎55 𝑎5‘ "
𝑎‘/ 𝑎‘5 𝑎‘‘

𝑎// 𝑎/5
𝐴5‘ = − 𝑎
‘/ 𝑎‘5 = −(𝑎//𝑎‘5 − 𝑎/5𝑎‘/ )"

**Note:"Remember"to"check"the"pattern"whether"it"is"‘+’"or"‘–’."

• Det(A)" =" multiplying" the" elements" in" any" one" row" or" column" by" their"
corresponding"cofactors"and"adding"together."

Example:" 𝐴 = 𝑎//𝐴// + 𝑎/5 𝐴/5 + 𝑎/‘ 𝐴/‘ "

o If"

𝑎// 𝑎/5 𝑎/‘


𝐴 = 𝑎5/ 𝑎55 𝑎5‘ "
𝑎‘/ 𝑎‘5 𝑎‘‘

Æ Then"

𝐴11 𝐴21 𝐴31


./
1
𝐴 = 𝐴12 𝐴22 𝐴32 "
𝐴
𝐴13 𝐴23 𝐴33

10"
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International**
University* * Math%for%Business%
─ Remember"to"double"check"if"𝐴𝐴./ = 𝐼1𝑎𝑛𝑑1𝐴./ 𝐴 = 𝐼."
• Can"be"used"to"solve"system"of"three"linear"equations"like"2"x"2"matrix."

Ex:"1,"2,"4,"5"page"510,"511,"5,"6"page"512"

7.3:$Crammer’s$rule$
Cramer’s"rule"for"solving"any"𝑛1×1𝑛"system,"𝐴𝑥1 = 1𝑏,"states"that"the"𝑖 ]^ "variable,"
𝑥a ,"can"be"found"from"
det1(𝐴a )
𝑥a = "
det1(𝐴)
where"𝐴a "is"the"𝑛1×1𝑛"matrix"found"by"replacing"the"𝑖 ]^ "column"of"𝐴"by"the"right"
hand-side"vector1𝑏."
Ex:"5"page"522,"7,"1"page"523"

Chapter*8:*Linear*programming*
8.1:$Graphical$solution$of$linear$programming$problems$
• Basic"concept"to"sketch"an"inequality:"

"

11"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%

"

"
─ Where"the"red"parts"are"eliminated."
• The"remaining"region"is"known"as"a"feasible"region."
Æ For"example,"the"feasible"region"defined"by""
𝑥 + 2𝑦 ≤ 12"
−𝑥 + 𝑦 ≤ 3"
𝑥 ≥ 0"
𝑦 ≥ 0"

12"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%

"
• To"sketch"a"feasible"region:"
─ Step"1:"determine"the"region"of"x,"y."
─ Step"2:"determine"the"line"of"all"𝑎𝑥 + 𝑏𝑦 = 𝑐"equations"by"connecting"2"
points"of"each"equation"in"the"same"coordinate"system."
─ Step"3:"limit"to"the"feasible"region"based"on"<, >, ≤, ≥."
• To"find"maximum,"minimum"in"a"feasible"region:"
─ Step"1:"find"the"objective"function"𝑎𝑥 + 𝑏𝑦"
─ Step"2:"find" all"of"the" available"points"inside" the"feasible"region"and"try"
each"of"them"to"find"the"maximum/minimum"value."

"
Ex:"4,5"page"545"
8.2:$Application$of$linear$programming$
• Decision"variable:"the"unknowns"in"a"linear"programming"problem"which"
can"be"controlled."

13"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh
International**
University* * Math%for%Business%

• Integer"programming:"a"linear"programming"problem"in"which"the"search"
for" solution" is" restricted" to" points" in" the" feasible" region" with" whole-
number"coordinates."
• Shadow"price:"the"change"in"the"optimal"value"of"the"objective"function"
due"to"a"one"unit"increase"in"one"of"the"available"resources."

14"
TA: Tran Hoang Lam - Bui Nguyen Hoang Trieu – Doan Ngoc Van Khanh

Common questions

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Cramer's rule provides a method to solve a system of linear equations with as many equations as unknowns using determinants. It is particularly effective when the coefficient matrix is square and non-singular. The conditions for its effectiveness include the requirement that the determinant of the matrix is non-zero, ensuring a unique solution exists for the system .

The relationship between marginal revenue (MR) and marginal cost (MC) is pivotal in profit maximization. Profit is maximized when MR equals MC, meaning the cost of producing one more unit equals the revenue it generates. Operating at this point ensures that the firm is not losing potential profits from overproduction or underproduction .

Marginal cost, defined as the derivative of total cost with respect to output, is critical in economic production models as it allows firms to determine the cost of producing one additional unit of output. This helps in optimizing production levels and pricing strategies, as firms aim for a point where marginal cost equals marginal revenue to maximize profit .

In a monopolistic market, elasticity affects how a monopolist sets prices to maximize profit. The price elasticity of demand influences pricing strategies, as higher elasticity indicates that consumers are more responsive to price changes, thus affecting revenue expectations. A monopolist might choose to lower prices to increase total revenue if demand is elastic or raise prices if demand is inelastic .

The product rule is crucial for differentiating functions that are products of two or more functions. It states that the derivative of a product u(x)v(x) is u'(x)v(x) + u(x)v'(x). This rule ensures accurate computing of derivatives when functions are multiplied, which is vital in fields like economics where interactions between multiple factors are often modeled as products .

The chain rule is applied to differentiate composite functions by differentiating the outer function and then multiplying by the derivative of the inner function. Mathematically, if a function y is defined as the composition of two functions u(x) and v(x) such that y = g(f(x)), the derivative is given by dy/dx = g'(f(x)) * f'(x), simplifying the differentiation of complex layered functions .

The tangent line is significant because it provides the slope of the curve at a specific point, representing the rate of change of the function at that point. This slope is given by the derivative of the function at that point, allowing us to understand the instantaneous rate of change and the behavior of the curve near that point .

The constant rule simplifies differentiation by stating that the derivative of a constant is zero. This means when differentiating a function involving a constant term, we can ignore it as it contributes nothing to the derivative. This rule reduces complexity by allowing focus on variable terms only .

The feasible region in linear programming is fundamental because it represents all possible points that satisfy the given inequalities or constraints. Graphically, it allows for the visualization of potential solutions to the problem, and finding the maximum or minimum value of the objective function occurs within this region, ensuring the solutions are viable and adhere to constraints .

Matrix transposition, the process of swapping the rows and columns of a matrix, is crucial in various mathematical operations including solving systems of equations. It helps in aligning matrices for multiplication, checking properties related to symmetry, and is also key in forming and solving transpose matrix equations which often appear in linear algebra applications .

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