APPLICATION OF FUNCTIONS TO BUSINESS AND ECONOMICS

In everyday life most specially in business and economics, the

term function will always be used because it indicates an association of
values for x and y variables. The x variable represents any quantity or
units of goods whether it is demanded or supplies , produced or sold,
etc. while y variable represents any amount such as selling price of a
particular commodity, revenue of a company, income or profit, total
cost, consumption and many more.
DEMAND FUNCTION
The term demand is commonly used in economics which refers to
quantity of goods that a consumer would be willing and able to buy at
different prices during some specified period of time. You will notice
that once the price of a particular commodity goes down, consumers
demand goes up. When price of commodity goes up, consumers demand
goes down. This relationship is best described by the law of demand.
Demand function is the number of units x that consumers are
willing to purchase at a given price per unit y of commodities. The
equation that summarizes the behavior of a demand function is then
formulated into a demand equation which can also be illustrated
graphically by a linear or non-linear curve. The equation can be written
in the form y = f(x).
Based on the law of demand, the relationship between the price
(denoted by y) and the quantity demanded (denoted by x) is most often
inverse, thus, its demand function is a decreasing line. However, there
are some cases when demand function may have a constant price at
varying demand or constant demand at varying prices. These can be
best understood by illustrations using horizontal and vertical lines,
respectively.


GRAPH SLOPE DEMAND FUNCTION
y






x
Case 1



Negative







As price increases,
quantity demand
decreases, and as
price decreases the
quantity demand
increases.
y






x
Case 2



zero







Price is constant
regardless of quantity
demanded.
y






x
Case 3



Undefined






Demand is
constant regardless of
the price.

Example:
Paying a telephone bill of P1,299.00 a month with unlimited
internet use and unlimited call is an example of demand function with a
constant price. No matter how many hours you are using the internet
and no matter how long you are talking over the phone to your friend,
still you will be paying the same amount. On the other hand, buying the
same quantity of kilos of rice in a period let say in a month for your
family is an example of constant demand at varying prices. Your
demand for the rice remains constant regardless of its increase or
decrease in price.
Examples:
1. A business sells 20,000 units per month at a price of P100 each. It is
projected that monthly sales will increase by 2,500 units for each
P2.50 reduction of price where x represents the quantity demanded
and y represents the price in pesos.

Demand Equation: x = 20,000 + 2,500 (100-y)
2.50
a. Simplify the demand equation pertaining to this prediction
b. What is the highest price to be paid for this commodity?
c. What is the largest quantity demanded for this commodity?
d. How many units would be demanded if the price is P80 per
unit?
e. How much is the price per unit if there were 25,000 units
demanded?
f. Graph the demand function

2. The demand function of a plastic folder is given by 10x + 30y = 360
where x represents the quantity demanded and y represents the price
in pesos.
a. Simplify the demand equation.
b. What is the highest price to be paid for the plastic folder?
c. How many units will be demanded if the unit price of folder is
P10.00?
d. What is the largest quantity demanded for this item?
e. What is the price of the folder if the quantity demanded is
30 units?
f. Graph the demand function.

3. The demand function of a computer set is given by 4x + 10y = 40000
where x represents the quantity demanded and y represents the price
in pesos.
a. Simplify the demand function.
b. What is the highest price to be paid for the computer set?
c. How many units will be demanded if the unit price of computer
set is P400?
d. What is the largest quantity demanded for this items?
e. What is the price of the computer unit if the quantity
demanded is 100 units?
f. Graph the function.