MATHEMATICS

OF
BUSINESS
By
Purwanto
Purwanto@president.ac.id
081380619254

1
 References :
• Barnett, Ziegler, Byleen, COLLEGE
MATHEMATICS For Business, Economics, Life
Sciences, and Social Sciences, 9th Edition,
Prentice-Hall, Inc.
• Haeussler, JR, Paul, Wood, Introductory
MATHEMATICAL ANALYSIS For Business,
Economics, Life Sciences, and Social Sciences,
12th Edition, Pearson Education, Inc.
• Dumairy, Matematika Terapan untuk Bisnis dan
Ekonomi, Edisi Kedua, BPFE Yogyakarta
2
A Beginning Library of
Elementary Functions

3
 1-1 Functions
• Cartesian Coordinate System

• Graphing : Point By Point

Sketch a graph of y = 9 – x2

4
Guidelines for graphing functions

5
Both axes must be labeled according to the
names of the variables given by the problem:
independent variable (often “x”) on the
horizontal axis
dependent variable (often “y”) on the
vertical axis
if the graph is the graph of a named function,
there is no dependent variable; instead, the
name of the function is used; e.g. "f(x)", as
shown above

6
• Function Notation
The symbol f(x)
Exercises :
Using function notation for f(x) = x2 – 2x + 7,
find :
a. f(a)
b. f(a + h)
c. f(a + h) - f(a)
h
7
• Applications

- Cost function:
C = (fixed costs) + (variable costs)
C = a + bx

- Price-demand:
p = m - nx

x is the number of items that can be sold for a

price of $p per item

8
- Revenue:
Revenue will be (#items sold) x (price per item)
R = xp where x = #items sold
p = price per item

- Profit:
Profit is, of course, Revenue – Cost:
P=R–C

9
• Exercises
A manufacturer of a popular automatic
camera wholesales the camera to retail
outlets throughout the United States. Using
statistical methods, the financial department
in the company produced the price-demand
data in Table 1, where p is the wholesale
price per camera at which x million cameras
are sold. Notice that as the price goes down,
the number sold goes up

10
Exercises
Table 1. Price - Demand Table 2. Revenue

x p($) x (millions) R(x)

(millions) (millions)
1 90
2 87
3
5 68 6
8 53 9
12
12 37 15
Using special analytical techniques, an analyst arrived at the
following price-demand function that models the table 1 data :
p(x) = 94.8 – 5x 1 ≤ x ≤ 15 (1)
11
a. Plot the data in table 1. Then sketch a
graph of the price-demand function in the
same coordinates system.
b. What is the company’s revenue function
for this camera, and what is the domain of
this function ?
c. Complete table 2, computing revenues to
the nearest million dollars.
d. Plot the data in table 2.Then sketch a
graph of the revenue function using these
points.
12
Table 3. Cost Data Table 4. Profit

x C(x) x P(x)
(millions) (millions) (millions) (millions)
1 175 1 - 86
3
5 260 6
8 305 9
12
12 395 15

Using special analytical techniques (regression analysis),

an analyst produced the following cost function the model
the data :
C(x) = 156 + 19.7x 1 ≤ x ≤ 15 (2)
13
a. Plot the data in table 3. Then sketch a
graph of equation (2) in the same
coordinate system.
b. What is the company’s profit function for
this camera, and what is its domain ?
c. Complete table 4, computing profits to
the nearest million dollars.
d. Plot the points from part (c). Then sketch
a graph of the profit function through
these points.
14
• Applications

- Cost function:
C = (fixed costs) + (variable costs)
C = a + bx

E. g. C = 3000 + 200x
This is an example of a function defined by an
equation, with
 independent variable x
 dependent variable C

15
Alternatively, the Cost function could have
been given as

C(x) = 3000 + 200x

This is a function defined using functional

notation. Here, the “C” is the name of a
function, not the name of a variable, as in the
prior example.

16
The independent variable is still x, but there is
no dependent variable, so you can label the
vertical axis with “C(x)”.

Using this notations, we can write:

C(1000) = 3000 + 200(1000) = 203000
That is, the cost of producing 1000 units is
$203,000.00
The 1000 is called an input, with
corresponding output 203000.
17
Some common business functions
• Cost:
C = a + bx , the cost of producing x items
The “parameters” (numbers that are specific to
a particular business situation), are a and b.

Example: C = 100 + 0.50x

fixed cost = $100 cost per item produced = $ 0.50

• Price-demand:
p = m - nx x is the number of items that
can be sold for a price of $p per item
18
Example: p(x)= 1 - 0.0001x:
Price




















Demand
          

19
• Revenue:
Revenue will be (#items sold) x (price per
item)
R = xp where x = #items sold
p = price per item

For our example: R(x) = xp = x(1 - 0.0001x)

Here’s the Revenue graph for our example:

20
Revenue











Demand
          

21
Note: lowered prices  greater demand 
increased sales
BUT the lower prices eventually overtake
increased sales, ultimately decreasing revenues.

• Profit:
Profit is, of course, Revenue – Cost: P = R – C
For our example:
C(x) = 100 + 0.50x
R(x) = x(1 - 0.0001x)
P(x) = x(1 - 0.0001x) – (100 + 0.50x) = -
0.0001x2 + 0.50x - 100
Here, Profit is written in terms of Demand (x).22
1-2 Transformations of Graphs

Horizontal shifts
y

reference:

f(x) = x2 
x
   
     


 23
shift left 2:
f(x + 2) = (x + 2)2
y



x
   
     



24
shift right 2:
f(x - 2) = (x - 2)2
y



x
   
     




25
Vertical shifts
reference:
f(x) = x2 y



x
   
     



26
shift up 2:
f(x) + 2 = x2 + 2

y



x
   
     



27
shift down 2:
f(x) - 2 = x2 - 2
y



x
   
     



28
 Linear Functions and Straight Lines

Linear functions
are of the form f(x) = mx + b
e.g f(x) = -3x + 4 (m = -3, b = 4)
called linear because they graph as straight
lines
sometimes written y = mx + b (slope-
intercept form)

29
Graphing a linear function using intercept
method
Example: or f(x) = 2x + 4
(1) convert to equation form: y = 2x + 4
(2) Find intercepts: set x = 0, solve to get
y-intercept = 4
set y = 0, solve to get
x-intercept = -2
(3) Plot the intercepts and draw the line:

30
 y




x
        





31
Graphing a function having restricted
domain
Most real-world functions will have restricted
domains, e.g.
A = 6t + 10, 0 ≤ t ≤ 100
The “0 ≤ t ≤ 100” is a domain restriction,
meaning that the function is valid only for
values of t between 0 and 100, inclusive.

32
To graph it, calculate the points at the
extreme left and right:
if t = 0, A = 10  point (0, 10)
if t = 100, A = 610  point (100, 610)
Graph the points and draw the line:

33
 A













t
          

34
Slope of a line

35
Computing slope, given two points:

36
In general, given two points (x1, y1)
and (x2, y2), the slope of the line
passing through them is

y 2  y1
m = (slope formula)
x 2  x1

37
Kinds of slope

38
When the slope is zero, we have a constant
function.
When a function is written in slope-intercept
form
f(x) = mx + b or
y = mx + b
the coefficient m of x will be the slope
the constant term b will be the y-intercept
e.g. the graph of f(x) = - ¾ x + 12 has slope -
3/4, and y-intercept 12.

39
Interpretation of slope
The following graph represents the value of an
investment (in $’s) over time (in years):
slope = rate = 100 $/yr




 100


1

 
 x
40
As you can see, it is a linear function, and has
slope = 100.
By looking at the graph, you can see that the
investment grows by $100/year,
so the interpretation of “slope = 100” for this
linear function is:
“The investment increases by $100 per year
($100/year)”
Notice the form of this statement: “Y per X”
or “Y/X”
Y is the slope expressed in y-axis units
X is the x-axis unit
41
Point-slope form of a line
This form is used to find the equation of a
line when you know a point (x1, y1) on the
line, and its slope m:
y – y1 = m(x – x1) (point-slope
form)
Finding the equation of a line, given two
points
Example: points: (1, 3) (3, 6)

42
1-3 Quadratic Functions and Their
Graphs
Quadratic function: has a squared term, but
none of higher degree
standard form of the quadratic function:
•f(x) = ax2 + bx + c (a  0)
•vertex =
  b   b 
 ,f  
 2a  2a  
vertex form of the quadratic function:
•f(x) = a(x - h)2 + k
•vertex = (h, k)
parabola: the graph of a quadratic function43
 The anatomy of a parabola

The role of a:
if a > 0, parabola opens upward
if a < 0, parabola opens downward 44
Finding the vertex
Example: f(x) = (x + 1)2 - 3
It is already in vertex form f(x)= (x - h)2 + k
so vertex = (h, k) = (-1, -3)
Example: f(x) = x2 + 2x – 2

x-coordinate of vertex = -b/2a = -2/2 = -1

y-coordinate of vertex =
f( -1 ) = (-1)2 + 2(-1) –2 = -3
so vertex = (-1, -3)
Note: this is not the way shown in the book
(i.e. by completing the square), but is far
45
superior to it
Sketching the graph of a quadratic function
Example: R(x) = x(2000 – 60x) 1 ≤ x ≤ 25
(1) write it in standard form:
R(x) = 2000x – 60x2
(2) find the vertex:
x-coordinate = -b/2a = -2000/-120
= 50/3 = 16.67
y-coordinate = 50/3(2000 – 60(50/3))
= 16667
(3) find the points at extreme left and right of
range :
R(1) = 1940  point on graph is (1, 1940)
R(25) = 12500  point on graph is (25,12500)
46
(4) graph points and draw
R(x)







x
     

47
Maximum and minimum of a quadratic
function
Here’s your familiar parabola (graph of a
quadratic function):

48
Maximum:
• refers to the largest value that f(x) can ever
have for this example, it is 4
• maximum is second coordinate of the vertex
point we say that "f attains its maximum of 4
for x = 1" f has a maximum value because it
opens down

49
The following parabola opens up, therefore
doesn't have a maximum, but rather a
minimum:

Minimum:
this parabola attains its minimum of -3 for
x=5 50
Finding maximum or minimum
for a quadratic function

Example:
When a cannon is fired at a certain angle,
the distance h (in meters) of the shell above
the ground t seconds after firing is given
by the formula
h(t) = -4.9t2 + 24t + 5
Find the maximum height attained by the shell.
51
Notes:
h(t) is a quadratic function (parabola)  has a
vertex!
for this parabola, a = - 4.9 and b = 24
a < 0  the parabola opens downward  has a
max value

The answer: The shell reaches its maximum

height of 34.4 meters 2.45 seconds after the
cannon is fired.

52
Break-even analysis

Example:
R(x) = x(2000 – 60x) 1 ≤ x ≤ 25
C(x) = 5000 + 500x 1 ≤ x ≤ 25

53
Graphing them on the same system, we see:
R(x), C(x)







x
54 
    
A break-even point is a production level in
response to demand (x) for which
Revenue = Cost
Graphically, this means x-values where the
graphs intersect.
Algebraically, we solve the equation
Revenue = Cost
x(2000 – 60x) = 5000 + 500x
to get x = 4 or 21 as production levels where
we break even.

55