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MATHEMATICS

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

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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
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A Beginning Library of
Elementary Functions

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1-1 Functions
• Cartesian Coordinate System

• Graphing : Point By Point


Sketch a graph of y = 9 – x2

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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

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• 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
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• 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

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- 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

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• 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

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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)
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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.
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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)
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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.
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• 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

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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.

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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.
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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
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Example: p(x)= 1 - 0.0001x:
Price




















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

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• 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:

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Revenue











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

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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
   
     



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shift right 2:
f(x - 2) = (x - 2)2
y



x
   
     




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Vertical shifts
reference:
f(x) = x2 y



x
   
     



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shift up 2:
f(x) + 2 = x2 + 2

y



x
   
     



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shift down 2:
f(x) - 2 = x2 - 2
y



x
   
     



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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)

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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:

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y




x
        





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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.

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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:

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A













t
          

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Slope of a line

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Computing slope, given two points:

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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

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Kinds of slope

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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.

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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
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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
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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)

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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
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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)
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(4) graph points and draw
R(x)







x
     

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

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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

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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.
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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.

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Break-even analysis

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

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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.

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