WOLLO UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

Distance Education Course Module

Calculus for Economists

(Econ 1011)

Prepared By:
Addisu Molla (PhD)

Edited By:
Abebe Fentaw (PhD Candidate)

January 2017
Dessie, Ethiopia
 Calculus for Economists
(Econ 1011)

Prepared By:
Addisu Molla (PhD)

Edited By:
Abebe Fentaw (PhD Candidate)

Wollo University, College of Business and Economics,

Department of Economics, BA Degree in Economics

ii
 COURSE INTRODUCTION
In economic theory there are a set of relationships between different economic variables and
phenomenon, and able to predict values of unknown economic variables and possible
outcomes from the relationship. Mathematical methods and concepts help to derive a set of
conclusions or valid generalizations about the cause effect relationships that prevails among
economic variables from a set of assumption and postulates through the process of logical
reasoning.

Among the dominant methods and approaches of mathematical reasoning, calculus has
paramount significance in the process. Thus, undergraduate economics students should be
exposed to the mathematical methods and approaches in general and calculus applications in
particular to economic analysis and reasoning. Indeed tackling of economic problems using
economic theory is obviously the major concern and the investigation of solutions to
economic problems becomes easy when we are well equipped with the basic mathematical
tools, including concepts and techniques in calculus.

Therefore, the course is designed to provide different mathematical concepts that could be
applied to economic analysis. Accordingly, it starts with introduction to functions, and then
the concepts of limits and derivatives. It also includes differential and integral calculus
together with applications to economic analysis and research. In addition, classical
optimization techniques involving the Lagrange multiplier will be covered. Finally, the
course is extended to cover the concept of difference and differential equations with their
application to economic analysis and research.

iii
 COURSE DELIVERY AND EVALUATION METHODS
Distance Education Program will have each three semesters/terms per annum and each
semester will have four months (16 weeks) and one tutorial program. About 10% of the total
lecture hours or 1.5 times the credit hour of the course (for example, 4.5 contact hours for a
3 credit course) will be delivered through face-to-face mode (tutorial mode) and the
remaining contact hours are expected to be covered by the distant learners provided that the
distance materials or modules are ready for the distance learners before one months of the
commencement of the tutorial sessions. The assessment technique could be final exam and
home based assignments or project work. All courses will have one final exam taken out of
60% and assignments or project work taken out of 35%. Though tutorial attendance is not
compulsory, attendance and participation in the tutorial session will account 5%. Students
must make sure that they have signed the attendance sheet for every course tutorial. Make-
up exams are given to students who can provide reliable reason and right evidence with the
CDEP time table. A student with an ‘I’ or an ‘NG’ academic status and with an ‘F’ grade
could take make-up exam through readmission cases after processing the required payments.

iv
 Table of Contents
COURSE INTRODUCTION .......................................................................................................... iii
COURSE DELIVERY AND EVALUATION METHODS .......................................................... iv
CHAPTER ONE .............................................................................................................................. 1
1. INTRODUCTION TO CALCULUS ............................................................................................ 1
1.1 Introduction............................................................................................................................ 1
1.2 Definition and Significance of Calculus .................................................................................. 1
1.3 Function ................................................................................................................................. 2
1.4 Application of Functions in Economics .................................................................................. 8
1.5 The concepts of Average, Margin, Rate of change, Slope and Tangency ............................... 12
CHAPTER TWO ........................................................................................................................... 16
2. LIMITS AND CONTINUITY .................................................................................................... 16
2.1 Introduction.......................................................................................................................... 16
2.2 The Concept of Limit ........................................................................................................... 16
2.3 The Limit Theorems ............................................................................................................. 21
2.4 Evaluation of Limit of a Function through Application of Limit Theorems ........................... 22
2.5 Limit at Infinity .................................................................................................................... 23
2.6 Continuous Functions ........................................................................................................... 25
2.7 Properties and Theorems of Continuous Functions .............................................................. 29
CHAPTER THREE ....................................................................................................................... 31
4. THE DERIVATIVE ............................................................................................................... 31
3.1 Introduction.......................................................................................................................... 31
3.2 Definition of Derivative (First order derivative) .................................................................... 32
3.3 Geometric Interpretation of the derivative: ............................................................................ 33
3.4 Techniques of Differentiation ............................................................................................... 35
3.5 Continuity and Differentiability of a Function....................................................................... 44
3.6 Derivatives of Exponential and Logarithmic Function .......................................................... 46
3.7 Higher Order Derivatives ..................................................................................................... 52
3.8 The Sign of the Derivative .................................................................................................... 54
3.9 Maximization and Minimization: Extremum ......................................................................... 57
CHAPTER FOUR.......................................................................................................................... 64
4. ECONOMC APPUCATIONS OF DERIVATIVE ...................................................................... 64
4.1 Introduction.......................................................................................................................... 64
4.2 Demand, Supply and Market Equilibrium ............................................................................. 64
4.3 Price and Income Elasticities ................................................................................................ 70

v
 4.4 Production and Cost Functions ............................................................................................. 73
4.5 Optimization Problems ......................................................................................................... 75
4.6 Economic Application .......................................................................................................... 76
CHAPTER FIVE ........................................................................................................................... 83
4. DIFFERENTIAL CALCULUS OF FUNCTION .................................................................... 83
OF SEVERAL VARIABLES ......................................................................................................... 83
5.1 Introduction.......................................................................................................................... 83
5.2 Partial Derivatives ................................................................................................................ 83
5.3 Derivatives of Implicitly functions........................................................................................ 93
5.4 Maximization and Minimization of Multivariable ................................................................. 95
5.5 Unconstrained and Constrained Functions ............................................................................ 97
5.6 The Method of Lagrange Multiplier for any Equality Constraint ........................................... 98
CHAPTER SIX............................................................................................................................ 104
6. INTERGRAL CALCULUS ..................................................................................................... 104
6.1 Introduction........................................................................................................................ 104
6.2 The Concept of Integration ................................................................................................. 104
6.3 Rules or Properties of Integration ....................................................................................... 105
6.4 Techniques of Integration ................................................................................................... 107
6.5 The Definite and Indefinite Integral .................................................................................... 112
6.6 Improper and Multiple Integrals ......................................................................................... 115
6.7 Economic Application of Integrals...................................................................................... 119
CHAPTER SEVEN ..................................................................................................................... 126
7. DIFFERENTIAL AND DIFFERENCE EQUATIONS ............................................................. 126
7.1 Introduction........................................................................................................................ 126
7.2 Differential Equations ........................................................................................................ 126
7.3 Difference Equations .......................................................................................................... 130
7.4 Economic Applications of Differential and Difference Equations ........................................ 132
Answers for Self Test Exercises ................................................................................................... 136
References ................................................................................................................................... 140

vi
 CHAPTER ONE
1. INTRODUCTION TO CALCULUS
1.1 Introduction
In economics there are various relationships among economic variables those are explained
by economic theories and models. Especially, mathematical models are paramount
significant by providing as generalized techniques of analysis. Therefore, we deal our focus
of study called calculus for economists, as a branch of mathematics, which analyses the
effect of changes in economic variables. To analyze this effect there must have relationship
among economic variables. This relationship in mathematics is known as function.

Objectives
At the end of this chapter, you will be able to
 Identify the different types of functions
 Solve economic problems with the application of functions
 Understand the concepts of margin, rate of change and slope

1.2 Definition and Significance of Calculus

Calculus can be defined as the course, which deals with limit, continuity, differentiability
and integration. Unlike algebra calculus for economists concerns about approximate value of
function and by then it analyzes the rate of change and movement of different economic
variables. Therefore, it is used to measure instantaneous rate of change of economic
variables by which we are able to solve problems of these different economic variables such
as producer surplus, consumer surplus, unconstrained optimization, constrained optimization
etc.

1
1.3 Function
Definitions and Notations
What is function? How a function is distinicted from a relation?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

The term function refers to relationships between variables provided that to every value of
independent variable X there corresponds exactly one value of the dependent variable Y. In
Other words, as you seen in your high school mathematics a function is a special type of
relation no two elements of the relation have the same first coordinate but two different
values of fist coordinate may match with a single or some second coordinate and such
functional relationship can be written as: Y=f(x), where x is independent variable, which is
also assumed to be the domain of function and Y is dependent variable, which is known by
range of a function.

Example: a speedy rent car charges Br.15 per day plus 25  per mile for its compact Autos.
Find the functional relationship between the charge & mile driven
Solution: Let’s C is the charges in Br., m is the mile age we drive. So the equation-
functional relationship will be: C= f (m) = 15+0.25m

Types of Function
Dear learner, please write the different types of functions that show simple relationship
between variables.
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Functions can be classified in to the following categories:

2
 I. Algebraic functions
(1) Constant function:- A function of form Y=f(x)=k where k is constant number is
called constant function. i.e., the value of Y remains the same for any value of x.
e.g. f(x)= 5
(2) Polynomial Function:- A function in the form of F(x)= a0+ax+ax 2 ax 3 +…+anx n
provided that an  0 & n is non –negative integral called polynomial function.

Based on the value of degree of function we have different types of polynomial

functions. These are:-
a) Constant Function:- A function with zero degree, n=0 e.g f(x)=1/2
b) Linear Function:- A function in the form of Y=f(x)=ax+b with a degree of 1.
e.g. Y=2x+3
c) Quadratic Function:- A Function in the form of y=f(x)= ax 2 +bx+c with
2
degree 2. e.g 2x +3x+5

The parameters a, b, & c are constant & a  0. The graphs represented by quadratic function
are known as parabolas. That is, for a>0 & a<0 the parabola opens upward & down word
respectively the vertex of the parabola is the lowest & highest point in the case of upward &
downward parabola respectively. Sometimes such function is said to be parabolic function.
d) Cubic function:- A function with degree 3, n=3 e.g. Y=x 3 +2x 2 +x +1

(3) Rational Function:- A function in which y is explained as a ratio of two polynomial

functions. i.e., If P(x) & Q(x) are polynomial functions then R(x) = p(x)/Q(x) is called
rational function.
7x  9 3x  6
e.g. f(x) = and f(x) =  x  2 are rational function
x5 3

x2 5x  2
but 1/ 4
and are not rational function
x x

3
II. Non Algebraic Functions
(1) Exponential Function
A function in the form of Y  a x , a  0 , that is constant base a variable exponent x is
2
exponential function. e.g. y = a x , y=e 5 x , y=c t  2 / c = ct
Note:- The exponential function becomes a power function simply by exchanging the
place of constant a and variable x each other, i.e.,Y=x n e.g. y=x 4
Rules of Power/Exponent:- if m & n are positive integers and X & Y are real numbers,
the following are rules of exponents:
1 . x m .x n  x m  n 5. x  m  1 / x m
2. ( x m ) n  x mn 6. x m1 / x n  x m n
3. ( xy) m  x m . y m 7. x n / m  m x n
4. ( x / y ) m  x m / y m

(2) Logarithmic Functions

It is the inverse of exponential function in which a>0 and a  1. It has the form Y=log ax

which is read as “the logarithm of x to the base a” and equivalent to x=a y (form of
exponent).
Note:- The logarithmic function may be common logarithm denoted by log 10x (log x ) the

logarithm of x to the base 10 given that x>0 or natural logarithm denoted by Ina ( log ae ), the

natural logarithm of a (a>0) to the base e which is given to an irrational number.

e=2.718289…

Rules of logarithm:- Let a be a number, a>1, and let x & y be positive numbers.
1. log 1a  0 5. log ax / y  log ax  log ay
2. log aa  1 6. log xy  log ax / log ay ; y  1
3. log axy  10 g ax  log ay 7. a log ax  x, x  0
y x a
4. log ax  y log ax 8. log a  1 / log x

4
III. Other Function
(1) Explicit and Implicit Functions:- A function is said to be explicit if the value of y is
directly given in terms of x i.e, y  f ( x ) where as it is implicit function if the variables
x & y are mixed in the functional relationship. (i.e., f(x, y)=a).
e.g. y  4 x 2  3 is an explicit function where as x 2  y 2  a 2 is an implicit function

(2) Composite Function: A function is said to be a composite function if a function

obtained from two given functions by applying one function to an independent variable and
then applying the second function to the result and whose domain consists of those values of
independent variable for which the result yielded by the first function lies in the domain of
the second. If we have two functions, for example f(x) and g(x), we can defined the
composite function h(x) = fog(x) = f(g(x)).
Example: If f(x) = x3 and g(x) = 2x-1 we have the composite function:
h(x) = f(g(x)) = f(2x-1) = (2x-1)3= 8x3 - 12x2+6x-1

(3) Single valued and Multivalued Functions:- if only one value of y is corresponds to
every value of x it is single value function where as a value of x owns more than one value
of y it is multi valued function.
e.g. y  x 2 is sin gle valued function(SVF) and y 2  x is multivalued function (MVF)

(4) Increasing and Decreasing Functions:- The function y=f(x) is said to be increasing
and decreasing function if the value of y always increase and decrease respectively , as the
value of x increases.

(5) Even and odd Function:- A function is said to be even if f(x) = f(x)
e.g. 
f ( x)  x 2 and it is odd if f ( x)   f ( x) e.g. f ( x)  x 3 

IV Economic Functions
The common economic functions which show quantitative relationships between variables
through applying mathematics in economics & business studies are the following.

5
(1) Demand & Supply Functions
 Demand function shows the relationship between quantity demand
(Qd x ) & price ( p x ) of a commodity and gives that the two economic variables are

inversely related, cetres paribus. i.e., provided that other variables being constant.
 Dx  f ( p x ); mathematically Qd x  a  bpx ; a, b  0

 Similarity supply function shows the relationship between quantity supplied

(QSX ) and Pr ice ( Px ) of a commodity. Unlike demand function it has positive or

direct relationship between such two economic variables, cetres paribus.

 S x  f ( Px ); mathematiy Qsx  a  bpx; a, b  0

 Importantly, the interaction between demand & supply functions results another
concept called market equilibrium that is the point of intersection of the lines of two
functions. Bringing the market in equilibrium, the corresponding levels of price &
quantity are the equilibrium price (p*) and the Quantity (Q*).

(2) Production Function: - it refers to the physical relationship between inputs and outputs,
for example, the quantity Q of a given commodity is produced using two inputs called
labor & capital (K). The production function becomes: Q=f(L,K). Generally, the
production function may take a variety of forms. But the most commonly used form of
production function is cobb-dougles production function which has form Q=A
X I1 X 2 2 X 3 3 .........; where 1 ,  2 ,  3 refer elasticity of output with respect to the

corresponding inputs (x’s).

e.g. Q  25L1 / 4 K 3 / 4 ;  1   2  1 / 4  3 / 4  1
Note :
1   2  1 Cons tan t returns to scale
1   2  1 Increasin g returns to scale
1   2  1 Decreasin g returns to scale

6
(3) Cost Function:- such function shows the relationship between cost, C and Output, Q.
i.e., C= f(Q).
The cost function may take linear, quadratic or cubic form of function. e.g. C=a+bQ
(Linear); a=fixed cost, b = marginal rate of change in cost with output changes. i.e., slope of
the cost curve. The cost function could be presented diagrammatically as follow:

= + +
= + −
= +

<0
>0
>0
>0
TFC TFC
TFC TFC
= =
= =

Figure 1.1 Curves of cost functions

(4) Revenue Function:- given the demand function, the total revenue will be
price*quantity.
i.e R=PQ For illustration, let Q=120-P be the demand for a firm’s product, then the
firm’s revenue function R(Q) become:
R(Q)  PQ  P(120  P); sin ce Q  120  P
R(Q)  120 P  P 2
alternetively ,
R(Q)  (120  Q) Q; Q  120  P and then p  120  Q
R(Q)  120Q  Q 2

(2) Profit Function:- it is the difference between the revenue function, R(Q), and the total
cost function ,C(x) of a firm. e.g. assume the firm has the following revenue & cost
functions.
C (Q)  3Q 2  10Q  500 R(Q)  200Q  Q 2

7
 The profit function becomes:  (Q)  200Q  Q 2  (3Q 2  10Q  500)
 200Q  Q 2  3Q 2  10Q  500
  3Q 2  Q 2  190Q  500
 4Q 2  190Q  500
Importantly, taking the revenue & cost functions, there is one concept called breakeven
point which refers to the level of output of which the firm’s total revenue of total cost
become equal. i.e. Profit becomes zero,  =0

(3) Other Economic Functions:- there are various other economic functions as listed out
below courses in
a) Utility function
b) Production transformation function
c) Consumption, saving and investment function
d) Money demand function etc

1.4 Application of Functions in Economics

Overview
One of the objectives of this chapter is solving the economic problems using different kinds
of functions discussed so far. To this end, you will see the application of various functions in
economic theories related to demand and supply, production, revenue, cost and profit.
Let’s see the following application of some economic functions.

1) A factory uses a cool and gas in the production of steel given that the cost of cool (C c )

and cost of a gas ( GG ) are birr 100 & 500 respectively. Write the equation of the cost

function, F(C,G) provided that the total expenditure is birr 10,000.

Solution:
Given :  CC  100; C G  500 and let the total exp enditure is donoted by E , which is F (C , G)
where C & G are quantity of coal and gas respectively.

8
 F (C , G )  CC C  GC G

F (C , G ) 100C  500G
10,000  100C  500G
100C  500G  10,000  0

2) Given the following two related markets, beef (B) and pork (P), find the equilibrium
conditions for each market. That is, equilibrium prices & quantities of beef & pork markets.
QdB  82  3PB  p p Qdp  92  2 PB  4 PP
(i) (ii)
QSB  5  15PB QSP   6  32 p P
Where Qd B and Qs B are quantity demand and supply of beef and pork markets
respectively. And PB and p p are price of beef & pork markets respectively.

Solution:
It could be solved using substitution method as follow:
 From (i) we get: From(ii) we get:
82  3PB  p p  5  15PB 92  2 PB  4 PP  6  32 PP
 3 pB  Pp  5  15 PB  82 92  6  2 PB  32 PP  4 Pp
PP  87  15PB  3PB 2 PB  36 Pp  98......(2)
Pp  18PB  87......(1)

 Substituting equation (1) from equation (2) we get:

2 PB  36 PP  98
2 p B  36 (18 p B  87)  98
2 PB  648PB  3132  98
3230 / 646  646 p B / 646
PB  5

To get QB , use one of the above equation (i )

QB  5  15 ( PB )
 5  15(5)
 5  75
 70
Thus, the equilibrium price and quantity of beef market are 5 birr and 70 units respectively.

9
To get PP , use equation (1) and to get Q B use the above equation (ii)
i.e., Pp  18 PB  87 QP  6  32 Pp
 18(5)  87  6  32(3)
90  87  6  96
3  90

Thus, the equilibrium price and quantity of pork market are 3 and 90, respectively.

3) Assume the total revenue (TR) function of a firm is given by R(x) = 3x 2 +2x+3 and the
total cost function is given by c( x )  x 2  x  1 find the profit function.
Solution
  TR  TC
 R ( x )  C ( x)
 x 2  x  1  (3x  2 x  3)
 x 2  x  1  3x 2  2 x  3
 2 x 2  x  2

4) What is the break even value of output x if the total cost function is TC = a+bx-cx 2 and
the selling price of the output is birr b per unit

10
 Solution
at breakeven TR  TC or   0
i.e.,   0
TR  TC  0
bx  ( a  bx  cx 2 )  0; TR  bx , TC  a  bx  cx 2
bx  a  bx  cx 2  0
 a  cx 2  0
cx 2  a
cx 2 a

c c
a
x2 
c
a
X 
c
a
x
c

5) A Charter airline changes rate of Br. 200 per passenger for groups of 50 or fewer people.
For each additional over 50 the airline ticket price reduced by Br.1 for all passengers in the
group. Find the air line’s revenue, R(x), as a function of x, the number of passengers in the
group, and find the group size that maximizes the airline’s revenue.
Solution
200, x  50
The ticket price be written as p
200  1( x  50), x  50
Therefore, R( X )  PX
200 x, x  50
R ( x)  
200  ( x  50)]x, x  50
200 x, x  50
R( x)   2
 x  250 x, x  50
U sin g the vertex of the quadratic function ,  x 2  250 x, the number of passengers
that max imizes revenue becomes :
 b  250 250
x    125
2a 2(1) 2

11
1.5 The concepts of Average, Margin, Rate of change, Slope and Tangency
What are the concepts of average, margin, rate of change, and slope and what are the
similarities and differences among them?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

 Average:- by definition average is the per unit value of a given total function, for
example the average value of the total revenue function, p (x)=PQ, becomes:
AR=TR/Q=PQ/Q=P
It can be also defined as the arithmetic mean of a group of stock designed to represent the
overall value, for example, given x1  10, x 2  5, x3  6, the average value of x becomes

(10+5+6)/33=7.
 Margin:- Margin refers to the change in the total value as a result of additional unit
involved, for example, the marginal value of the total revenue function, R(X)=PQ,
becomes MR  TR / Q  TRn  TRn 1  (TRn  TRn1 ) /(Qn  Qn1 )

 Rate of change:- Percentile change of a variable to its initial value, for example, a
variable x changes from x 1 to x 2 , its rate of change will be ( x 2  x1 ) / x1 * 100
 Slope:- Slope is the rate at which a given variable will be changed as a result of
changes in other variable.
the vertical change rise y
Slope (m )   
the horizontal change run x

1
Example: given the equation y  1  , calculate the slope, m.
4x
1
Solution: The equation y  1  has the form y  ax  b, which is a linear equation. So,
4x
1
the slope is (  0.25) on the equation.
4
Illustration:

12
 X Y Y X
0 1 - -
1 0.75 0.25 1
2 0.50 0.25 1

For every one unit of change in x, the value of y changes constantly. Therefore, for every
linear equation of the form y=ax+b, the slope is always equal to ‘a’. However, for equations
1
other than linear (e.g. a quadratic equation y=1- the slope is not specific like linear
4x 2
rather it is many. It will be illustrate by concept of tangency as follow.
 Tangency:- The slope of equations with curvilinear graph (i.e. equations with more
than one degree of function) is calculated by the concept of point of tangency, that is,
the slope of the curve at every points on the curve is equal to the slope of the secant line
(a line that touches but does not cross) which is tangent to the curve at that specified
point.

Example: Find the slope of a quadratic equation y=1-(1/4x 2 ) at a given point on the curve,
say at point ‘A’.

By drawing the graph

Secant line
1
( )= 1−
4

Figure 1.2 Concept of tangency through slope of curvilinear line

13
Thus, the slope of the curve only at point A = the slope of the secant line. This indicates that
for every one unit of changes in x the value of y charges by different values. Generally
speaking, average, margin, slope & point of tangency concepts are more related and further
illustrated by the concept of limit and continuity and the concept of derivative, which are
topics in the later chapters.

Summary
 A function is a special type of a relation in which no two elements a relation have the
same first coordinate. A function is a relation but the converse is not true.
 There are three main categories of functions algebraic, non-algebraic and economic
functions. Under economic functions we have demand and supply functions,
production functions, revenue function, cost functions and profit functions.
 Average is a per unit value of a given total function
 Margin refers to the change in total value due to a change of extra unit
 Rate of Change reflects the percentage change of a variable to its initial value
 Slope indicates the rate at which a given variable will be changed because of changes
in the other variable.

14
 Self Test Exercise 1
1. Find the equilibrium price and quantity for a market represented by the following
demand and supply function.
Qd  24  4 p
QS  27  p
2. Suppose the firm manufactures radios and sells them for $50 each. If the cost
incurred in the production and sale of radios are $200,000 plus $10 for each radio
produced & sold.
a) Write the profit function
b) How many units produced by breakeven.
2 2
3. Suppose P  Q  3Q  20  0 and P  3Q  10Q  5

Are the demand (DD) and supply (SS) functions respectively, then find the market

equilibrium price (P) and quantity (Q).

4. Given a group of stock represented by variables
x1 , x 2 and x3 with values 3, 6 and 15,
then find
a) The average value
b) The rate of change from x1 to x3

15
 CHAPTER TWO
2. LIMITS AND CONTINUITY
2.1 Introduction
The concepts of limit are useful in developing some mathematical techniques and also in
analyzing various problems in economics. Necessarily students of calculus should have the
concepts of limit before going to other topics of calculus, as limit is the central point or the
basis for the rest chapters. Therefore, it is the concept of limit that makes calculus different
from other disciplines like algebra. In this chapter you will be familiarized the lessons such
as concept of limit, theorems of limit and continuous functions.

Objectives
When you have completed this chapter, you should be able to
 Explain the concept of limit
 Understand different theorems of limit and continuous function
 Evaluate the limit of a function through the application of limit theorems
 Identify whether the function is continuous or not

2.2 The Concept of Limit

Overview
The concept of limit can be presented by general statement “what will happen to certain
dependent variable as the independent variable approaches some limit or bound. It can be
also explained as what happens to the variable x or function f as its constant number n or
variable x approaches a particular value. For further illustration, let’s observe the concept of
limit in two ways:
What do you mean by limit of a variable and limit of a function?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

16
A. Limit of Variable:- let x be variable with domain D, D={x/x: a,b,d,f,}. Here the
statement x=a is meaningful as a is a members of domain D but x=c doesn’t have meaning
since c  D. However, x approaches to c has a meaning since it is possible that X may take
1 1 1
values closer to c but not exactly c. e.g. D= {1, , ... } given x is any member of D, the
2 3 n
statement x=1/2 is meaningful but x=0 has no meaning. However it is possible to say x  0
since value of x (i.e. l/n) becomes smaller and smaller (i.e. approaching 0) as x increases.
The variable x approaches to 0 as n approaches or represents higher value.

B. Limit of a function:- it can be described as what happens to given function f(x) as x

approaches to a particular number. e.g. let f(x)= x+4 what happens to f(x) as x approaches to
1 but not equal to 1. Constructing table and drawing graph as follow can investigate it.

( )= +4
5

(0,4)

(−4,0) 1
)

Figure 2.1 Limit of a function

17
 Table 2.1 limit of a function
As x approaches as x As x approaches as x
approaches from the right approaches from the left
x+ f(x) x- f(x)
1.5 5.5 0.5 4.5
1.3 5.3 0.7 4.7
1.1 5.1 0.9 4.9
1.01 5.05 0.99 4.99
1.001 5.005 0.999 4.999

Thus, both the table and the graph tells as the function f(x) = x+4 approaches to 5 as x
approaches 1 on both sides, that is, from the right (+) and left (-) sides. In general term
the limit of function y=f(x) as x approaches ‘a’ equals a given value, L, is written as
lim f ( x)  L
xa

lim f ( x)  L and lim f ( x)  L

x a  x a

are the right side and left side limits respectively. Also the limit itself, that is, lim f(x)=L
is the common finite limit value.

Note:
* if lim f ( x)  L, then, lim f ( x )  lim f ( x )  L
xa  x a  xa 

* if lim f ( x)  lim f ( x )  L, then lim f ( x )  L

xa  xa x a

* if lim f ( x)  lim f ( x) then, lim f ( x)  L does not exist.

x a x a x a

e.g.1 Find the limit of a function f(x)=3x-1 as x approaches to 1

Solution:
In order to find the limit of a function, an important point is the use of substitution process
by allowing us to solve the limit of a given function that is continuous at x=a. Therefore the

18
limit of the above function f(x) = 3x-1 as x  1 can be obtained by substituting 1 for x in the
function.
i, e., lim 3 x  1  3( 2)  1  2
lim 3 x  1  2
x 1

Also we should see the two sides limit so as to arrive the decision whether the limit of the
above function does exist or not.
lim 3 x  1  2 & lim 3x  1  2. So sin ce both sides lim it are equal the lim it x exists.
x 1 x 1

x2
e.g. 2 Find limit of f ( x)  as x approaches to 5.
5 x
Solution :
lim( x  2) /(5  x)  5  2 / 5  5  7 / 0 (undefined )
x 5

Since the function is undefined at x=5 the limit does not exist as x approaches to 5

e.g.3 find the limit of f(x)=(3x 2 -3)/(2x-2) as x approaches to 1

Solution:
3x 2  3
lim  3(1)  3  0 / 0 (undefined)
x 1 2 x  2

The function is not defined of x=1 but is does not tell us about whether the limit exists or not
because for such type of questions first we have to simplify the function further and then
come up with decision.
i.e. (3 x 2  3) /( 2 x  2)  3( x 2  1) / 2( x  1)  3 / 2( x  1)
So, lim( 3x 2  3) /(2 x  2)  lim 3 / 2( x  1)  3 / 2(1  1)  3
x 1 x 1

Therefore, the lim it exists at x  1 which is 3

e.g .4 f ( x)  x  1, x  1
3  x, x  1, find lim f ( x ) as x  1
Solution :
lim f ( x)  lim( x  1)  x  1  1  1  2 as x  1
lim f ( x)  lim( 3  x)  3  1  2 as  1
Thus , sin ce the two side lim its are equal the lim it exists.

19
e.g .5 f ( x )  / x / find lim it f ( x ) as x approaches to 0
Solution :
The left side lim it can be found as
lim f ( x )  lim(  x / x )  lim( 1)  1 as x  0 
The right side lim it can be found
lim f ( x )  ( x / x )  lim(1)  1 as x  0 
Thus , sin ce the left and right side lim its are not the same . i.e, lim f ( x )  lim f ( x )
x0 x 0

So that the limit does not exist.

e.g.6 If the firm makes and sells 6000 or fewer units, its profit is p(x)=250x-400,000.
However, in order to sell more than 6000 units, it must put on the second shift which causes
the profit to be p(x)=200x-300,000. Thus, find
a) The Left side limit
b) The right side limit
c) Whether the limit exist or not
Solution:
a) First, by considering the above stated guide the profit function will have the form:
250 x  400,000 0  x  6000
P ( x)  
200 x  300,000 x  6000
So, the left side limit can be found as follow:
lim p( x)  lim 250x  400,000  1,100,000
x 600  x 6000 

b) lim p ( x)  lim 200x  300,00  900,000

x  6000  x  6000 

c) the lim it does not exist because, lim p( x)  lim p ( x)

x  6000  x  6000 

Note: two facts regarding limit must be noted as:

1. The limit of a function as X approaches to a is independent the value of the function at a
i.e., even though f(x) exists, the value of the function at a.
i. may be the same as the limit
ii. may be defined but different from the limit.
iii. may be undefined

20
2. Limit is said to exist if the following conditions are satisfied:
i, The limit L is a finite number.
ii. The limit as x approaches to a from the left equals the limit as x approaches a
from the right.
iii. In evaluating limits of any function, we produce four different results that we
summarizes as presented below provided that L represents some non-zero real
number whenever L appears in the denominator, then:
Limit evaluation result Conclusion/decision
L limit is L
0/L limit is 0
L/0 limit does not exist
0/0 transform the function to produce
one of the above forms.

2.3 The Limit Theorems

Overview
Dear learner, in the preceding section you have understood the concept of limit. In this
section you will learn different theorems of limit which helps you to simplify the evaluation
of limit of a function these theorems could be categorized as theorems involving a single
function, two functions and many (more than two) functions.
If k and c are constants, n is any real number and
lim f ( x)  L & lim g ( x)  M , then
x c x c

1. Theorems involving a single function

i. Constant limit theorem
lim k  K
x c

ii. constant-multiple limit theorem

lim kf ( x )  k lim f ( x)  KL
x c x c

iii. Power limit theorem

21
 lim [ f ( x ) n  [lim f ( x )] n  Ln
x c xc

iv. lim ax  b  ac  b; a & b are cons tan ts.

xc

v. lim x  c
x c

2. Theorems involving two functions:

vi. Sum–difference theorem
lim f ( x)  g ( x)  lim f ( x)  lim g ( x) L  M
xc x c x c

vii. Product Limit theorem

lim f ( x).g ( x )  lim f ( x ) . lim g ( x)  L.M
xc xc x c

Viii. Quotient Limit theorem

lim f ( x ) / g ( x )  lim f ( x ) / lim g ( x )  L / M ; M  0
x c x c x c

3. Theorem involving more than two functions and/or polynomial function

Although the above theorems are stated for only two-function f & g, the result will still be
true for a finite number of function. By the same analogy of theorems involving two
functions, for instance, see the following sum limit theorem on more than two functions.

lim f ( x )  g ( x )  p ( x )  q( x )  ...  lim f ( x )  lim p( x ) lim q( x ) ...

xc x c x c x c

2.4 Evaluation of Limit of a Function through Application of Limit Theorems

Dear learner, what do you think about the process of finding the limit of a function?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

In this section we will see more examples on how the limit theorem can be used to evaluate
limit of a function. The process of limit evaluation involves letting the variable x
approaches a particular number (N) and observing the value that f(x) will take as a limit. The
evaluation of limit is illustrated with the help of different examples as listed below.

22
 3
e. g .1 lim 9 x 2  4 x  3  lim 9 x 2  lim 4 x  lim
x2 x2 x2 x2
2
 9( 2 )  4( 2 )  3
 31
e, g.2 lim [ x 3 ( x  4)]  lim x 3 (lim x  lim 4)
x 2 x 2 x2
3
 2 ( 2  4)
 48

lim 9 x 5  10 9(lim x 5 )  lim 10

9 x 5  10 x 2 x 2 x2
e g .3 lim 2  2
 2
x 2 7 x  2 x  1 lim 7 x  2 x  1 7(lim x )  2 (lim x )  lim 1
x 2 x2 x 2

9(32)  10

7( 2 2 )  2( 2 )  1
298

33
e. g .4. lim( x  3) /( x  1)
x 2

Since lim(x-1)=0 as x approaches 2, the quotient rule does not apply here. In other word,
since the limit evaluation result has form L/O, the conclusion/decision becomes limit does
not exist.

e.g.5 lim ( x 2  x  2) /(2 x  1) as x  2. Since the limit evaluation result takes the form 0/0,
we need to simplify the function algebraically in order to find the desired limit.
f ( x)  ( x 2  x  2) /( x  2)  ( x  2) ( x  1) ( x  2)  x  1
Thus, lim f ( x)  lim f ( x )  lim ( x  1)  3
x 2 x2 x 2

2.5 Limit at Infinity

Definition:- Give the limit a function lim f ( x ) =c, as L is real number, if and only if when
x  

x assigned to a large positive (small negative) values, the corresponding value of the
function of approaches the number L. For an illustration, given the limits
lim 1 / x  2 and lim 1 / x  2 can make some conclusion about the behavior of the function
x  x  

23
simply by observing the values exist in the table below.
x 10 100 100,000 1,000,000.................... 
f ( x)  1 / x  2
y 1 / 8 1 / 98 1 / 99,998 1 / 999,998......................0
x  10  100  100,000  1,000,000.............. 
f ( x)  1 / x  2
y  1 / 8  1 / 98  1 / 99,998  1 / 999,998..................0
Therefore, from the table we have the following conclusions:
a) as x  , f ( x)  0  i.e, lim f ( x)  0
b) as x  , f ( x)  0  i.e , lim f ( x )  0

e.g .1 Evaluate lim 3 x  1 / x  2

x 

Solution:
Lets divide both the numerator and denominator of f(x) by x (i.e., variable x with higher
degree).
lim( 3  1 / x)
x 3  lim(1 / x)
lim( 3x  1) /( x  2)  lim( 3  1 / x) /(1  2 x )  (1 2 x )

x  x lim 1  2 lim(1 / x)
x x 

but lim 1 / x  0; thus, lim 3x  1 / x  2  3

x x
2
e. g .2 lim x /( x  2) evaluate it.
x 0

2
lim x / x 2
lim x ( x  2)  x
 lim 1 / x (1  2 lim 2 / x 2 )  0 / (1  0)  0 / 1  0
x  lim 1  ( 2 / x 2 ) x x
x 

e.g.3 XYZ company is spending x birr (measured in millions) and yielding sells of S(x) birr
5 x 2  10 x  5
(measured in millions) represented by : S ( x )  , x  1.
x 2  2x  2
Determine the absolute ceiling of sales.
Solution
5 x 2  10 x  5
Given S ( x)  2
x  2x  2
lim (5 x  10 x  5)/( x 2  2 x  2)
2
x 

lim( 5  10 / x  5 / x 2 ) /(1  2 / x  2 / x 2 ) (dividing both by x 2 )

x

lim (5  10 / x  5 / x 2 ) /(1  2 / x  2 / x 2 )  (5  0  0) /(1  0  0)  5 / 1  5

x 
24
Thus, the maximum sale is 5 millions birr.
Note: In general, limits at infinity for rational functions given by f(x)=P(x)/Q(x) where
p( x)  a n x n  a n 1 x n 1  a n  2 x n 2  ...  a n  c , a n  0 and
Q ( x)  a m x m  a m 1 x m 1  a m  2 a m  2  ...  a m c , a m  0 has three conclusions on its lim it behavior.
i.e. lim f ( x) is equal to :
x

i. 0 if n  m
ii a n / a m if n  m
iii does not exist (d .n.e) if n  m

2.6 Continuous Functions

Overview
Dear learner, once you have grasped all the techniques and evaluation of a limit, it is
important to deal the continuity of the function as it is crucial property of a function.
Continuous function can be defined as a function whose graph can be dawn without lifting
or removing a pen from a paper. Otherwise the function is said to be discontinuous if its
graph is broken at some point. In its formal definition a function f(x) is said to be continuous
at x=a if and only if the following conditions are satisfied.
a ) f ( x ) is defined at x  a i.e, f (a ) exists
b) lim f ( x ) exists
xa

c ) f ( a )  lim f ( x )
xa

e.g .1 show that the function f ( x)  3 x 2  4 x  4 is continuous at x  2

Solution :
f (2)  3( 4)  4( 2)  4  24 and lim f ( x)  lim(3 x 2  4 x  4 )  3( 4)  4( 2)  4  24
x 2 x 2

Since f ( a ) is defined , lim f ( x ) is exist and f ( a )  lim f ( x)  24,

x a x a

we conclude that the function is connuous at x  2

e. g.2 is the function f ( x )  ( x 2  1) /( x  1) is continuous at x  1
Solution :
f (1) is not defined . i.e. the lim it evaluation result is 0 / 0
lim f ( x )  lim( x 2  1) /( x  1)  lim x  1  2.
The lim it exists, even with 0 / 0 lim it evaluation result.

25
Although the limit of a function exist, f(a) is not defined at x=1. Therefore, the function is
discontinuous at x=1. It is not a continuous function.

e.g.3 The weekly cost, c (m), of renting a car from the auto rent company depends on the
number of miles driven. The cost function is given by:
100, 0  m  200

C (m ) 100  0.2m, 200  m  500
150  0.1m, m  500

Is the function continuous?

Solution:
To investigate whether the function is continuous or not at the given values of m, let’s check
the two trouble spot areas: m=200 and m=500
 For m  200 (i.e. lim c(m)
m  200
100
lim c(m)  lim
m  200 m  200

C (m)  c(200)  100 (it exists )

lim c(m) ( Let ' s see both sides lim it )
m  200

lim c(m)  lim 100


 100 ( from the first equation)
m  200 m  200

lim c(m)  lim 100  0.2m  100  40 ( from the sec ond equation)
m  200  m  200

Since the two side ( LHS & RHS ) lim its are not equal , lim c(m)  lim c(m)
m  200  m 200

then the lim it does not exist , consequently lim c(m)  c (200).
m  200

Therefore, the function is discontinuous at m  200.

26
 For m  50 (lim C ( m ) )
m 500

lim c (m)  lim 100  0.2m

m  500 m 500

C (m)  c(500)  200 ( from the sec ond equation)

lim (let ' see both sides lim its )
m 500

lim c (m)  lim 100  0.2

m  500 m 500

lim c (m)  lim 150  0.1m  lim c(m)  c(m)  200, the function is continuous at m  500
m 500  m 500 m 500

Finally, it can be concluded as, the function c(m) is not continuous function as it disconnects
or breaks at m=200 even though it is continuous at m=500.

Continuity on an Interval
A function becomes continuous on an interval:
 A function is continuous on an open interval (a,b), if it is continuous of every point in
(a,b) i.e. only points between a & b.
 A function is continuous on a closed interval [a,b], if it is continuous at every point (a,b)
and then continuous from the right at a and from the left at b.

e.g.1 Show that the function f(x)=(x+5)/(x-2) is continuous on the open interval of (-3,2)
Solution:
The three conditions for continuity are satisfied for any value of x between -3 & 2 (-3 <x<2).
Therefore, it is continuous in the open interval (-3, 2). However is not continuous for the
closed interval [-3,2], because f(x) is discontinuous of x=2, f (x) does not exist f at x=2

e.g.2 Show that f(x) = x is continuous on [0, 2].

Solution:

lim f ( x )  lim x is defined and then continuous for every value a  0.

x A x A

So the function is continuous on points between 0 & 2 (0 < x<2) as these points lie on a>0.
Moreover, here the two sides limit should also continuous for the continuity of the function
f(x) as it is a closed interval.

27
lim f ( x)  lim  x  2  f (2)  2 (continuous from LHS at 2)
x  2 x2

lim f ( x)  lim x  0  f (0)  0 (continuous form RHS at 0 )

x 0 x  0

Hence, the functionis continuouson 0,2.

ax 2  2, x  3
e.g . 3 Given the function f ( x)  
2ax  11, x  3
Find the value of ‘a’ that makes f continuous.
Solution:
To make the function of continuous at x=3; f(3) must be defined,
lim f ( x ) exist and lim f ( x )  f (3).
x 3 x 3
2
lim f ( x )  lim(ax  2)  9a  2, and
x 3 x  3

lim f ( x )  lim  6a  11
x 3 x 3

Next , equate the LHS & RHS lim its to get ' a '
lim f ( x )  lim f ( x )  lim f ( x )  f (3)
x 3 x 3  x 3

9a  2  6a  11
3a  9
a3
 The value of ' a ' must be 3 to make the function f continous at x  3

Note:
 The limit at a of a function that is continuous at a is the value of the function a
lim f ( x)  f (a ).
xa

 The function f is continuous form the left of a lim f ( x)  f (a).

x a 

 The function f is continuous from the right of a lim f ( x )  f (a ).

xa

 A function f is continuous at ‘a’ if and only if it is continuous from both the left & the
right at a. So
lim f ( x )  f ( a ). i.e. lim f ( x )  lim f ( x )  lim f ( x )  f ( a ).
x a x a  x a  x a

28
2.7 Properties and Theorems of Continuous Functions
i. A constant function f(x)=k, is continuous for all x where k is any constant
f(x)=3 is continuous for all x.
ii. Polynomials are continuous at each point.
f ( x)  3x 3  2 x 2  1 is continuous for all x.
iii. If p & q are polynomials, then the rational function p/q is continuous at each point
where it is defined. f(x)=(x2 +1)/(x-3) is continuous for all x except x=3.
iv. If f(x) & g(x) are both continuous functions, then
a ) f ( x )  g ( x ) is continuous
b) f ( x ). g ( x ) is continuous
c ) f ( x ) / g ( x ) is continuous

V. If f(x) is continuous at x =a, then f (x ) is continuous at x=a

Vi . If n is an odd positive integer greater than 1, n f ( x) is continuous wherever f(x) is

continuous. And if n is an even positive integer, n f ( x) is continuous wherever f(x)

is continuous and non negative.

Vii. If g(x) is continuous at x=c and the function f(x) is continuous of g(c) then the
composite function fog[f(g(x)] is continuous at x=c

Summary
 Limit is explained as what happens to a variable x or a function f as its constant
number n or variable x approaches to a particular value.
 The limit of a function exists when both the RHS and LHS limits are equal and it is
finite.
 Theorems of limit are categorized as theorems involving a single function, two
functions and more than two functions.
 A function is continuous if and only if
a) The limit of a function f(x) exists
b) The function f(x) is defined at a particular value x=a
c) The limit of a function f(x) must be equal to the value of f(a).

29
 Self Test Exercise 2
1. Find the limit of the following functions and verify whether the limit exists or not
a) g ( x )  x 5  3 x 4  20, x  0
 1
1  x, x
2
b) f ( x )  
 x, 1
 x
2
2. Show if the following functions are continuous at the given points
a ) f ( x )  5 x 2  8 x  9, at x  3
 x3 
b) f ( x )   2 , at x  3
 x  9 
3. Using the rules of limits, evaluate the limits of the following functions.

a) lim (3x 2  5 x) /( x  6) e) lim ( x  2) /( x  4)

x 4 x 4

b) lim 6 x 3  1 f ) lim 2 / x
x2 x 

c) lim ( x 2  2 x  24) /( x  6) g ) lim (2 x  5) /( x  1)

x6 x

1/ x
d ) lim (5 x 2  2 x  15) /( x  2) h) lim (1  x )
x2 x 2

4. Show whether the following functions are continuous at specified value of x.

a ) f ( x )  x 2  x  1, x3 d ) f ( x )  ( x 2  3x  12) /( x  3), x  4
b) f ( x )  ( x 2  1) /( x  1), x  1 e) f ( x )  ( x  3) /( x 2  9), x  3
 x  1 if x  0, x  0
c) f ( x )  
 x  1 if x  0

5. Using properties of continuity, determine whether the following functions are continuous
or not.
a ) f ( x)  x 3  x  3
b) f ( x )  x  2

30
 CHAPTER THREE
3. THE DERIVATIVE
3.1 Introduction
The derivative or differential calculus concerned with determining the rate of change of a
given function due to a unit change in the independent variable. In other words, it is the
study of the changes that occur in one variable when other variables on which it depends
changes. Different related terms will be discussed below before taking up the detailed study
of differential calculus.

Objectives
Upon completion of this chapter, you will be able to
 Explain the concepts and techniques of derivatives
 Derive the different orders of derivative
 Identify the conditions of a function to be continuous and differentiable
 Compute extremum values of a function

1. Increment:- Increment is a small change in the values of variables, for instance,

 x / dx (read as delta x) and y / dy (read as delta y) are representing the increment or

small change in the value of variable x and y respectively.

2. Average rate of Change:- The average rate of change of a function f(x) over and
interval x to x+  x is increment in x. In order drive this:
Let y  f ( x),
Thus y  y  f ( x  x)
y  f ( x  x )  f ( x ) (by subtraction)
f ( x  x)  f ( x)
 y / x  (dividing both sides by x).
x
 y / x is called the average rate of change of y w. r. t x. it is also called
incremental ratio.

31
 3. Instantaneous Rate of Change:- the limiting value of average rate of change of the
function f(x) as x  0 is known as instantaneous rate of change of function f(x) w . r.
t. x and expressed by the equation:
lim y / x  lim [ f ( x  x )  f ( x)] / x
x0

3.2 Definition of Derivative (First order derivative)

Can you define the term derivative particularly first order derivative?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

The derivative of a function denotes the instantaneous rate of change of a function. It shows
how the dependent variable changes for each unit change in the independent variable. It also
tells us that derivative or first order derivative of a function measures the slope of the
function.

By considering the function y=f(x) provided that x charges from x 0 to x 0  x and the

function y= f(x) changes from f ( x 0 ) to f ( x0  x ), the average rate of change of y can be

presented as y / x  [ f ( x0  x )  f ( x 0 )] / x. This change in y per unit change in x is also

known as difference quotient. Therefore, the instantaneous rate of change, which is the
limiting value of the function as x is small and approaching to zero is called the derivative.
i.e lim y / x  lim[ f ( x0  x )  f ( x0 )] / x
x0 x0

Note:
 The original function f is referred to as a primitive function where as the derivative
function is a derived function.
 The Difference quotient is a function of x 0 and x. But the derivative function is a

function of x 0 only as x approaches to zero. i.e., the derivative is the limit of the
difference quotient.

32
 The difference quotient measures the average rate of change where as the derivative
measures both the slope and the instantaneous rate of change of the original function.
 The primitive function is denoted by y=f(x), where as the derivative function is denoted
by f’(x) or f  (read as f prime of x) or dy/dx (read as the derivative of y w.r. t x) i.e. der.

f(x)=dy/dx= f  (x)= lim y / x

x  0

3.3 Geometric Interpretation of the derivative:

Overview
The derivative or first order derivative can be explained by graphical presentation through
recalling the concepts of slope and point of tangency in the first chapter. To illustrate this
curvilinear function is taken.
Can you make Geometric interpretation of derivatives? How the slope of curvilinear
function differs from that of a linear function?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Dear learner, unlike the linear function that you have seen earlier, the slope of the
curvilinear function is not constant; rather it differs at different points on the curve. Thus,
the slope of the line that is tangent to the function at that point measures the slope of a
curvilinear function at given point.

As it is shown in figure (a) in order to measure the slope of a curvilinear function at different
points separate tangent lines should be required as each tangent lines touches the curve at
only one point.

33
 Tangent line
Secant line
∆
∆ = ( +∆ )
∆

∆
∆
∆
= ( )
∆

0 = +∆ x
∆

Figure (a) Figure (b)

Figure 3.1 The Slope of a curvilinear function

In Figure (b), the slope of the tangent line (T) is derived from the slope of a family of secant
lines (S) which intersects a curve at two points.
f ( x 2 )  f ( x1) y 2  y1
i.e. Slope S  
x  x1 x 2  x1
f ( x1  x )  f ( x)

( x1  x )  x1
f ( x1  x )  f ( x1 )

x
[ It is exp ression of slope of S by letting x 2  x1  x & y 2  f ( x1  x )
If the distance between x1 & x 2 becomes smaller and smaller due to involvement of many
secant lines, the secant line pivots back to the left and becomes closer to the tangent line T.
i.e., As x  0, the slope of S approaches to a certain values of limit that such limit is the
slope of the tangent line T, which is also the slope of the function at the given point.
Slope T  lim it of slope S
 lim [ f ( x1  x )  f ( x1 )] / x
x  0

 lim[ f ( x1  h )  f ( x1 )] / h
h0

e.g. Find the slope of the function f ( x)  2 x 2

34
 Solution :
 lim[ f ( x1  h)  f ( x1 )] / h
h0

 lim[2( x  h)2  2 x 2 ] / h
h0

 lim ( 2( x 2  2 xh  h 2 )  2 x 2 ] / h
h0

 lim[2 x 2  4 xh  2h 2  2 x 2
h0

 lim 4 x  2h  4 x
h0

 The slope of the function y  x 2 depends on the value of x when x  2,

slope of T is 8; and it is 12 when x  3.

3.4 Techniques of Differentiation

What do you mean by differentiation what are the two ways of differentiating a function?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Differentiation is the process of finding derivatives of function. A function, which has a

derivative, is said to be differentiable function. The derivative of function can be obtained in
two ways:
1. By using the first principle or from definition
2. By using some standard rules of differentiation

1. Finding the derivative from first principle or from definition

This is a method of finding derivatives of a function without making use of the standard
theorems or rules of differentiation. This method involves the following five steps:
Step I: Put the given function equal to Y i.e., y=f(x)
Step II: Let x be increment in x and y the corresponding increment in y.

35
  y  y  f ( x   )
Step III : Subtract (1) from (2)
( y  y )  y  f ( x  x )  f ( x )
y  f ( x  x )  f ( x )
Step IV : Dividie both sides of (3) by x
y / x  [ f ( x  x )  f ( x )]x
Step V : Search for lim it or derivative at a function when x apporaches to zero.
y / x  lim y / x  lim f ( x  x)  f ( x)] / x
x  0 x0

e.g .1 Differentiate the function given by x 2.

Solution : Let y  x 2
y  y  ( x  x ) 2
y  y  y  ( x  x 2 )  x 2
y  x 2  2 xx  x 2  x 2
y  2 xx  x 2
y / x  [2 xx  x 2 ] / x
y / x  2 x  x
dy / dx  lim y / x  lim y / x  lim 2 x  x  2 x
x  0 x  0 x  0

e. g .2 Differentiate x abinitio w.r.t. x

solution : y x
y  y  x  x
y  y  y  x  x  x
 x  x x 
y  x  x  x   Rationalizing
 x  x  x 
x  x  x x
y  
x  x  x x x
x
y / x  [1 / x ]
x  x  x
y / x  1 /[ x  x  x ]
dy / dx  lim y /   lim 1 /( x  x  x  1 /(2 x )
x 0 x  0

36
e.g .3 Find the derivative of 3x 2  4 x  5
Solution :
* Y  3x 2  4 x  5
* y  y  3( x  x) 2  4( x  x )  5
y  y  3 x 2  6 xx  3x 2 4 x  4x  5
* y  y  y  3 x 2  6 xx  3x 2  4 x  4x  5  3x 2  4 x  5
y  6 xx  3x 2  4x
* y / x  [6 xx  3x 2  4x] / x  6 x  3x  4
y / x 6 x  3 x  4
* dy / dx  lim x  0  lim x  0  6x  4

2. Finding the Derivative with the use of Rules of Differentiation

Finding the derivative of a function by first method of using steps is a tedious process and
time taking. Hence this method of finding the derivative helps to simplify the process
through the application of rules.

a) Rules Involving a function of one variable

i. Constant function rule: For a constant function Y=f(x)=k, the derivative is zero for all
values of x i.e. dy/dx=0
e.g. f(x)=3; f (x) =0

ii. The power rule: for any number n, the derivative of a power function(x)=x n is nx n 1
i.e., d ( x n ) / dx  nx
e.g . Find the derivatives of the following functions
a) f ( x )  x 2
Solution : f ( x )  d ( x 2 ) / dx  2 x 21  2 x
b) f ( x )  x
dx 1 / 2 1 1 / 2 1
Solution :  f ( x)  d ( x ) / dx   (x ) 
dx 2 2 x

37
b) Rules involving two or more function of the same variable
iii. Sum-Difference rule
The derivative of sum/difference of two functions is the sum/difference of the individual
derivatives.
i.e, d [ f ( x)  g ( x)] / dx  df ( x) / dx  d g ( x ) / dx  f  ( x)  g ( x )
Examples : Find the derivative dy / dx for each of following functions.
a) x 3  x 2  x  f ( x)
Solution :
f ( x )  d ( x 3  x 2  x) / dx  d ( x 3 ) / dx  d ( x 2 ) / dx  d ( x) / dx
 3x 2  2 x  1

b) f ( x )  5 x 3  2 x 2  3
Solution :
f ( x )  d (5 x 3  2 x 2  3) / dx  d (5 x 3 ) / dx  d (2 x 2 ) / dx  d (3) / dx  15 x 2  4 x

iv. The product rule

The derivative of two differentiable functions is equal to the first function times the
derivative of the second function plus the second function times the derivative of the first
function.
i.e., d [ f ( x).g ( x )] / dx  f ( x)dg ( x ) / dx  g ( x)df ( x ) / dx  f ( x) g ( x )  g ( x ) f ( x)
Examples : Find the derivative of the following functions
a) y  (2 x 2  3) ( x  1)
Solution :
Let f ( x )  2 x 2  3 & g ( x )  x  y
dy / dx  f ( x ).g ( x)  g ( x) f ( x )
 (2 x 2  3)(1)  ( x  1) (4 x )
 2x 2  3  4x 2  4x
 6 x 2  4x  3

38
 b) y  2 x 2 (3 x 4  2)
Solution :
Let f ( x )  2 x 2 and g ( x )  3 x 4  2
dy / dx  f ( x ).g ( x )  g ( x ) f ( x )
 2 x 2 (12 x 3 )  (3x 4  2)4 x
 24 x 5  12 x 5  8 x
 36 x 5  8 x

V. The quotient Rule

The derivative of the quotient of two function, f(x)/g(x) is
d [ f ( x ) / g ( x)] / dx  [ f ( x) g ( x)  f ( x).g ( x )] / g 2 ( x )
Examples
Find the dervatives of quotient
a) y  ( x 2  1) /(1  x 2 )
Solution :
dy [d ( x 2  1) / dx.(1  x 2 )  d (1  x 2 ) / dx.( x 2  1)]
dy / 
dx (1  x 2 ) 2
2 x (1  x 2 )  [( 2 x )( x 2  1)]

(1  x 2 ) 2
2 x  2 x 3  [2 x 3  2 x ]

(1  x 2 ) 2
2 x  2 x 3  2 x 3  2 x]

(1  x 2 ) 2
4x

(1  x 2 ) 2

39
b) y  ( x 2  2 y  21) /( x  3)
Solution :
dy d ( x 2  2 x  21) / dx.( x  3)  [( x 2  2 x  2 x  21).1]

dx ( x  3) 2
(2 x  2)( x  3)  [ x 2  2 x  21).d ( x  3)dx ]

( x  3) 2
2 x 2  6 x  2 x  6  ( x 2  2 x  21)

( x  3) 2
2 x 2  6 x  2 x  6  x 2  2 x  21

( x  3) 2
( x 2  6 x  15)

( x  3) 2
`
Note: The product and quotient rule can be extended to more than two functions.

c) Rules involving functions of different variables

Vi. The chain rule
In this rule two functions are considered and form a new fog(x) or gof(x) function called
composite function. For instance, f(x) and g(x) are two functions whose combined function
fog(x)/gof(x) can be differentiated. For this condition the chain rule can also be known as
derivative of a composite function.
If f and g are differentiable function with y=f(u) and u=g(x), then the derivative of y with
dy df (u ) du dy du
respect to x is the derivative of u with respect to. x. i.e,  .  .
dx du dx du dx

Examples
Find dy/dx of the following functions:
a) y  u 2  1 and u  3 x  2
Solution :
dy dy du
 .  2u (3)  6u
dx du dx
dy
  6u  6(3x  2)  18 x  12 (sin ce u  3x  2)
dx

40
 b) y  (2 x  5)10
Solution :
To differenti ate such kind of function first we shoud decompose the function in to two functions.

i.e take the function inside the bracket as one function say u and then make y as use u 10
 u  2 x  5 , then y  u10
dy dy du
 .  10u 9 (2)  20u 9  20(2 x  5)9
dx du dx

c) y  x 2  1
solution :
apply decomposition first like " b"
i.e, u  x 2  1 and then y  u
dy dy du 1 1 2x x
 .  u ( 2 x)  .2 x  
dx du dx 2 2 u 2 u x 12

Vii. The inverse function rule

This rule is applicable if the function f(x) has its inverse function f 1 ( x )  f ( x )  x. This
implies that if there is one to one mapping between the variables x & y, strictly speaking,
the inverse function rule is applicable when the function is monotonic function (one-to-one
mapping function), which has two cases: monotonically increasing function
if x1  x 2 and f ( x1 )  f ( x 2 ) and monotonically decreasing function
if x1  x 2 and f ( x1 )  f ( x 2 ).
If this is so, the derivative of the inverse function is the reciprocal of the derivative of the
original function.
dx 1
i.e, 
dy dy / dx

dx
Examples: Find derivative of inverse function,
dy

a) y  x 3  x
Solution:

41
Here it is not possible to explain x in terms of y. So, first check the inverse function exists or
not so as to decide whether the rule is applicable or not.
dy
i.e.  3 x 2  1  0  The inverse exist and it is monotonically increa sin g function as the value
dx
2
3 x  1 is grater than zero for only values of x. Thus , the dervative of the inverse function becomes :
dx 1 1
  2
dy dy / dx 3 x  1

b) y  5 x  25
Solution :
Here it is possible to solve x int erms of y (i.e, its inverse function f 1 )
1
i.e. x  y  5. However , the derivative of the inverse function can be easily solved as
5
dx 1 1 dy
  sin ce 5
dy dy / dx 5 dx

Hence, the slope of the function is positive, i.e. 5>0, the function is monotonically
increasing function and then we can apply the inverse function rule to get the derivative of
the f 1

c) y  x 2
invese function ( x 2 )1 / 2  ( y)1 / 2  x  y 1 / 2
dx 1 1 / 2 1
 y 
dy 2 2 y

Hence it is not a monotonic function is (i.e, f(x) is positive, negative, zero) derivative of f 1
is obtained simply from its inverse of instead of applying the inverse function rule .

Viii. The L  H oˆ Pitals rule

This rule deals with the evaluation of the limit of function

42
 m( x )
f ( x)  as x approches to a where a can either finite or inf inite. Under this condition
n( x)
the lim it evaluation result may have the form 0 / 0
a) when both m( x) & n( x ) tends to zero as x  a
b)   ,   ,   ,    when both m( x ) & n( x) tends to   as x  a

Therefore, the limit of function with the above limit evaluation result form can be found by
the L H 0̂ pital’s rule instead of making simplified the function algebraically (i.e factoring
the function) as we have seen so far.
m( x ) m ( x )
i.e, lim  lim , where m' ( x ) and n ' ( x ) are the first derivative of m( x ) & n ( x )
x n( x ) x  n ( x )

Note: if the first derivatives m ( x ) & n ( x ) falls to the 0/0 or   format, we can reapply
the second derivatives m' ' ( x ) and n (x) in order that finding the limit of the function.


Examples: Find the limit using L.H 0 pital’s rule
1  x2
a) f ( x)  as x  1
1 x
Solution :
1 x2 0
lim  thus, by u sin g the rule
x 1 1  x 0
2
1 x  2x
lim  lim ( )  lim ( 2 x)  2
x 1 1  x x 1 1 x 1

2x  5
b) f ( x )  as x  
x 1
Solution:
Since m(x) and n(x) are infinite as x   and then have the form   , we can solve the
limit by using the rule:
2x  5 2
lim  lim ( )  lim ( 2)  2
x  x  1 x  1 x 

43
3.5 Continuity and Differentiability of a Function
Overview
In this section we will use the concept of limit to recognize the relationship between
continuity and differentiability. The conditions of a function to be continuous and
differentiable will be discussed in this section.
What properties or conditions should continuity of a function possess? Once the function is
continuous what additional conditions are required to be differentiable?
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As we have seen in the previous section about continuous function, function said to be
continuous if three of the following conditions satisfied.
i, The limit of the function must exist lim  lim  L
xa  x a

ii, f(x) must be defined  must be in the domain of f(x)

iii, lim f ( x)  f (a )
x a

And a function is said to be differentiable function at a point if it

i, is continuous at that point
ii, have a unique tangent at that point having a unique tangent refers to the existence of the
limit of difference quotient y x , which is expressed as:
y dy f ( x)  f ( a )
lim it   f ( x )  lim let x 0  a, x 0  x  x and x  x  a
x 0 x dx x  a xa
Note: For a function to be differentiable continuity is the necessary condition and the
existence of limit of the difference quotient is the sufficient condition.

Examples: show that the following function is continuous and /or differentiable.
a) f ( x)  2 x  3 at x  2
Is it continuous ?

44
Solution :
lim f ( x )  lim( 2 x  3)  7 and lim f ( x )  lim( 2 x  3)  7
x2  x2  x2  x 2 

f (2)  7
lim f ( x)  f (2)  7 Thus , the it is contnious
x 2

is it differentable
f ( x)  f ( a) f ( x )  f ( 2) 2x  3  7 2x  4 0
* lim  lim  lim  lim 
x e xa x  2 x2 x  2 x2 x  2 x2 0
2x  4 2( x  2)
 lim  lim  lim 2  2
x2 x  2 x2 x2 x 2

f ( x )  f (a ) f ( x )  f ( 2) 2x  3  7 2x  4 0
* lim  lim  lim lim 
x a xa x  2 xa x  2 x2 x  2 x2 0
2x  4 2( x  2)
 lim  lim  lim 2  2
x 2 x  2 x 2 x2 x 2

* lim 2  lim 2  lim 2  2

x 2 x 2 x 2

 Since the limit of the difference quotient exist and it is continuous at x=2, the function
f(x) is differentiable.

x
b) f ( x) at x  0
x
Solution :
Is it continuous ?
x x
* lim  lim (
) lim 1  1 and
x 0 x  x x 0 
x 0

x x
* lim  lim ( )  lim 1  1
x 0 x x 0 x x 0

sin ce the lim it doesn' t exist (i.e, lim f ( x)  lim f ( x)), it is not continuous.
x0  x0 

Is it differentiable?
As the function is not continuous it is also not differentiable.

45
c ) f ( x )  x  2  1 at x  2
Solution :
Is it continuous ?
lim x  2  1  1 and lim x  2  1  1
x 2  x2

f (2)  1
lim f (0)  f (2)
x 2

Thus, it is continuous.
Is it differenti able?
f ( x )  (a ) x  2 11 ( x  2)  ( x  2) lim  1
lim   lim  lim  lim   1
x a  xa x  2 x2 x  2 x2 x  2 x2 x  2
f ( x )  f (a ) x  2 11 ( x  2))
lim 
 lim  lim  lim  1
x at xa x  2 x2 x  2 x2 x 2

Since the both side limits are not equal, the limit at the difference quotient does not exist.
Thus, the function f(x) is not differentiable.

3.6 Derivatives of Exponential and Logarithmic Function

Can you make the proof of deviating exponential and logarithm functions?
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Under this topic, different forms of exponential and logarithmic functions are derivated
with the help of relevant theorems each will have a proof presented as follow:

3.6.1 Derivatives of Exponential Function

de x
Theorem 1 Given y = e x the derivative of e x is e x itself, i.e.,  ex
dx

46
 proof
y  e x ( given function)
x  1n y (inverse function)
dx 1
 (by inverse function rule )
dy y
dy de x 1
   y  ex
dx dx 1 / y

Theorem II Given the function y  e h ( x ) its derivative is multiplyin g e h ( x ) by derviatives of the

d (e h ( x )
exp onent h( x ). i.e,  h ( x ).e h ( x )
dx

Pr oof :
Given y  e h ( x ) and u  h( x ), then y  e u
dy dy du
 . (by the chain rule )
dx du dx
d (e u ). d [h( x )]

dx dx
u
 e , h ( x) (by theorem 1)
 h( x ).e h ( x )

Theorem III Given the function with the base a, y  a h ( x ) the derivative becomes:

d (a h ( x ) )
 h( x)a h ( x ) ln a
dx
Pr oof :
Given y  a h ( x ) and let t  h( x), then y  a t
a t  a t ( general truth).
ln a t  ln a t (taking natural log arithm of both sides )
ln a t  ln a t .1 (multplying the RHS by 1)
ln a t  ln a t . ln e (sin ce ln e  1)
ln a t  t ln a. ln e (by power rule)
ln at  ln e(t ln a) (by power rule)
a t  e (t ln a ) (cancelling ln on both sides ) *

47
d (a t ) d (e t ln a )
 (differentiating both sides )
dt dt
d (a t ) d (e u ) du
 . (chain rule by letting u  t (ln a ) * *
dt du dt
d (a t ) d (a t ) d (t ln a )
 . ( from above * and * *)
dt dt dt
d (a h ( x ) ) d (a h ( x ) ) d (tl na )
 . ( from the beggining let t  h ( x )]
dx dx dt
 h ( x ).a h ( x ) . ln a (by theorem 1 & 2)

Examples: Find the derivatives of the following functions using exponential rules.
a) f ( x )  e x 1
Solution :
let h( x )  x  1, then f ( x)  e h ( x )
f ( x)  h( x ).e h( x )  1.e x 1  e x 1

b) f ( x )  e 4 x
Solution :
let h ( x )  4 x, then f ( x )  e h ( x ) .
f ( x )  h ( x ).e h ( x )  4e 4 x

c ) f ( x )  e rt w. r. t ' t '
Solution :
let u  f (t )  rt , then f ( x )  e u
dy dy du d (e u ) d ( rt )
f ( x )   .   e u. r  re rt
dx du dt du t

2
3 x
d ) f ( x)  12 x
Solution :
let h ( x)  x 2  3x, then f ( x)  12 h ( x )
f  ( x)  h ( x).12 h ( x ). ln 12
2
3 x
 (2 x  3)12 x ln 12

48
e) f ( x)  161t w.r.t ' t '
Solution :
let u  1  t , then f ( x )  y  16u
dy dy du
 .  16u. ln 16.  1  161t (ln 16)
dx du dt
f ) f ( x )  x a e kx c
Solution :
taking the ln of both sides
ln y  ln( x a )  Ln( e kx c )
ln y  a ln x  kx  c
d (ln y ) d (ln x ) dx
a k
dx dx dx
1 1
( ) a  k
y x
dy a a
 (  k ) y  (  k ) x a e kx c
dx x x

Note: Theorem II and III are the generalized forms of theorems I provided that the
exponent is a function instead of a single variable and the base is any base a instead of
natural logarithm of base e.

3.6.2 Derivatives of Logarithmic Function

dy 1
Theorem I Given that f ( x )  y  ln x , its derivative is 
dx x

49
Pr oof :
f ( x)  f ( a)
f ( x)  lim
xa ( formula for first order derivative)
xa
ln x  ln a
 lim
x a (sin ce f ( x )  ln x and f (a)  ln a )
xa
ln( x / a)
 Lim
xa (quotient rule)
xa
a k 1 x 1
let k     1
xa a xa a k
ln( x / a ) 1 k 1 1 1
then  ln( x / a )  ln(1  )  ln(1  ) k
xa xa a k a k
ln( x a ) 1 1 1 1
f ( x)  lim  lim [ ln(1  ) k ]  lim ( ln(1  ) k ]
x a xa xa a k x  a k
a 1 as x  a  , K  
Since K   as x  a  , k  
x  a x 1
a
1 1
f ( x )  ln e 
a a
d ln x 1
f ( x )   (by replacing a by x )
dx x

Theorem II if x is replaced by some function of x, f (x), then the generalized rule for
finding the derivative of lnf(x) with respect to x is given as:
d ln f ( x) f ' ( x ) m arg inal function
 
dx f ( x) total function
Pr oof
Given that z  ln y and y  f ( x), then z  (ln f ( x)
dz dz dy
 . (chain rule)
dx dy x
d ln y
 . f ( x) (derivatives )
dy
1
 , f ' ( x) (log arithmic rule)
y
1
 f ( x )
f ( x)
dz f ( x)
 
dx f ( x)

50
Theorem III The other generalize d rule of theorm 1 for bases a other than e. i.e, (log ax )
d Log x a 1
is given as 
dx x ln a
proof :
log e x ln x 1
log ax  a
 a  a ln x (by log arithmic rule)
log e ln ln
x
d log a 1 1 d ln x 1 1 1
 d ln x  .  . 
dx ln a ln a dx ln a x x ln a

Theorem IV The more generlized rule of the theorem for the exp onent function f ( x )
instead of var iable x for the base a instead of e presented as :
d log af ( x ) f ' ( x) 1 f ( x )
 . if a  1, then the formula will reduced to
dx f ( x ) ln a f ( x)

Examples: Find the derivatives of the following functions using logarithmic rules
a ) f ( x )  ln 2 x
Solution :
let g ( x )  2 x
g' ( x) 2 1
f ' ( x)   
g( x) 2x x

b) f ( x )  ln x 2  1
Solution :
1
2
(2 x )
x 1 g ( x ) 2 x 2  1 x x2  1 x
let g ( x )      2
f ( x ) g ( x) x2  1 a ( x 2  1) ( x  1)
2
c) f ( x)  log 3( x  x )

Solution :
g ' ( x) 1  1  2 x  1 2x 1
let g ( x )  x  x 2 f ( x)  .  2

g ( x) ln a  x  x  ln 3 ( x  x 2 ) ln 3

51
d ) y  ln at
Solution :
let u  f (t )  at , then y  ln u
dy dy du 1 a a 1
 .  .a   
dt du dt u u at t
e) y  t 3 ln t 2 w.r.t. ' t '
Solution :
dy 3 d (ln t 2 ) dt 3
t  ln t 2  ( product rule)
dy dt dt
2t
 t 3 ( 2 )  ln t 2 (3t 2 )
t
 2t  3t 2 ln t 2  t 2 (2  3 ln t 2 )
2

f ) y  ln t c w.r. t ' t '

Solution :
(ln t c ) d ln t 1 c
d c c 
dt dt t t
c
Or let u  f ( t )  t , then y  ln u
dy dy du 1 c1 ct c  c
 .  .Ct  c  ct 1 
dt du dt u t t

3.7 Higher Order Derivatives

Overview
So far you have seen the first order derivatives of functions with the help of several
techniques. Now is the turn to see the higher order derivatives in terms of the derivative of
various order ranking.
Can you make a distinction between second and higher order derivative with previously
discussed first order derivative?
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52
Dear learner, as you have seen in previously discussed topics, the first derivatives of the
function, f’(x), is done using various techniques of differentiation. Moreover, in this section
we will see successive derivatives of function by considering the derivatives of a function
itself as a function, for instance, the derivative of the first derivative is called the second
d2y
derivative denoted by f " ( x ) or . In this case if f f (x) exist for all values of x in the
dx 2
domain the function f(x) is a said to be twice differentiable function and then continuously
differentiable function if f (x) is continuous. The derivative of the second derivative is
third derivative. Following the same principle we can derive the successive derivatives of
the function. Such phenomenon is known as the higher order derivative.

Generally speaking, the higher order derivative can be obtained for any positive integer n
indicating derivatives of order ranking (1st, 2nd, 3rd etc.), then nth derivatives of the function
fn(x) can be denoted by
d d n1 f ( x ) d n f ( x )
n 1
 n
provided that f n1 ( x ) is differentable function
dx dx dx

1 x
e.g .1 find the first and sec ond dervatives of the function f ( x)  , x 1
1 x
Solution :
1(1  x)  (1  x )  1 1  x  1  x 2
f ( x )  2
 2

(1  x) (1  x) (1  x ) 2
df ' ( x ) 0(1  x ) 2  [(2 x 2)(1  x )  1] 4
f ' ' ( x)   4

dx (1  x) (1  x) 3
Note : The s tan dared formula for the function with the form y  (ax  b) m is m(ax  b) m 1 .a
e.g .2 Find the first through the fourth derivatives of function y  4 x 3  cx 2  5 x  6.
Solution :
f ' ( x )  12 x 2  2 x  5
f ' ' ( x )  24 x  2
f ' ' ' ( x )  24
f 4 ( x)  0
e.g.3 Find the first three derivatives of Y=ax

53
f ' ( x )  a x ln a
d ln a da x
f ( x )  a x  ln a  a x (0)  ln a ( a x )
dx dx
2 x
d (ln a ) 2 da
f ( x )  a x 2
 (ln a )  a x (0)  (ln a ) 2 (a x ) (ln a )  a x (ln a ) 3
dx dx

e.g 4 Given the function y  (3 x  1) 5 find the first and third derivatives at x  1
Solution :
f ' ( x )  5(3x  1) 4 .3  15(3 x  1) 4  3840
df ' ' ( x) d [180(3 x  1) 3
f ' ' ' ( x)    1620(3 x  1) 2  25,920
dx dx
Note : some s tan dared formula for the n th derivative
1. y  (ax  b) m  f n ( x )  m( m  1)(m  2)........(m  n  1)(a n )(ax  b) mn
2. y  x m  f n ( x )  m(m  1)( m  2).....(m  m  1) x 0  m for m  n and 0 for n  m
3 . y  e ax  f n ( x )  a n e ax
( 1) n 1 (n  1)a n
4.  ln (ax  b)  f n ( x ) 
(ax  b) n

3.8 The Sign of the Derivative

What can you imagine about increasing and decreasing functions?
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Overview
Dear learner, the first through higher order derivatives have been discussed in the
proceeding section. The sign of such derivatives have a special importance in order that
identifying whether a given function is increasing or decreasing and whether a given
curvilinear function has convex or concave upward or downward.

54
To know if a function is increasing or decreasing we can use the result of the first derivative
sign that is, simply by looking the sign of the first derivative (+ve/-ve), we can judge about
the increasing or decreasing nature of function. If the first derivative of a function y=f(x) has
positive sign, f ( x)  0 , the function is increasing function at the point x, which refers that
the value of always increases as x increases and has an upward slope. similarly, if the first
derivative of a function y=f(x) has a negative sign, f ( x )  0, the function is decreasing
function at the point x which indicating that the value of y always decreases as x increases
and has a downward slope.

Examples: Given the function y=40-6x+x2 identity if the function increasing, decreasing at
values of x=2, x=3 and x=4.
Solution:
f ( x )  6  2 x
when x  2 f ' ( 2)  2  0 (the function is decrea sin g )
when x  4 f ' ( 4)  2  0 (the function is increa sin g )
When x  3 f ' (3)  0  0 ( niether of the two but the function is horizontal and stationary )

Although the first derivative test tells us about the shape of the curve it doesn’t indicate
whether the curves is convex or concave (i.e the convexity or concavity of the function).
Indeed, both convex and concave curves are upward sloping which implying that their sign
of first derivative result is positive. In order to identify the convexity and concavity of the
function we need to test the sign of the second derivative.
For illustration, let’s see the following upward sloping three curves.

Y B

P D
AA

C
X

Figure 3.2 Graphs of curvilinear function

55
The curve APB is convex downward (concave upward)
The curve CPD is curve upward (concave downward)
The curve CPB is neither convex nor concave
d2y
If the sign of second derivative is positive (  f ' ' ( x)  0), the function is increasing at
dx 2
increasing rate and has a concave upward curve, that is, Curve APB. Similarly if the sign of
d 2y
the second derivative is negative (  f ' ' ( x)  0), the function is increasing at a
dx 2
decreasing rate and has a concave down word curve, that is, curve CPD.

However, the curve CPB is neither of the two cases, because when the curve is between C
and P, its second derivative f ' ' ( x)  0 as CD is concave downward where as between points
P and B, the second derivative f ( x )  0 as PB is concave upward. Thus, at point P the
second derivate changes its signs. Such point is called the point of inflection of the curve
and then the tangent is called inflectional tangent.

e.g.1 Indicate the convexity or concavity of the function y  x 2  4 x

Solution :
f ' ( x )  2 x  4; f ' ' ( x )  2  0
 it is convex down ward / concave upward

1 4
e.g .2 Given the function y  x  3 x 2 indicate its convexity concevity
2
Solution :
 f ' ( x)  2 x 3  6 x; f ' ' ( x)  6 x 2  6
Since the sec ond derivative s changes it s sign ( f ' ' ( x )  0, f ' ' ( x )  0 and f " ( x )  0),
it doesn ' t give inf ormation about convexity convavity of the function f ( x ).

 x2
2
e.g .3 Given the function Y  ke , find the po int s of inf lection.
Solution :
 x2  x2  x2 x2
2 2 2
2 2 2
f ' ( x)   xke f ' ' ( x )  ke  x ke  ( x  1)ke

56
  x2
2
The po int of inf lection is where f ' ' ( x )  0, Thus, ( x  1)ke 2
, which occurs when x 2  1  0
i.e, x 2  1  ( x  1) ( x  1)  0
 The inf lection po int s will be x  1 and x  1

3.9 Maximization and Minimization: Extremum

Overview
The Successive derivatives from the first to the higher order are important to determine the
extreme values of a function, that is, maximum and minimum values. These maximum or
minimum points can be found by using two alternative methods. The conditions must be
satisfied for a point to be maximum or minimum will be discussed in this section.

How the critical and stationary values are computed? When do you say a value is maximum
or minimum?
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Maximum or minimum points can be easily found by using to alternative methods?

1. Using the first derivative test

Given the smooth and continuous function if the first derivatives of the function f(x) at x=x0
is zero (f’(x0)=0) then the value of the function at xo , f ( x o ), will be:
i. Relative maximum if f’(x) changes its sign from positive to negative from
immediate left of the point x0 to its immediate right.
ii. Relative minimum if f’(x) changes its sign from negative to positive from
immediate left of x0 to its immediate right.
iii. Neither maximum nor minimum if f’(x) has the same sign on both the immediate
left and right of x0. In such a case the point is on inflection.

Steps necessary to solve extremes in the first method are:

Step I Find the first derivative of the function
57
 Step II Solve for critical values of x, x0 by setting f’(x)=0
Step III Solve stationary values of f(x) by substituting x0 at the original function f(x)
Step IV Verify the change in signs for values x<x0 and x>x0, where x is immediate
neighborhood of X0.

Examples: Find the relative minimum and maximum values for the following functions:
a) f ( x )  x 3  12 x 2  36 x  8
Solution :
i . f ' ( x )  3 x 2  24 x  36
ii . the crtical values are obtained by marking :
3 x 2  24  36  0
(3 x  6) ( x  6)  0
x2& x6
iii Stationary values are :
f ( 2)  2 3  12( 2) 2  36( 2)  8  40
f ( 6)  6 3  12( 6) 2  36( 6)  8  8
 The stationary values are ( 2,40) & ( 6,8)
iv . Varifying sign changes :
x  2  f ' ( x )  0 eg x  1  f ' (1)  15
x  2  f ' ( X )  0 eg x  3  f ' (3)  9
 Since the sign changes from  ve to  ve (2,40) is a relative max imum
x  6  f ' ( x )  0 eg x  5  f ' ( s )  9
x  6  f ' ( x )  0 eg x  7  f ' (7)  15
 Since the sign changes from  ve to  ve (6,8) is a relative min imum.

58
 b) f ( x)  2 x 2  4 x  9
Solution :
f ( x )  4 x  4
 4x  4  0
x 1
f (1)  2(1) 2  4(1)  9  11
x  1  f ' ( x)  0 eg. x  0  f ' (2)  4
x  1  f ' ( x)  0 eg x  2  f ' (2)  4
 sin ce the sign changes from  ve to  ve the po int (1,11) is a relative max imum

2. Using the second derivative test

If the first derivative of a function of at x=x0 is f’(x)=0, then the function of x0 , f(x0),
will be:
i A relative maximum if f ( x0 )  0

ii A relative minimum if f ( x 0 )  0

iii A relative maximum or minimum or inflection point if f ( x 0 )  0

That is, if nth derivative is even number and f n ( x 0 )  0, fn (x0)>0 it is a relatively

maximum while if nth derivative is even number and it is a relative minimum and it is
inflection point if nth derivative is odd with a non zero derivative value at the critical value
x0, i.e, f n ( x0 )  0.

Examples: Find the relative maximum, relative minimum & inflection point for the
following function.
a) f ( x )  x 3  12 x 2  36 x  8
Solution :
f ' ( x)  3 x 2  24 x  36  critical values x  2 & x  6
f ' ' ( x)  6 x  24  f ' ' (2)  6(2)  24  12
 f ' ' (6)  6(6)  24  12
Thus, since the second derivative value at x=2 is less than zero, f ( 2)  12  0  the
function f is a relative maximum at (2,40) where as it is a relative minimum at (6,8) as
f (6)  12  0

59
b) f ( x )  2 x 2  4 x  9
Solution :
f ( x)  4 x  4  critical value 1 f ( x)  0
f ( x)  4
The value of the function f at critical value x  1, f (1)  11. Thus, the function is
relatively max imum at (1,11).

c) f ( x)  ( x  2) 4 , critical value x  2 and stationary value x  0  (2,0)

Solution :
f ( x)  4( x  2) 3 f ( x)  12( x  2) 2
f ( x)  0 f (2)  0
f ( x)  24( x  2) f ( 4 ) ( x)  24
f (2)  0 f ( 4 ) (2)  24
Since the order of derivative is even, f4(x) and the value of the derivative is greater than zero
the stationary value (2,0) represent a relative minimum.

Summary:
 The derivative of a function indicates how the dependent variable changes for each
unit of change in the independent variables. In this regard, the first order derivative
of a function measures the slope of the function
 For a function to be continuous, its limit must be defined
 For a function to be differentiable, it must be continuous (necessary condition) and
the limit of the difference quotient must exist (sufficient condition)
 There are two alternative methods of to determine the extremum values of a
function.
1. First order test
 The value of a function at a given point xo, f(xo) will be
i. Maximum if the sign of f (x) changes from positive to negative from left-to-right
of xo
ii. Minimum if the sign of f (x) changes from negative to positive from left- to-right
of xo

60
iii. Neither maximum nor minimum if the sign of f (x) doesn’t change
2. Higher order test
 If the first derivative of a function at xo, f (x) is equals to zero, f ( xo ) will be

i. Maximum if f ( x o )  0
ii. Minimum if f ( xo )  0
iii. Maximum or min imum or inf lection po int if f ( xo )  0

61
 Self Test Exercise 3
1. Differentiate the following functions with respect to x from definition
a ) y  3x  4 c) y  2 x 2  4 x  5
b) y  1 / x d ) y  x2  2x
2. Find the derivatives of the following function by using rules involving a function of one
variable
1 1 3
a) f ( x )  b) f ( x)  x  x1 / 2  3 x  2
5 2
3. Differentiate the following function by using involving two ore more function of the
same variable
a) f ( x )  ( x 2  1) (2 x  3) b) f ( x )  (2 x  1)( x 2  1) (3 x 2 )
x 2  3x  2 ax 2  b
c) f ( x )  d ) f ( x) 
2 x 2  5x 1 cx
4. Using the chain rule, find derivatives of the following functions
a) z  3 y 2 and y  2 x  5 b) ( x 2  5 x  3) 25
5. Check whether the following functions are monotonic or not and find the inverse
functions if it exists.
1 2
a) y  x  3x b) y  x 2
2
6. Using the L' H oˆ pital’s rule evaluate the following limits

6x 3  7 1 x  1 x
a) lim b) lim it
x  3x 2  9 x0 x
7. Derivate the following function using exponential rule
a ) y  x 2e5x
e5x  1
b) y  5 x
e 1
8. Use logarithmic rules to derivate the following functions
a) y  ln( 4 x  7)
b) y  3 ln(1  x ) 2
c) y  log a x 2  7

62
9. Find the relative minimum or maximum value of the following functions using first
order test
a) y  x 2  3
1 3
b) y  x  x 2  x  10
3
10. Find the relative minimum or maximum value of the following functions using higher
order test
a) y  x 2  3
1
b) y  x 3 x 2  x  10
3
c) y  x 3

63
 CHAPTER FOUR
4. ECONOMC APPLICATIONS OF DERIVATIVE
4.1 Introduction
The concept of derivative is paramount significant to evaluate economic problems.
Therefore, through the application of derivative it is possible to evaluate and interpreter the
economic problems given by different economic function such as demand, supply, revenue,
cost, profit and production functions.
Dear learner, do you remember what demand and supply function mean? Please define
them. How the market equilibrium could be achieved?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Objectives
After successful reading of this chapter, you should be able to
 Calculate the market equilibrium price and quantity
 Compute and interpret the price and income elasticity of demand
 Obtain the average and marginal products and cost
 Compute the optimum values of revenue, cost and profit functions using the concepts
and principles of optimization problem
 Determine the level of output which optimizes the total revenue, cost and profit
 Apply short run profit maximization principles so as to decide whether the firm
operates or not at a given price level.

4.2 Demand, Supply and Market Equilibrium

Demand Function: Demand is the ability and willingness of a consumer to purchase a
given commodity. Under such circumstance, there are some factors which determine ability
and willingness to buy. Among these factors price is the one which influences the quantity
of commodity demanded. So functional relationship between price and quantity demanded
of a commodity is known as demand function and denoted by Qdx  f ( p x ) where Qx & P

64
Are quantity demanded and price respectively. The relationship between the two economic
variables can be illustrated graphically as follow:

P D

D’
0 Q

Figure 4.1 Demand curve

The curve of demand DD’ slopes downward from left to right indicating that negatively
sloped demand curve in turn implies that the existence of inverse relationship between P
and Q. Thus, demand function is a decreasing function as its first derivative f’(p)<0 at x=p.
The different function can be written by different equation with the form Q x    bp x

Supply Function: following similar analogy to demand, supply is the ability and
willingness of a producer to produce and sell commodity. There are some determinants of
supply in which price is one of them. So such functional relationship between the two
economic variables price and quantity supplied of a commodity is called supply function.
Supply function refers to the relationship between these two economic variables and denoted
by QSx f ( p x ) where Qsx & p x are the quantity supplied & price of commodity x and its
graphical representation looks like.

P S

S
0
Q
Figure 4.2 Demand curve

65
Unlike the demand curve, the supply curie is positive sloped from left to right indicating that
the direct relationship between Qsx & Px. Thus, the supply function is an increasing function
as its first derivative f’(p) greater than zero at x=p. The supply function can be written by the
supply equation called Q sx  a  b p x .

Market Equilibrium: When the quantity demanded is exactly equal to the quantity
supplied of a given commodity the market quantity supplied equilibrium between DD and
SS for the commodity attained. Hence the point of intersection of demand and supply
functions will become the point of market equilibrium.

P
D
s

P*

s D’
0 Q* Q

Figure 4.3 Market equilibrium

Point E is the point of market equilibrium in which DD=SS. Consequently the price and
quantity at which the demand for commodity equals to the its supply are equilibrium price
(P*) and equilibrium quantity (Q*).

Numerical illustrations
e.g.1 Given the demand and supply curve of a commodity are DD = 20p-p2 and SS = p-1
respectively. So find the equilibrium price (p) and equilibrium quantity (Q)
Solution :
For equilibrum, demand equals sup ply
DD  SS  20  3P  P 2  P  1
P 2  4 P  21  0
P  7 or p  3

66
Since Price cannot be negative the possible equation price is p=3 and the quantity becomes:
Q = 20-3p-p2 = 20-9-9 = 2. Thus, the equilibrium and price quantity are 3 & 2 respectively.

e.g.2 If the demand is given by 6q+12p=36 and supply is q=3p-4, find the equilibrium price
1
and quantity demanded before and after tax t= per unit is imposed.
3
Solution :
i ) before tax imposition
For equilibrium :
DD  SS  6q  12 p  36  p  6  2 p
6  2 p  3p  4
10  5 p
p  2 ( equilibrium price ) and by substituting p  2 on DD equation, we get
q  6  2 p  6  2(2)  6  4  2 (equilibrum quantity )

1
ii) after tax imposition of t  , the new sup ply function will become :
3
1
SS : q  3 p  4  3( p  )  4  3 p  5
3
Thus , for equilibruim :
DD  SS  6  2 p  3 p  5
11  5 p
11
p   2.2 (equilbrium price) and
5

The equilibrum quantity becomes :

11 22 8
p  6  2( )  6   1.6
5 5 5
Analysis and int erperetation of tax impsition
* The total tax revenue  tax rate * quantity
1 8 8
 x 
3 5 15
8
So the additional revenue obtained due to tax imposition is .
15
*increase in price due to tax imposition is price after tax - price before tax = 2.2-2 = 0.2

67
*The price actually realized by seller (money received gained by the seller) is
21 1 28
Price paid by the buyer - tax per unit   
5 3 15

e.g.3 Given demand function p=S-2x and supply function

1
P ( x  S ). where p & x are prices and quantity , respectively.
2
a) find the equilibrium price & quantity
5
b) find the new equilibrium price and quantity provided that birr Subsidy is granted to
2
the producer.
Solution :
1
(a ) DD  SS  5  2 x  ( x  5)
2
10 x  4 x  X  5
5x  5
x  1 and p  5  2 x  5  2  3
5
(b) Due to subsidy , the new sup ply function will be :
2
1
p ( x  5)  2 p  x  5
2
x  2p  5
5
x  2( p  )  5
2
x  2p  5 5
x
x  2p  p 
2
So, the new equilibrium price & quantity becomes:
DD  SS
x
5  2x 
2
10  4 x  x
x 2
x  2 and p   1
2 2
*Total amount of subsidy= new quantity x subsidy rate
5
 2 x  5 birr
2

68
e.g. 4 Assume that there are two commodities in the market with p x & py are price of
commodity x and commodity y respectively and then the DD & SS for the two commodities
are as follow:
D x  10  p x  p y D y  12  2 p x  p y
S x  6  px  2 p y S y  9  3Px  5 p y

Find the equilibrium prices & quantities exchanged in the market.

Solution :
D x  s x ( equilibrium for com mod ity x )
10  p x  p y  6  p x  2 p y
2 p x  p y  4.....(eq 1)
D y  S y ( equlibirium for com mod ity y )
12  2 p x  p y  9  3 p x  5 p y
p x  6 p y  3.....(eq 2)

By forming a simultaneous equation we can get the required values through substitution
method.
2 p x  p y  4
2
 p x  6 p y  3
2 p x  p y  4

2 p x  12 p y  6
 11 p y  2
2
py 
11
To get p x :
2 p x  p y  4 ( from eq1)
2 px  4  p y
2 1 42  1  42 21
p x  (4  ).    
11 2 11  2  22 11
21  2 9
So, D x  10  p x  p y  10   
11 11 11
21 2 172
and D y  12  2 p x  p y  12  2 ( )  
11 11 11

69
4.3 Price and Income Elasticities
Overview
Elasticity is the responsiveness or sensitivity of a consumer to the price change. Price and
income elasticity’s are the usual typed of elasticities collectively it is known are elasticity of
demand. Price elasticity of demand is a technical term used to describe the responsiveness of
consumers towards the quantity demanded of a commodity to a change in its price.
How prices and income elasticities of demand are computed?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Price and income elasticity of demand is computed using the following equation expression.
proprtional or percentage change in quantity demanded
Pr ice elasticity 
proprtional or percentagechange in price
%Q d Q Q dQ dp M arg inal function
d    
%p d P P Q p Average function
dQ p
d  .
dQ Q
Where dQ & dp are change in quantity demand and price respectively, and Q & P are
quantity and price respectively. The role of elasticity concept on the relationship between
total revenue (TR) & price (P) looks like
dQ dp dp
TR  P.Q  der TR  MR  P. Q  P Q ( product rule)
dQ dQ dQ
Q dp  1  1 
 P(1  ] p 1    p 1  
p dQ  d    d 
 1   1  TR PQ
 MR  p 1    AR 1  ; sin ce AR  . p
  d    d  Q Q

Thus, when  d  1, MR  0  TR remains cons tan t  price has no

effect on total total revenue
 d  1, MR  0  TR rises
 d  1, MR  0  TR falls

70
 proportional or percentage change in quantity demand
Income elasticity 
proportional or percentage change in consumer' s income
Q y
y  . (by the same principle as  d )
Y Q
Income elasticity is the sensitiveness of consumers or households towards the quantity
demand for the change in their income.
The income elasticity of demand is different at different levels. i.e,
i.. if  y  0 the demand is perfectly inelastic
ii. if o   y  1 the demand is inlastic
iii. if  y  1 the demand is unitary elastic
iv. if  y  1 the demand is elastic
V . if  y   the demand is perfectly elastic

Numerical Examples
a) given that the demand function is Q=20-5p, find the inverse function and estimate
elasticity of the original and inverse function at p=2 and p=3
Solution :
inverse function  Q  20  5 p  p  4  0 2Q
 Q  20  5 p (original funcion) p  4  0.2Q (inverse function)
dQ / dp  5 ( slope ) dp / dQ  0.2 ( slope )
at p  2, Q  20  5(2)  10 at p  2, 2  4  0 2Q  Q  10
dQ p 2 1 p 1 2
d   5( )  1 d      1
dp Q 10 dp dQ Q 0.2  10 
at p  3, Q  20  5(3)  5 at p  3, 3  4  0.2Q  Q  5
 dQ   f  3 1  p 1  3
 d       5   3 d        3
 dp  Q   5 dp dQ  Q   0.2  5 

20
b) if the demand law is given by Q  , find elasticity of demand with respect to
( p  1),
price at the point p=3

71
 Solution :
dQ p dQ d (20( p  11 )
 20( P  1)
2
d  . ; 
dp Q dp dp
20 20
and p  3, Q   5
(3  1 4
 dQ p (20) 3  20  3   3
 d  .  2
.  .  
dp Q (3  1) 5 16  5  4

c) Given p=40-x, find the value of x for which  d  1.

dx
p = 40 - x  x = 40 - P, 1
dp
 dx p  40  x  40  x
d  .  ( 1)  
dp Q  x  x
40  x
So ,  d  1  40  x  x  40  2 x  x  20
x
d) The demand x as a function of income y is given by 30x=10+2y. Obtain the expression
for the income elasticity of demand and its value when y=250
Solution:
Given 30x=10+2y, differentiate x w. r. t y
dx dx 1
 30 2 
dy dy 15

dx y 1 y 30 y 1 2y
y    .   
dy x  15  (10  2 y ) / 30 10  2 y  15  10  2 y
2(250) 50
So, at y  250,  y  
10  500 51

72
4.4 Production and Cost Functions
Overview
Production function: it is the technical relationship between inputs and outputs referring to
the transformation of the factors of production to output produced. The Production function
can be expressed mathematically by considering different factors of inputs x for the
production of quantity produced. i.e, Q  f ( x1 , x 2, ....)

What does the first order derivative yield if you calculate the first order derivatives of
production and cost function?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Each factors of input has its marginal product with holding constant other inputs, for
instance the marginal product of x1 say x1 Labor (MPL) becomes the partial derivative of Q
with respect to. L.
change in total product Q
i.e MPL  
change in units of labor L
and its average product becomes :
total product Q
APL  
units of labor L

Cost Function: cost function are derived functions those derived from production function
the total cost is the sum of total fixed cost which are not changed with the change in output
level in the short run production and total variable cost, which are changed with level of
output changes. The application of derivatives on cost function is briefly explained by the
concepts of marginal and average cost.

Marginal Cost: it is an additional cost in which extra units of input is involved.

dC (Q)
i.e, MC   C (Q), C (Q ) is the total cos t function
dQ

73
Average Cost: the per unit cost of the total cost
C (Q )
i.e, AC 
Q
The rate of change of AC with respect to Q brings certain relationship between AC & MC.
d [C (Q )] dQ
Q  C (Q )
d ( AC ) d C (Q ) / Q  dQ dQ QC (Q )  C (Q )
  2

dQ dQ Q Q2
1  C (Q ) 

Q C (Q )  Q 
 
1
 [ MC  AC ]
Q
Suppose that rate of change or slope of AC is denoted by AC  there will be such relationship
between AC and MC.
 If AC   0, Mc  AC , MC lies above AC
 If AC   0, MC  AC , crosses each other
 if If AC   0, MC  AC , MC lies below AC

Numerical Examples
1. Given that the total cost function c(Q)  .0005Q 3  0.7Q 2  30Q  3000
a) Find AC, MC and their slopes and
b) Find the values for which MC=AVC
Solution :
C (Q)
a ) AC   0.0005Q 2  0.7Q  30  3000 / Q
Q
dAC
0.001Q  0.7  3000 / Q 2 (slope)
dQ
dTC
MC   0.0015Q 2  1.4Q  30
dQ
dMC
 0.003Q  1.4 (slope)
dQ

74
 TVC 0.0005Q 3  0.7Q  30Q
b) AVC    0.0005Q 2  0.7Q  30
Q Q
and MC  0.0015Q 2  1.4Q  30
So, MC  AC  0.0015Q 2  1.4Q  30  0.0005Q 2  0.7Q  30
0.0015Q 2  0.0005Q 2  1.4Q  0.7Q  0
0.001Q 2  0.7Q  0
0.001Q 2 0.7Q

Q Q
Q  0.7 / 0.001  700

2. Given total cos t (TC )  ac bq , find the value of q at which MC  AC

Solution :
dae bq de bq abq
MC  a  ae bq .  ae bq .b
dq dq dq
ac bq
AC 
q
ae bq qabe bq ae bq 1
 MC  AC  abe bq   bq
 bq  bq  1  q 
q ae ae b

4.5 Optimization Problems

Overview
Economic problems especially in the form of revenue and profit function would be solved
by the help of concept of optimization. i.e, solving the optimum or relatively extreme value
of a given function through derivatives application. Previously, we have seen that relatively
minimum or relatively maximum values of an economic problems found using the first and
second order derivative test.

For the sake of reminding what has been discussed previously let’s see the following:
A given function f(x) at critical value x=x0 will be:
i. relatively max imimum if n is even number and f ( n ) ( xo )  0
ii. relatively min imum if an even number and f ( n ) ( x0 )  0
iii . an inf lection po int if n is an odd number and f ( n ) ( x0 ) is a non negative value

75
e.g .1 find the relative extremum of the function y  ( x  4) 6

Solution :
crtical value : f ' ( x)  6( x  4) 5  0  x  4
f ' ( x)  6( x  4) 5 f ' ' ( x)  30( x  4), 4 f ' ' ' ( x)  120( x  4),3 f 4 ( x( 360( x  4) 2
f ' (4)  0 f ' ' (4)  0 f ' ' ' (4)  0 f 4 ( x)  0
f 5 ( x )  120( x  4) f 6 ( x)  720
f 5 (4)  0 f 6 ( x )  720
 The function f ( x) is relatively min imum sin ce n  6 is an even number
and f 6 (4)  720  0

e.g .2 find the extreme value of function x  7 x 2  112 x  54

Solution :
112
crtical value : f ' ( x )  14 x  112  x   8
14
f ' ( x )  14 x  112 f ' ' ( x )  14
f ' (8)  0 f ' ' (8)  14
 it is a re latively min imum sin ce n  2 is even and f ' (8)  14  0
Exercises : find the relatively extremum value of function given below
a ) y  (7  x ) 3 b) y  9 x 2  72 x  13

4.6 Economic Application

e.g.1 Maximize the following total revenue (TR) and profit (  ) function using application
of derivatives on economic problems.
TR  32Q  Q 2   Q 3  6Q 2  1440Q  545
Solution :
In economic application the economic problems are solved by making
the first derivative of the given function or the m arg inal value of the
function or the slope of the function to zero.

76
Therefore, the maximum value of the TR and  will be calculated first finding out the
quantity that makes TR or  maximum though making TR/  derivative to zero.
i.e, TR  32Q  Q 2
TR '  32  2Q  0
32  2Q
Q  16 (level of quantity that makes TR max imum)
 TR  32Q  Q 2 , Q  16
 32(16)  (16) 2
 256

  Q 3  6Q 2  1440Q  545
'  3Q  12Q  1440  0
 b  b 2  4ac
Q , to solve value of Q
2  4ac
12  (12) 2  4(3)(1440) 12  17,424 12  132
Q  
2(3) 6 6
12  132 12  132
Q or Q
6 6
Q  24 or Q  20
 The level of quantity that makes  max imum becomes Q  20,
So the max imum  becomes :
  Q 3  6Q 2  1440Q  545
 (20) 3  6(20) 2  1440( 20)  545
 17,855

e.g . 2 For the following total cos t function : TC  Q 3  21Q 2  500Q

a) find the average cos t ( AC ) function
b) the critical value at which AC is min imized
c) the min imum average cos t.

77
Solution :
TC Q 3  21Q 2  500Q
a ) AC    Q 2  21Q  500
Q Q
b) AC   2Q  21  0
 2Q  21
21
Q  10.5
2
c) min imum AC which exists at Q  10.5
i.e, AC  Q 2  21Q  500, Q  10.5
 (10.5) 2  21(10.5)  500
 389.75

e.g. 3 Given the total (TR) function, TR  5900Q  10Q 2

total cos t (TC ) function, TC  2Q 3  4Q 2  14Q  845 of a given firm.
find the output level of which
profit is max imized and the max imum profit.
Solution : The output level that max imizes 
  TR  TC
  5900Q  10Q 2  (2Q 3  4Q 2  140Q  845)
5900Q  10Q 2  2Q 3  4Q 2  140Q  845
 2Q 3  6Q 2  5760Q  845
'  6Q 2  12Q  5760  0
 b  b 2  4ac
Q
2a
12  (12) 2  4(6)(5760) 12  144  138,240 12  138,384
Q  
2( 6)  12  12
12  372 12  372 12  372
Q Q  or Q 
 12  12  12
Q  32 or Q  30
The  max imizing level of out put is 30. Thus, the max imum profit will be :
  2Q 3  6Q 2  5760Q  845, Q  30
 2(30) 3  6(30) 2  5760(30)  845
 54000  5400  172,800  845
 112,555

78
e.g . 5 For a firm under perfect competitio n it is given that p  10, and
1
C  q 3  5q 2  28q  27, where p s tan ds for price per unit, q s tan ds for units of out put
3
and C for total cos t find

a ) Quantity produced at which profit will be max imized and the amoun t of max imum profit
b) What h appen to equlibrium out pu t and max imum profit when p  2
c ) Should the firm produces at this price in the short run

Solution :
1 3
a )   TR  TC ; TR  19q & TC  q  5q 2  28q  27
3
1
   19q  q 3  5q 2  28q  27
3
4
   q 3  5q 2  9q  27
3
d
  q 2  10q  9
dq
d
So, for max , 0
dq

  q 2  10q  9  0
 10  100  4( 1)(9)  10  64  10  8
q  
2( 1) 2 2
 10  8 10  18
q or q 
2 2
q  1 or q  9
The other criteria that should be verified here is that the second derivative of  have to be
less than zero.
d 2
 2q  10
dq 2
 ' (1)  2(1)  8  8  0 (impossble)
 ' (9)  2(9)  8  8  0 ( possible)

79
 Therefore, the  max imizing out put is 9 but not 1.
Consquently, the max imum profit will be :
d 3
 q  5q 2  9q  27
3
1 3
 (9)  5(9) 2  9(9)  27
3
 54
1 3
b) If p  12, then TR  12q & TC  q  5q 2  28q  27
3
1 3
  TR  TC  12 q  q  5q 2  28q  27
2
1
   q 3  5q 2  28q  27
3
2
d
2
  q 2  10q  16  0
dq

 10  100  4(1)( 16)  10  36  10  6

q  
2( 1) 2 2
 10  6 10  6
q or q 
2 2
q  2 or q  8
d 2
 2  10
dq 2
 ' ' (2)  2( 2)  10  6  0 (imposisible)
 ' ' (8)  2(8)  10  6  0 ( possible)
The  max imizing output q  8 and then,
1 3
The max .   q  5q 2  16q  27, q  8
3
1
 (8) 3  5(8) 2  9(8)  27
3
  17 3  5.67 (loss )

c) Note that Although the firm gets a loss, it is possible to continue its operation if its price
is greater than the minimum AVC (i.e, p >min AVC) or if its loss is less than its fixed cost
(i.e , loss <FC). But if the loss is greater than its fixed cost, the firm should cease its

80
operation instead of continuing it. The point of which the p=min. AVC is called the
breakeven point.

Let’s see the case prevailed in (b)

1 3
TC  q  5q 2  28q  27 (TVC  TFC )
3
1
TVC  q 3  5q 2  28q & TFC  27
3
1 3
q  5q 2  28q
TVC 3 1
AVC    q 2  5q  28
Q q 3
2
AVC '  q 5  0
3
2
q5
3
15
q  7.5
2
1 15 15
min . AVC  ( ) 2  5( )  28
3 2 2
111
  9.25
12
Since the price p  12 is greater than the min imum AVC  9.25 (or the loss  5.67  FC  27)
the firm can continue its operation.

81
 Self Test Exercise 4
1. Given the total cost (TC) function : Tc  Q 3  5Q 2  60Q, find
a) The average Cost (AC) and marginal cost (MC) functions
b) The Critical value at which AC is minimized and the minimum AC
2. Given the total revenue (TR) and total cost (TC) functions:
TR  1400Q  7.5Q 2 and TC  Q 3  6Q 2  140Q  750
a) Find the critical value where profit is at a relatively extremum and
test the second order condition
b) Calculate the maximum profit
3. Given that Q = 5-3p, find the elasticity coefficient if p=4

82
 CHAPTER FIVE
5. DIFFERENTIAL CALCULUS OF FUNCTION
OF SEVERAL VARIABLES
5.1 Introduction
Dear learner, the technique of derivatives that was discussed in chapter three is function of
single independent variable. However, in this chapter function of several in dependent
variables will be differentiated. The difference between the two cases of finding derivatives
is that in the case of function of single independent variable a derivative gives the rate of
change of a function with respect to (with respect to) that particular single variable while in
the case of function of several independent variables a derivative gives the rate of change of
function by considering the several independent variables once at a time. The process of
finding derivatives of several variables function is known as partial differentiation, and the
result is referred to as partial derivative of f with respect to chosen independent variable

Objectives
By the end of your work in this chapter, you will be able to
 Derive partial derivates of functions
 Distinguish between partial and total derivatives
 Calculate and interoperate marginal values with the application of first and higher
order derivatives.
 Critically examine the effects on target variables due to extra unit change on other
variables
 Identify rules of differentiation
 Solve constrained and unconstrained optimization problems.

5.2 Partial Derivatives

5.2.1 First Order Partial Derivative
Suppose that Z=f(x,y), the first partial derivative with respect to x is the derivative of f
considering y as a constant and x as a variable. It is denoted by f / x where :

83
 f f ( x  h, y )  f ( x , y )
 lim
x h  0 h

It can be also denoted by z  f x ( x, y )  f x

x

Similarly , f y  f is given by
y
f f ( x, y )  h  f ( x, y )
 lim ( partial derivative of f w. r. t.)
y h0 h

e.g . 1 Suppose that z  f ( x. y )  2 x 2  3 x 3 y  5 y 2  1 find

a) first partial derivatives of z w. r. t. x & y
b) evaluate the above partial derivatives of x & y at po int (2,3)
Solution :
z
a) partial derivatives of z w.r .t x, is found by considering y as a cons tan t
ax
z  4 x  6 xy (think of 3 y as a numericaal cofficient of x )
x
z
and partical derivative of z w.r.t. y, , is found by considering x as a cons tan t.
y
z
 3x 2  10 y (think of 3 x 2 as a numerical coefficient of y
y
b) The value of partial derivative of z w.r . t x and y will be evaluated as follow
by the given notations.
z
  f x (2,3)  4 x  6 xy  4(2)  6(2 * 3)  28
x /(2,3)
z
  f y (2.3)  3x 2  10 y  3(2) 2  10(3)  18
y (2,3)

e.g . 2 For f ( x, y )  e xy  5 xy 2 , find

a ) f x (0,1) b) f y (1,0)
Solution :
de ax
a) f x ( x, y )  ye xy  5 y 2 (sin ce  ac ax )
dx
f x (0,1)  1(e 0. y )  5(1) 2  1  5  6
b) f y ( x, y )  xe xy  10 xy
f y (1,0) 1(e 0 y )  10(1)(0)  1  0  1

84
5.2.2 Higher Order Partial Derivatives
As with ordinary derivatives it is possible to take a partial derivative of second, third or
higher order. For instance, there are four different ways to find a second partial derivative of
z=f(x,y). There are:
  f   2 f
1. Differentiating twice w.r .t. x :    f xx
x  x  x 2
  f   2 f
2. Differentating twice w.r.t y :    f yy
y  y  y 2

  f   2 f
3. Differentating first w.r.t x and then w.r .t y :    f xy
y  x  yx
  f   2 f
4. Differentating first w.r .t y and then w.r .t x :    f yx
x  y  xy

Note: The third and fourth cases are called “mixed” partial derivatives. The distinction
  f   2 f
between them is that the partial derivative   indicates differentiating with
y  x  yx
respect to. x first and ordered from right to left but the partial derivative (fy)x = fyx indicates
differentiation with respect to y first and ordered from left-to –right.

e.g. 1 Find the second partial derivatives of f(x,y)=3xy2-2y+5x2 y2 and determine the value
of f xy (1,2).

Solution:
We should first begin by finding the first partial derivatives.
y f
f x ( x, y )   3 y 2  10 xy 2 f y ( x, y )   6 xy  2  10 x 2 y
x y
then, differentiating each with respect to. x & y
  f   2 2 2
f xx ( x. y )     (3 y  10 xy )  10 y
x  x  x
  f  
f yy ( x, y )     (6 xy  2  10 x 2 y )  6 x  10 x 2
y  y  y

85
   f  
f yx ( x, y )     (3 y 2  10 xy 2 )  6 y  20 xy
x  y  x
  f 
f xy (1,2)     6 x  20 xy  6(2)  20(2)  28
y  x /(1,2) 

e.g. 2 Find the sec ond partial derivatives of f ( x, y , z )  ye x  x ln z

Solution :
First partial derivatives are
1 x
f x ( x, y, z )  ye x  ln z; f y ( x, y , z )  e x ; f z ( x, y , z )  x  
 z z
Second partial derivatives are
1
f xx ( x, y , z )  ye x f xy ( x, y, z )  e x f xz ( x, y , z ) 
z
f yx ( x, y , z )  e x f yy ( x, y , z )  0 f yz ( x, y , z )  0
1 x
f zx ( x, y, z )  f zy ( x, y, z )  0 f zz ( x, y , z ) 
z z2

Note: from the above illustrations we can obtain two facts:

1. For the function of two variables there are two first partials and four second partials
while for the function of three variables , there are three first partials (fx,fy,fz) and
nine second partial (fxx, fxy, fxz, fyx, fyy, fyz, fzx, fzy and fzz) in which six of all are
mixed variables.
2. To take partial derivatives of order three and higher we follow the same pattern used
in taking second partial derivatives for instance z=f(x,y):

  2 f  3 f   2 f  3 f
z xxx     3 and z xxy    
x  x 2  x y  x 2  yx
2

5.2.3 Economic Applications of Partial Derivative

e.g. 1 The cost (C) of producing a color video monior is dependent on the cost of material
(x) and the cost of labor (y) and it is approximated by c(x,y)=2x+5y2-3xy+6 where c and x
are measured in birr.
a) Find Cy(3,8)

86
 b) What interpretation can be given to Cy (3,8)
Solution:
a. Cy(x,y) = Cy = 10y-3x
Cy (3,8) = 10(8)-3(3) = 71
b. Cy represents rate of change of cost (C) with respect to. labor cost (L). Thus, Cy(3,8) =
birr 71 tells us that the cost of producing color monitor is changed by birr 71 for a unit
change in labor cost (may be from birr 7 to birr 8 or from birr 8 to birr 9)

e.g. 2 The total sales for a particular product for a certain corporation is dependent on
amount of money (x) spent on magazine and the amount (y) spent on commercial activities.
The sales function is given by S ( x, y )  5  4 xy  x 2 , where S, x, y are measured in
thousands of birr.
S
a) Find
x /( 2,5)
b) If the corporation rises its expenditure on magazine from 2 to 3 and commercial
activity expenditure remain the same. Do you think this a good idea? Explain your
answer.
Solution :
S
a)  4 y  2x
x
s
 4(5)  2(32)  16
x /(2.5)
f
b)  4 y  2 x  4(5)  2(3)  14
x /( 3.5)
Really, it is not good idea, because the corporation decreases its sales from 16 to 14
thousand birr by using its magazine expenditure by thousand birr.

e.g. 3 The productivity of an airplane manufacturing company is given by the cobb-douglas

production function f(x,y)=40x 0.3 y0.7
a) Find fx(x,y ) and fy(x,y)
b) If the company is currently using 1,500 units of Labor (x) and 4500 Units of capital
(y) find the MPx and MPy.

87
 Solution :
0.7
y
a ) f x ( x, y )  0.3 (10) x 0.31 y 0.7  12 x 0.7 y 0.7  12 
x
0.3
0.3 0.7 1 0.3 0.3 x
f y ( x, y )  0.7(40) x y  28 x y  28 
 y
0.7
 4500 
b) MPx  f x (1500,4500)  12   12(3) 0.7  25.89
 1500 
0.3
 1500  1
MPy  f y (1500,4500)  28   12   20.14
 4500   3

e.g. 4 A company manufactures ten-speed and three-speed bicycles. The weekly demand
and cost function are
p  230  9 x  y
q  130  x  4 y
C ( x, y )  200  80 x  30 y
Where P is the price of a ten-speed bicycle in birr, q is the price of a three-speed bicycle in
birr x is the weekly demand for ten-speed bicycles y is the weekly demand for three –speed
bicycle and C(x,y) is the cost function. Find the revenue (R) & profit (p) amounts at Rx
(10,5) and Px (10,5) respectively & interpret the results.
Solution:
Rx(x,y) is the summation of revenue gained from ten-speed (ten) and three-speed (three)
bicycles. That is,
R x ( x, y )  Rten  Rthree
Rten  p.x  (230  9 x  y ) x  230 x  9 x 2  xy
Rthree  p. y  (130  x  4 y ) y  130 y  xy  4 y 2
 Rx ( x, y )  Rten  Rthree
 230 x  9 x 2  xy  130 y  xy  4 y 2
 9 x 2  4 y 2  2 xy  230 x  130 y

R x ( x, y )  18 x  2 y  230
R x (10.5)  18(10)  2(5)  230  180  240  60

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 p( x, y )  R( x, y )  C ( x, y )
p( x, y )  9 x 2  4 y 2  2 xy  230 x  130 y  (200  80 x  30 y )
p( x, y )  9 x 2  4 y 2  2 xy  230 x  130 y  200  80 x  30 y
p( x, y )  9 x 2  4 y 2  2 xy  150 x  100 y  200
p x ( x, y )  18 x  2 y  150
p x (10,5)  18(10)  2(5)  150  180  160  20 (loss )

Interpretation: The revenue of the company changes by 60 for a unit change in quantity
demand of bicycle of ten-speed. Also the profit changes by -20. i.e incur a loss of 20.

5.2.4 Differentials and Total Derivatives

What is the difference between total differential and total derivative?
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5.2.4.1 Differentials
Given the function Z = f(x,y), its differentials with respect to x & y through applying the
rules of derivatives will be:
If we assume that x changes by an amount x, the change in Z ( z ) will be

 z   z  z
x     x  z  .x, and
 x   x  x
If we assume Y changes by an amount y, the change in Z (z ) will be :
z z z
  z  y
x x x
Therefore, differentials referred to as the effect prevailed in the given function due to a small
change in different independent variables.

Total Differential
Dear learner, previously you have seen the change in a given function as a result of changes
in one independent variable keeping other variables remains unchanged. This is the case of
differentials. But in the case of total differentials all independent variables changed

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simultaneously and results a total change in the function. i.e., the change in the function is a
result of a joint change in the independent variables. Therefore, given the above function Z =
f(x,y) the total change in Z ( z ) is a result of sum of small changes in x (x) and y ( y ).

 z   z 
i.e z   .x    x 
 x   y 
and a lternative ly when these small changes tends to approach zero;
 z   z 
dz   .dx    .dy   total differental
 x.   y 
This exp resion of total differential can also be denoted by dz  f x dx  f y dy

The total differential of a given function is solved using the rules of differential.

Rules of differentials
By using the rules of differentials we can differentiate the total differentials of the function
as follows:

Rule1: Total differential of sum

e.g . 1  Z  3x 2  2 y 3
 dz  d (3x 2 )  d (2 y 3 )
 6 x.dx  6 y 2 dy

Rule 2፡ Total differential of a product

e.g . 2 Z  ( x 2  y ) (2 x  y 2 )
 dz  d ( x 2  y ).(2 x  y 2 )  d (2 x  y 2 ) x 2  y
 (2 xdx  dy )(2 x  y 2)  (2dx  2 ydy)( x 2  y )

dz  4 x 2 dx  2 xy 2 dx  2 xdy  y 2 dy  2 x 2 dx  2 x 2 ydy  2 ydx  2 y 2 dy

 6 x 2 dx  2 xy 2 dx  2 ydx  2 x 2 ydy  3 y 2 dy  2 xdy
 (6 x 2  2 xy 2  2 y )dx  (2 x 2 y  3 y 2  2 x )dy

90
Rule 3 Total differential of a quotient
x2  y2
e.g . 3 Z 
x y

( x  y )d ( x 2  y 2 )  ( x 2  y 2 )d ( x  y )
dz 
( x  y) 2
( x  y )(2 xdx  xydy )  ( x 2  y 2 )(dx  dy )

( x  y) 2
( x 2  y 2  2 xy )dx  ( x 2  y 2  2 xy )dy

( x  y) 2

Rule 4 The Chain rule in total differential

e. g. 4 Z  x  y
1
2
 Let u  x  y, Z  u  u
1
1
dz  u 2 . du ..................................(i)
2
du  d ( x)  d ( y )  dx  dy...........(ii )
Substituting (i ) in (ii ) we get :
1
1 
dz  u 2 (dx  dy )
2
1
 (dx  dy )
2 x y

Rule 5 Total differential of exponential function

2
 y2
e.g. 5 Z  e x
 Let u  x 2  y 2 , then z  e u
dz  d (e u )du  e u du
du  d ( x 2  y 2 )  2 xdx  2 ydy
2
 y2
dz  e u .(2 xdx  2 ydy )  e x (2 xdx  2 ydy )
2
 y2 2
 y2
 2 xe x dx  2 ye x dy

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Rule 6 Total differential of logarithmic function
3x y
e. g. 6 Z  log 10  ln( 3 x  y )
 Let u  3x  y , then Z  Ln u
1
dz  d (ln u ).du  .du
u
dy  3dx  1dy

1
dz  d (ln u ).3dx  dy  (3dx  dy )
u
1
 (3dx  dy )
3x  y
3 1
 dx  dy
3x  y 3x  y

5.2.4.2 Total Derivatives

Let’s consider the following function Y=f(x,w) and x & w are related i.e,x=h(N) so that the
concept of total derivative a rises from this to find the rate of change of y with respect to. w
*In the above function the variable w can affect y in two ways
f
i. Directly via the function f, fw=
w
ii. Indirectly via the function h and then f
Thus, the total derivative will be found by first differentiating y total to get the total
differential
(i.e dy  f x dx  f w dw and then dividing both sides by dw.

dy dx dw
  fx  fw.
dw dw dw
dy dx
 fx  fw
dw dw
dx
where f x is thein direct effect of w on y. Therefore,
dw
dy dx
 fx  fw is the total derivative
dw dw
dy
Note: The process of finding the total derivative is called total differentiation of
dw
y with respect to w.

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 dy
e.g . 1 find the total derivative given the function y  f ( x, w)  5 x 2  3w  1,
dw
where x  h(w)  zw
Solution :
dy dx
 fx  fw
dw dw
10 x (2)  (3)  20 x  3, x  2w
 20(2 w)  3  40 w  3

e.g . 2 Find the total derivative of the function  f ( x, t )  ( x  t ) ( x  zt ), x  h(t )  2  t

Solution :
dz dx
 fx  ft
dt dt
f dx
 [1( x  2t )  ( x  t )(1)],  7  1 ( x  2t )  ( x  t )  2
x dt
dz
Thus ,  [1( x  2t )  ( x  t )  1].(7)  1( x  2t )  ( x  t ) (2)
dt
 ( x  2t  x  t )(7)  x  2t  2 x  2t
 (2 x  t )(7)  x  4t
 14 x  7t  x  4t
 15 x  3t , x  2  7t , we get
 15(2  7t )  3t  108t  30

5.3 Derivatives of Implicit Functions

Overview
4x
The function with the form y  f ( x)  is explicit function as Y is explicitly
(2  x )
expressed as a function of x where as a function with the form 2y+xy-4x=0 is an implicit
function as x & y are mixed together and equals to zero. Therefore, explicit and implicit
function of one variables is expressed as y=f(x) and f(x,y)=0 respectively and in the case of
two variables it is expressed as Z=f(x,y) for explicit and z=f(x,y,Z) for implicit function.
Here the main point is the method of finding derivatives of such implicit function using total
differentiation.

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i.e F ( x, y )  0 ( for one var iable case)
F ( x, y , z )  0 ( for two var iable case)
dy
e.g .1 find of the implicit function 2 y  xy  4 x  0
dx
Solution:
In order to find the derivatives of such implicit function we should apply total differential
rules on both right & left hand sides.
i.e, d (2 y )  d ( xy )  d (4 x )  d (0)
2dy  xdy  ydx  4dx  0
(2  X )dy  ( y  4)dx  0
dy 4  y

dx 2  x

dy
eg. 2 Find of implicit function x2-xy-2x+3=0
dx
Solution:
x 2  xy  2 x  3  0
d ( x 2 )  d ( xy )  d (2 x )  d (3)  d (0)
2 xdx  ydx  dxdy  2dx  0  0
(2 x  y  2)dx  xdy  0
dy ( 2 x  y  2)

dx x

Based on the above two illustration, we can drive general rule for finding derivatives of an
implicit function of one variable.
i.e, F ( x , y )  0
[dF ( x , y )]  d (0)
Fx dx  Fy dy  0
Fx dy   Fx dx
dy F
 x
dx Fy

 The derivative of on Implicit function F(x,y)=0 is the negative of the ratio of the two
partial derivatives.

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e.g. 3 find the derivative of the implicitly function

f ( x )  x 2  xy  2 x  3  0 by the general rule

Solution :
dy  Fx 2 x  y  2
 
dx Fy x

Note: The implicit function of one variable F(x,y) can also be extended to more than one
variable F(x,y,z) as follow.
i.e, For F ( x, y )  Fx dx  f x dy  0 (one var iable case)
For F ( x, y, Z )  f x dx  f y dy  f z dz  0 (three var iable case)
For F ( x1 , x2,........xn )  F1dx1  F2 dx2  .....Fn xn (n var able case)

5.4 Maximization and Minimization of Multivariable

Overview
In the single variable case, it is discussed that how the relatively extreme values of a
function (relatively minimum, maximum, inflectional point) is calculated using the first and
second order test. Similarity, this section also illustrates the relatively, extreme values of a
function with several variables. It will be obtained by calculating the first and second
differentials of a function.

What are the conditions to be satisfied to determine the extremum values of function?
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Given a function with two variables Z = f(x,y), its first order differential and second order
differentials are calculated as:
f f
dz  dx  dy  f x dx  f y dy
x y
 (dz )  (dz )
d 2 Z  d (dz )  dx  dy  f xx dx  f yy dy
x y

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Therefore, for a multivariable function such as Z = f(x,y) the relatively maximum and
relatively minimum values are identified through the following conditions.
i. The first order partial derivatives must be equal to zero and then the point (a,b) will
become the critical point.
i.e f x  0 and f y  0 for both extreme cases. (The necessary condition)

ii. If the second partial derivatives value at the critical point becomes positive, it will
be relatively minimum where as it will be relatively maximum if the value becomes
negative,
i.e, f xx  0 , f yy  0 ( relatively max imum )
f xx  0, f yy  0 ( relatively min imum )
( It is the sufficent condition )
iii. The product of the second –order direct partials evaluated at critical point must
exceed the product of the loss partials evaluated at the critical point.
i.e, f xx . f yy  ( f xy ) 2 for both extreme values
Re mark :
*If f xx . f yy  ( f xy ) 2 ( a saddle po int)
*If f xx f yy  ( f xy ) 2 ( no inf ormation about extremes )

Example : Find the extreme values of f ( x, y )  x 3 y 3  3x  27 y  24

Solution :
First order condition :
f x  3x 2  3  0  x 2  1  0
f y  3 y 2  27  0  y 2  9  0

The Critical values are (1,3), (1,-3) (-1,3), (-1,-3)

Second order condition: f xx  6 x, f yy  64, f xy  0

(1,3) (1,-3) (-1,3) (-1,-3)

Fxx = 6x 6 6 -6 -6
Fyy= 6y 18 -18 18 -18
(fxy)2 = 0 0 -0 0 0
Fxxfyy- (fxy)2 108 -108 -108 108
Result Minimum Saddle Saddle Maximum

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Remark: This section is directly concerned to the optimization problem (maximization &
minimization) which is discussed in the earlier chapter through economic application of
derivatives.

5.5 Unconstrained and Constrained Functions

Overview
Having discussed about the relative extreme value of a given function as on objective
function, now we will discuss about the meaning of unconstrained and constrained function.
A function which concerned on the goal of economic agents like profit maximization of the
firm and utility maximization of the consumer is known as the objective function. Therefore,
if the objective functions is free from any constraint meant by the choice variables are in
dependent of one another, it is said to be unconstrained function where as if the objective
function is restrained by another variable among the choice variables, it is said to be
constrained function. i.e, The objective function is affected by variables which makes certain
relation between themselves with in the choice variables. Such variables affecting the
objectives function will form another function called subjected function.

Dear learner, have you come across the concepts of constrained and unconstrained
optimization? Please define them?
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Let’s take a utility function with an objective to maximize the utility of a consumer. The
function will be explained as utility U=f(x1 x2, . . . . xn) where U is the utility and x1 x2, . . . . xn
are quantity of goods consumed According to the unconstrained optimization problem
concept, a given consumer will purchase an infinite amount of all commodities so as to
maximize his/her utility. However, in reality he/she is constrained by the budget that is
allocated to him /her. The budget constrained function is given by

97
M  P1 X 1  P2 X 2  ...  Pn x n Where M is the money income of the consumer & p1, p2… pn
are price of commodities purchase.

Thus, According to the concept of constrained optimizing problem, the objective function
(i.e, the utility maximizing function) is subject to the budget constrained function. The
constrained function is sometimes referred to as restrain, side relation or subsidiary
condition function.

5.6 The Method of Lagrange Multiplier for any Equality Constraint

The method is developed by the French mathematician Joseph Louis Lagrange to solve on
optimizing problem in which the objective function is subject to a constraint. Generally
speaking, the method of Lagrange multiplier has two alternative methods, that is, constraints
are restricted to the equality and inequality sign. Even though in this section only the method
of equality constraint will be discussed. Let’s see the method of Lagrange multiplier in two
cases.

A. Two Variables Case

Given the function Z  f ( x , y ) Objective function
Subject to g ( x, y )  c Constra int function
The lagrangian function will be :
Z  f ( x , y )   [ g ( x , y )] where the symbol  (lamda ) represents underer min ed number
which is refered to as lagrange multiplier for the stationary values of Z .

Key-steps for method of Lagrange multiplier

Step1 Formulate the problem in the form maximize (or minimize) Z=f(x,y) subject to
g(x,y)=c
Step2 Form the function Z (i.e. the lagrangian function)
Z ( x, y ,  )  f ( x, y )  [ g ( x, y )]
Step3 Find the critical points for Z, that is
Z x ( x, y ,  )  f x  g x  0
Solve the system Z y ( x, y ,  )  f y  g y  0
Z  ( x, y,  )  g ( x, y )  c  0

98
Step 4 If ( xo , y o , o ) is the only critical point of Z, then we assume that ( xo, y o ) will always

produce the solution to the problem we consider. But if Z has More than one critical point
we evaluate z=f(x,y) at (xo,yo) for each critical point and then we assume that the largest of
these values is the maximum value of f(x,y) and the smallest is the minimum value of f(x,y).

e.g . 1 min imze f ( x, y )  x 2  y 2 subject to x  y  10

Solution :
Step 1 min imize f ( x, y )  x 2  y 2  Z
Subject to g ( x, y )  x  y  10  0

Step 2 .Z ( x, y ,  )  x 2  y 2   ( x  y  10)
Step 3 Z x ( x, y ,  )  2 x    0
Z y ( x, y,  )  2 y    0
Z  ( x ,  , Z )  x  y  10  0

From the first two equations we get x    2 and y=   2, then substituting the two
equations on the third equation we get:
     10
2 2
   10
  10
Thus (5,5,10) is the Only critical point.
Step 4 Since (5,5,-10) is the only critical point for Z, we conclude that the minimum value
becomes f ( x, y )  f (5,5)  5 2  5 2  50

Note: Assume that the critical point for the above equation becomes two (i.e, more than
one, for instance (5,5,-10) and (4,4,-8], The possible minimum value will be found out by
evaluating Z(xo,yo) and a variable critical values and then taking the smallest value of Z as a
minimum value of Z=f(x,y)
i.e, f (5,5)  52  52  50
f (4,4)  4 2  4 2  32. So it is the critical po int (4,4) but not (5,5) that will be the possible
solution . Consquently it is 32 but not 50 that will be the min imum value.

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e.g .2 The research department for a manufacturing company arrived at the following cobb-
doulas production function for a particular product: N ( x, y )  10 x 0.6 y 0.4 where x & y are the
number of units of labor and capital required to produce the particular product. Each units of
labor & capital cost $30 and $50 respectively and the total budget allocated for the
production of the product is $300,000. Find the amount of labor & capital for the maximum
production.
Solution :
T C  30 x  50 y  300,000 as a constra int function
Step 1 max imize Z  N ( x, y )  10 x 0.6 y 0.4
s.t g ( x, y )  30 x  50 y  300,000  0

Step 2 Z ( x, y ,  )  10 x 0.6 y 0.4   (30 x  50 y  300,000)

Step 3 Z x  6 x 0.4 y 0.4  30  0
Z y  4 x 0.6 y 0.6  50  0
Z   30 x  50 y  30,000  0
From the first two equations :
 1 0 4 0.4  2 0.6 0.6
Thus,     x y  x y (mulltiply both sides by x 0.4 y 0.6 )
5 25
1 2
y x
5 25
2
y x
5
2
Substituting y= x on the third equation we get:
5
2 
30  50 x   300,000  0
5 
50 x  300.,00
x  6000
2  1 0.4 0.4  1
Thus, y  (6000)  2400 and   x y  (6000) 0.4 (2400) 0.4  243
5 5 3
 The only critical po int of N is (6000,2400,243)
Step 4 max . N ( x, y )  10(6000,2400)  10(6000) 0.6 (2400) 0.4  41,579

100
B. Three Variables Case
Given the objective function f(x,y,z) subject to g(x,y,z)=c, the critical points become
(x0,yo,zo) and the solution to the system is ( x o, y o , z o ,  o ).

The Lagrange multiplier is given by

W ( X , Y , Z ,  )  f ( x , y , z )   g ( x , y , z )  C  and the solution for every variable is obtained
by
W x ( x, y, z ,  )  0
W y ( x, y, z ,  )  0
W z ( x, y, z ,  )  0
W ( x , y , z ,  )  0
Note: The steps on the two variable case are also applicable here.

Examples: maximize the given function F = f(x,y,z) = xyz

Subject to: g(x,y.z) = x+xy+z = 10
Step 1 max. N  f ( x, y , z )  xyz
S .t g ( x, y, z)  x  xy  z  10
Step 2 W ( x, y, z )  xyz   ( x  xy  z  10)
Step 3 f x  yz    0
f y  xz  x  0
f z  xy    0
Z   x  xy  z  10  0
From the first two equations :
   y z and   c
Since      yz   z  y  1
From the first & thrid equations
   z and    xy
Since      z   xy  z  x
*substituting y=1 and x=2 on the fourth equation we get:

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 x  xy  z  10  0
 x  x  x  10  0 sin ce y  1 & z  x
 3 x  10
10  10   10
x z and    yz  1  
3  3 3

 10 10 10 
Thus, the only critical point will be:  ,1, , 
3 3 3
10 10 100 50
Step 4 max . F ( x, y , z )  xyz  .1.  
3 3 6 3

Summary
 The Partial derivative deals with the application of derivative concepts when there
are more than one variable.
 First order partial derivatives are obtained by partially differentiating function once
where as higher order partial derivatives are obtained by partially differentiating
functions twice or more times with respect to one of the independent variables
holding the others constant.
 Differential refers to changes in a given function as a result of changes in one
independent variable keeping other variables remains unchanged. Total differential,
however, all independent variables changed simultaneously and result a total change
in the function.
 The total derivative is also obtained first by differentiating the dependent variable
totally to get the total differential and divide the differentiated function by the
deferential.
 The functions is a constrained function if its objective function is restrained by
another variable among the choice variables where as the function is said to be
unconstrained function if its objective functions is free from any constraint meant by
the choice variables are independent of one another.

102
 Self Test Exercise 5
1. Find the first order partial derivatives of the following functions
5x
a) Z 
6x  7 y
b) Z  6w 3  4 wx  3 x 2  7 xy  8 y 2
1
C) Z 
x  y2
2

d ) Z  ( 5w  4 x  7 y ) 3
2
 8x  7 y 
e ) Z   
 5x  2 y 
2. Find the higher order partial derivatives of the following functions
a) Z  (8 x  4 y ) 5
b) f ( x, y , z )  10 x 3 y 2 z 4
3. Find the marginal utility (MU) and marginal rate of substitution (MRS) if the utility
function is given by u  5 x1 x 2
34 1
4. If the Utility function is u  4q1 q2 4 , find the slope of the indifference curve(IC) what
will be its slope when q1=20 and q2=30?
1
5. Given the production function q  f ( L, K )  L2 3 K 3 , find the slope of the isquant
6. Find The differentiations and derivatives of the following functions
9x  4
a ) dy for y 
5x
b) dz for Z  3x 2 (8 x  7 y )
c ) dz dw for z  7 x 2  4 y 2 where x  5w & y  4 w

7. Given the function f  3 x 3  9 xy  3 y 3 find the critical points where the function could
be optimized and determine whether the function is maximized, minimized or saddle
point at these points.
2 2
8. Find the critical and stationary values of the function Z= x1  x 2 with a constraint

function x1  4 x 2  2 (Use lagrangian multiplier method).

103
 CHAPTER SIX
6. INTERGRAL CALCULUS
6.1 Introduction
Integration is defined as the reverse (or inverse) process off differentiation. In
differentiation, we are given a function and we find the rate of change in the function. In
integration, we are given the rate of change in the function and we find the function. In other
words, integration consists in finding a function whose derivative is given.

Objectives
On the successful completion of this chapter, you will be able to
 Describe the difference between differential calculus and integral calculus
 Identify different types of integrals and the associated properties
 Compute various problems of integration with the help of different rules and
techniques of integration
 Solve economic problems using the concept and techniques of integration

6.2 The Concept of Integration

Overview
We have seen that a differentiation is the process of finding out the derivative (rates of
change of the primitive or original of function) with respect to (with respect to) the choice
variables. That is, given the primitive function, y=f(x), its derived function will become
dy/dx= f (x ) . However, the concept of integration indicates that integration is the reverse
process of differentiation in which the primitive function that best fits the derived function is
identified. i.e., the derived function f (x) gives a set of primitive function.
How integration difference from differentiation? Please illustrate it with your own example.
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104
For the sake of illustration, the concept of integration is useful in some economic analysis,
for instance, an economist who has information about the rate of inflation can estimate the
future price level by obtaining the primitive function from the rate or derived function. Such
process of finding function from its derivative is called antidifferentiation or integration and
the relationship between differentiation and integration is elaborated as:

Differentiation
Primitive function Derived function

Integration

Note that the total revenue and total cost functions can be examples of primitive functions
and the respective marginal revenue and marginal cost functions can be examples of derived
functions.

Having the concept of integration, it is denoted by the symbol  f ( x) dx

Where : sign represents the int egal

f ( x ): the function to be int egrated and termed as int egrand
dx : shows as that int egration takes place w.r.t x

 f ( x)dx : int egration of f ( x ) w.r.t x

6.3 Rules or Properties of Integration

The following are rules of integration provided that K and C are constants.
Rule I Power Rule
1 n1
  x n dx  x  c, n  1
n 1
1
e.g .  xdx  x 5  c
5

Rule II Cons tan t Rule

  kdx  kx  c
e.g .  3dx  3 x  c

105
Rule III Cons tan t  multiple Rule
  kf ( x )dx  k  f ( x )dx
1 5
eg .  5 x 2 dx  5 x 2 dx  5 x 3  c  x 3  c
3 3

Rule IV Exponential Rule

x x de x
  e dx  e  c (sin ce  e x and
dx
x x da x 1
 a dx  a / in a  c (sin ce  a x ( ))
dx inc
f x
Rule IVa  f ( x)e dx  e f  x   c
f x 1
Rule IVb  f ( x)a dx  a f  x  c
ln a
kx 1 kx
Rule IVc e dx  e c
k
Examples :
3x
3x
a)  3e dx  e  c
3x
b)  3a dx  a 3 x / ln a  c
2x 2 1 1
c) e dx   e 2 x dx   2e 2 x dx  e 2 x  c
2 2 2
Rule V  log arithmic Rule
1
  dx  ln x  c, x  0
x
k
Rule Va  dx  k ln x  c, x  0
x
f ( x)
Rule Vb  dx  ln f ( x)  c, f  x   0
f x 
Examples :
6 6 1 6
a)  10 x dx  10  x dx  10 inx  c
2x
b) x 2
5

dx  ln x 2  5  c 

106
Rule VI : Sum and Difference Rule
  f ( x )  g ( x )dx   f ( x)dx  ( x)dx

 3x 
 5 x  110 dx   3 x2 dx   5 xdx   10dx sum  difference rule 
2
e.g .
 3 x 2 dx  5 xdx   10dx cons tan t multiple Rule 
1 5
 3 x 3  x 2  10 x  c  power cons tan t Rule
3 2
5
 x 3  x 2  10 x  c
2

Note : the Single cons tan t c is the sum of separated cons tan ts of each of
the three int egral as c1  c2  c3  c
Re mark : we can prove each rule by showing that the derivative w.r.t x of
the right side is the int egrand.
1 1
e.g .  x 4 dx  x 5  c, then d ( x 5 )  c  x 4  0  x 4
5 5
1 5 4
 The derivative x  c on the right side is the int egrand . i.e,  x dx
5
Can you check whether some of the integration results given for the examples on section 6.3
are correct or not by differentiation.
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6.4 Techniques of Integration

Commonly, there are two techniques or methods of integration so as to solve integral
problems. These are:

107
1. Integration by substitution
Integration by substitution is the integral version of the chain rule in differentiation. Given a
df (u ) df (u ) du
function f(u), where u  u ( x ), the chain rule states that :  .  f (u )
dx dk dx
Thus, the antiderivative

du
of f (u )  will become. :
dx
du
 f (u) dx .dx   f (u)du  f (u )  c

Examples :
a ) find  2 x( x 2  1)dx by substitution technque
solution :
one impor tan t po int here is that if the int egrend is a product or qoutient of two terms and one
term is a cons tan t multiple of the derivative of on an exp ression that appears
in the other , then the int egral is solved in such a way that :
du
Let u  x 2  1, then  2x
dx
du
  2 x( x 2 )dx   u dx   udu
dx
1 1

  udu  u 2  c  x 2  1  c
2 2
2


b)  9( x 2  3 x  5) 8 ( 2 x  3)dx
Soution :
du
Let u  x 2  3 x  5,  2x  3
dx
du
  9( x 2  3x  5) 8 (2 x  3) dx   9u 8 dx   9u 8 du
dx

  9u 8 du  9(1 / 9)u 9  c  u 9  c  x 2  3 x  5  c 
9

108
 2
c) Find  xe  x dx
du
Let u  then  2 x
dx
1 u
  e  x 2 dx   eu x(2 /  2)dx  e  2 xdx
2 
1 2 1 2
   2 xe x dx  e  x  c by exp onential rule
2 2

2. Integration by parts
Integration by parts is the restatemen t of the product rule of diffecentietion.. That is,
considerin g the two functions will become

 f ( x ).g ( x)dx  f ( x )G( x)    f ' ( x )G( x)dx

  v u dx  vu   (vu )dx
Where G ( x ) / U is the antiderivative as the int egral of g ( x ) / u

Examples :
a) Find  ( x x  5 )dx u sin g int egration by parts
Solution :
Let v  x and u  x  5
  (vu )dx  vu   (v u )dx

1/ 2 2
v  x, v '  1, U   U   ( x  5)  x  53 / 2
3
2 2
 vu dx  x 3 ( x  5)
3/ 2
 1. ( x  5) 3 / 2
3
2 2 2
 x( x  5) 3 / 2   ( x  5) 5 / 2  c
3 3 5
2 4
 x ( x  5) 3 / 2  ( x  5) 5 / 2  c
3 15

109
 x
b) find  xe dx
Let V  x and U  e x , ,
  (VU )dx  VU   V 'U

V  x, V 1  1, U   U   e x dx  e x
  (VU )dx  xe x   1e x  xe x  e x  c
 e x ( x  1)  c

c) Find  ln xdx, x0

Let V  ln x and U  x
  ln xdx  VU   V U dx
1
V  ln x, V   , U   U   xdx  x
x
1
  ln xdx  ln x( x )   ( x )dx  ln x( x )  x  c  x(ln x  1)  c
x

3. Integration by Partial Fractions

If the integrand is in the form of an algebraic fraction say functions involving polynomials in
the denominator and the integral cannot be evaluated by simple methods, the fraction needs
to be expressed in partial fractions before integration takes place. To do so, we need to find
the partial fraction decomposition based on the simple concept of adding fractions by getting
a common denominator. There are three steps to decompose an algebraic fraction say a
rational function P(x)/Q(x) , into its partial functions and hence its integral.

Step 1: Use long division to ensure that the degree of P(x) is less than the degree of Q(X)
Step 2: Factor Q(X) as for as possible
Step 3: Write down the correct form of the partial fraction decomposition
Step 4: Finding the integral of the partial fraction
Example 1: Evaluate the following integral
2x  3
x 2
dx
9
Step 1: Check the degree of the numerator is less than the degree of denominator

110
Step 2: Factor the denominator as much as possible and get the form of the partial fraction
decomposition

= +
Step 3: Find out partial fractions by searching for the constants A&B
( ) ( )
= ( ) (

2x+3= A(x-3) +B(x+3)

Note that the numerators must be equal for x=3 and x=-3
3
X = 3: A(0) + B(6) = 9 = B =
2
1
X = −3: A(−6) + B(0) = −3 = A =
2
Step 4:
2x  3 A B 1/ 2 3/2 1 1
x 2
dx        [(1 / 2)  (3 / 2) ]
9 x  3 x -3 x3 x -3 x3 x -3
1 3
 ln x  3  x  3  c
2 2
3x  11
Example 2: Integrate  (x - 3)(x  2)
Solution
3 + 11 ( + 2) + ( + 3)
= + =
( − 3)( + 2) −3 +2 ( − 3)( + 2)
3x + 11 = A(x + 2) + B(x + 3)
x=-2 : 5=A (0) +B (-5)  B= -1
x=3: 20=A (5) + B (0)  A= 4
3x  11 4 1 4 1
 (x - 3)(x  2) =  x  3  x  2 dx   x  3 dx   x  2 dx  4 ln x  3   ln x  2  c

111
6.5 The Definite and Indefinite Integral
6.5.1 Definite Integral
Overview
Let f(x) is a continuous function and if F(x) is the antiderivative of f(x), then the integration
of f(x) with respect to. x will be  f ( x)dx  F x   c
If we choose two values of x in the domain, say x=a and x=b and substitute the values on the
right side of the equation and taking the difference we get:
 f (b )  c   F a   c   F (b )  F ( a )

Therefore, such specific numerical value which is free from the variable x as well as the
arbitrary constant c is called the definite integral of f(x) from a to b. In other word, the
definite integral exists on an integral a to b given that f is a continuous function on the
closed integral [a,b].
The definite integral is denoted by:
b
f ( x)dx  F ( x)a  F (b)  F (a)
b
a

where a and b are the lim its of int egration (a  the lower lim it & b  the upper lim it ),
b
and the denotation  f ( x )dx is read as the definite int egral of f ( x) w.r .t x when lim its
a

of int egrations ranges from a to b

Examples :
4
3
a) Evaluate  (x
2
 4)dx
Solution :
4
4
3 x4 
2 ( x  4 )dx   4 x  c
4 2
 44   24 
   44  c     42  c 
4  4 
 64  16  c   4  8  c 
 68

112
 2
b) Evaluate  x 2 dx
0

Solution :
2 1 3 1
 x 2 dx  x  c  x3 by taking the difference
0 3 3
2
2 1 3 1  1  8 8
 x 2 dx   
x    23    03    0 
3 0 3
 
0
 3  3 3

Rules or properties of definite Integrals

Rule I Limit interchanging rule
Interchanging the limits of integration changes the sign of the definite integral
a b
  f ( x) dx    f ( x ) dx
b a

1 4
1 1  1  4
eg.  x dx    x dx  x 3    x 3 
2 2
4 1 3 4 3 1
1 3 1 3 1 3 1 3
( 1  4 )  ( 4  1 )
3 3 3 3
1 64  64 1 
    
3 3  3 3
63 63
 
3 3
 21  21

Rule II The zero integral rule

A difinit integral will have a value of zero when the two limits of integration are identical.
a
  f ( x) dx  F ( a)  F ( a)  0
a

3 4
4
2 x  4 2 43
eg . 
4
x dx        21  21  0
3 4  3 3 

Rule III: Sum and difference rule

if f(x) and g(x) are continous on (a,b), then

113
 b b b
  [ f ( x)  g ( x)]dx   f ( x )dx   g ( x)dx
a a a
1 1 1
2
eg.  (4 x  5 x )dx   4 x dx   5 x 3dx
3 2
0 0 0

Rule IV: Additive rule

If f is continuous on some interval containing a, b & c, then the definite integral can be
expressed as the sum of a finite number of definite sub-integrals.
c b c
  f ( x ) dx   f ( x) dx   f ( x) dx, a  b  c . This can be extended to sub  int egrals
a a b

4 3 4
e.g .  4 xdx   4 xdx   4 xdx 
2 2 3

2x 2 4
2  2x2  3
2  2x 2  4
3

2(4) 2
 
 2(2) 2  2(3) 2  2(2) 2  2(4) 2  2(3) 2  
32  8  18  8  32  18
24  10  14
24  24

Rule V Sign change rule

The integration of a negative function is equal to negative integration of a positive function.
b b
   f ( x)dx    f ( x)dx
a a

2 2
e.g .   x 3 dx    x 3 dx
1 1
2 2
1  1 
 x 4    x 4 
4 1  4 1
1 4 1 4 1 4 1 4
( 2  )  ( 1 )  ( 2  )  ( 1 )
4 4 4 4
1  1 
 4  ( )    4  (  ) 
4  4 
1 1
 4   4 
4 4
15 15
 
4 4

Rule VI: Constants rule:

114
 b b
 
a
k f ( x )dx  k  f ( x) dx, where k is any const tan t
a
2 2
eg.  3x 2 dx  3 x 2 dx
1 1

6.5.2 Indefinite Integral and its Property or Rule

What is indefinite integral? How if differ from definite integral?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

We have already seen what the indefinite integral mean on the sub-topic ‘’concept of
integration”. Besides the rules of integration that we have seen next to the sub-topic ”
concepts of integration” are also the rules or properties of indefinite integral. Generally
speaking, an indefinite integral or constant of integration is an integral which has no specific
numerical value and denoted by  f ( x)dx  F ( x)  c
Where : : sign of int egration
f  x  : the int egral
dx : Integration takes place w.r .t. x
F ( x )  c   f ( x)dx : indefinite int egral of f ( x ) w.r.t x
Note : For the rules or properties of indefinite int egral , please refer the
rules or properties of int egration discussed so far.

6.6 Improper and Multiple Integrals

6.6.1 Improper Integrals
Overview
In the Definite integral we have seen the existence of two requirements for the function to be
a definite integral. i.e., both the lower and upper limits (i.e., [a,b] be finite and the function f
be continuous and bounded on an interval [a,b]), However, if one or two of the
requirements do not satisfied, the integration is said to be improper integral.

115
So the improper integral can be explained as an integral
b
 f ( x ) dx is called improper if either
a

i. One of the limits of integration (i.e, a or b or both) are infinite

ii. The function f is discontinuous on an interval [a,b] or not bounded by a
closed internal (a,b)

Practically, we can observe such condition by graph presented below.

X
Figure 6.1 Graphical representations of improper integrals

Due to the infinity of limit be the area of the region extended infinity for to the right along
the x-axis. More generally, we define improper integrals having infinite limits of integration
as follow:
 b
i. If f is continuous on an integral a ,  , then  f ( x) dx  lim  f ( x ) dx
a b a

ii. If f is continuous on an interval

b b
 , b , then   f ( x ) dx  lim
a   a  f ( x ) dx

iii. If f is continuous on an interval

 c 
 ,  , then  
f ( x) dx  

f ( x ) dx   f ( x )dx,
c
C  IR

Remark: If the limit exist and the improper integral is a finite number, it is said to be
convergent where as if the limit does not exist the improper integral is said to be
divergent.

116
Examples: Identify whether it is convergent or divergent
1 
a)  dx
x21

Solution :
 1  1
 2
dx  lim  2 dx
1 x x  1 x
b
1 
 lim ( 2 )
x  x
1
 1 
 lim   (1)
x  b
 
1
 lim (1  )
x b
1
 1  1 0  1

Since the lim it exist lim it (i.e., 1) the improper int egret is convergent . i.e, it converges to 1

0 dx
b) 
  (1  2 x) 3 / 2

Solution
0 dx 0 dx
 lim
 (1  2 x) 3 / 2 b  (1  2 x) 3 / 2
0
1 
 lim ( )
b 
1  2x b
1
 lim (1  )
b  1  2b
1  0
1
 Since the lim it is exist and finite, the improper int egral is convergent. It cov erges to 1.

117
  1
c) Evaluate  dx
1 x
Solution :
 1 1
 d x  lim  d x
1 x 1 x
b 
b
 lim(ln x)
b  1
 lim(ln b  ln 1)    0   lim it does not exist  d . n. e 
 Since the lim it d . n. e the improper int egral is divergent.
1 2
d ) Evaluate dx

x3 0

2 1 2 1
  3 dx  lim  3 dx
0 x b 0 0 x
2
1 
 lim ( )
b 0 2 x 2  b
1 1
 lim ( 2
 2)
b 0 2( 2) 2b
1 1
(
2
 )
2b 8
1
 
8
 Since the lim it d .n..e., the improper int egral is divergent.

6.6.2 Multiple Integral

What is multiple integral? How it is differ from improper integral?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Dear learner, in chapter five you have seen how functions of several variables are
differentiated by the process of partial differentiation. In similar fashion such function of
several variables are integrated by a process of multiple integration. For the sake of
simplicity, in this section you will see integration of function of two variables which is
known by Double integral.

118
Double integral is denoted by
d b
 f ( x, y)dxdy and evaluated as iterated int egrals of the form 
c a
f ( x, y )dxdy or
b d
 f ( x, y )dxdy from inside to outside.
a c
d b
Re mark : In int egrating the double int egral  f ( x, y )dxdy we should first int egrate
c a

the inside int egral i.e.,  ba f  x, y dx  int egreting f  x, y  w.r.t. x from x  c to x  b)
through treating y as a cons tan t and then int egrate the outside int egral
(i, e, int egrating the result of the inside int egral w.r.t. y from y  c to y  d )

2 1
Example : Evaluate   (2 x  y)dxdy
0 0

Solution :
1
Firstly ,  2 x  y dx  x
0
2
 
1
  
 yx 0  12  y (1)  02  (0)  1  y
2
2 1   1   1 
Secondly ,  1  y dy  y  y   2  (2) 2   0  (0) 2   (2  2)  (0)  4
0 2 0  2   2 

6.7 Economic Application of Integrals

6.7.1 Application of Indefinite Integral
Overview
Indefinite integral can be applied in economic problems of different function by shifting the
given derived function rates of changes or slopes or marginal values to the original or
primitive function for instance, shifting from marginal cost (MC) to total cost (TC), from
marginal revenue (MR) to total revenue (TR), from MR & MC to profit, from MR to
demand function and so on. But for one consideration we will focus on the application of
indefinite integral on revenue, cost & profit function.

Example: the marginal cost function manufacturing x pair of shoes is 6+10x-6x2 and the
total cost of producing a pair of shoes is 12. Find the total cost (TC) and average cost (AC)

119
functions.
Solution :
TC  Integration of MC w.r.t. x
 TC   MCdx   (6  10 x  6 x 2 )dx
 6 x  5 x 2  2 x 3  c where c is cons tan t in this case a fixed cos t. So to find c
we use the tatal cos t of producing a pair of shoes (i.e, TC  12 when x  1
.
from the question)
 TC  6 x  5 x 2  2 x 3  c, TC  12 when x  1
12  6(1)  5(1) 2  2(1) 3  c
12  9  C
C  12  9  3
Thus, the total function becomes:
TC  6 x  5 x 2  2 x 3  3 and
TC 6 x  5 x 2  2 x 3  3
AC  
x x
3
 6  5x  2x  3 / x

e.g. Given that MR=2000-4x, MC=50+2x and the total cost of producing 10 units of pen (x)
is birr 700. Then,
a) At what level should the firm sets its production in order to maximize its profit
b) What is the maximum profit
c) Find the demand function and its price at profit maximizing level of output

Solution:
a) First we have to find the TR & TC functions by integrating MR &MC function with
respect to. x

120
 TR   MRdx   (200  4 x)dx  200 x  2 x 2  c
Since there is no revenue with out production & sell of a product we ignore cons tan t c .
 TR  200  2 x 2 TC   MCdx   (50  2 x )dx  50 x  x 2  k
Since the TC of producing 10 units of pen is 700. TC  700 when x  10,
the total cos t function becomes :

TC  50  x 2  k  700  50(10)  102

 k  700  600  100
 TC  50 x  x 2  100
d
 To find the level of production that max imize profit    0
dx
  TR  TC  200 x  2 x 2  50 x  x 2  100
  150 x  3x 2
   150  6 x  0  6 x  150  x  25
Thus , the profit max imizing level of production is x  25
2
b) max   150 x  3x  100, x  25
 150 25  325  100  3750  1875  100
2

 1775 birr
c) The demand function will be
 TR  200 x  2 x 2
 TR  200 x  2 x 2  P.x  200 x  2 x 2  p  200  2 x
and the price of max .   p  200  2(25), x  25
p  200  50  150

6.7.2 Application of Definite Integral

Overview
Most commonly the definite integral is applicable for producer and consumer surpluses. To
defined such surpluses producer suplus (PS) is surplus gained by a producer as a result of
sell of its product where as consumer surplus (CS) is surplus gained by the consumer as a
result of the purchase of goods from the seller and the PS & CS are represented by the
formula given below through the application of definite integral.

121
 x0 x0
PS  P0 x0  
0
S x dx and CS  
0
Dx dx  P0 x0

Where: Sx & Dx are the supply & demand function respectively

: Po & xo are equilibrium price & quantity respectively
: Po xo is the total revenue at equilibrium price and quantity

Moreover, the PS & CS can be shown by graphical presentation as follow:

Price y
Sx
A
E
P0

Dx
C

0
x0 Quantity x

Figure 6.2 Concumer and producer surplus

AP0 E : Consumer surplus

CP0 E : Pr oducer surplus
X 0 EP0 : Total revenue

Example: Using the concept of definite integral find the producer & consumer surpluses
with demand function p=12/(x+1) and supply function p=1+0.2x
Solution:
Before going to find the PS and CS we have to find the equilibrium price & quantity.
For equilibrium:

122
 12
DD  SS   1  0.2 x
( x  1)
 12  (1  0.2 x)( x  1)
x  1  0.2 x 2  0.2 x  12
0.2 x 2  1.2 x  11  0
1 6
5( x 2  x  11)  (0)5
5 5
2
x  6 x  55  0
( x  11)( x  5)  0
x  11 or x  5
Since t here is no negative output we take x  5 at equilibrium output
and the equilibriu m price become :
P  1  0.2 x
P  1  0.2(5)
P  11
P2
So, taking x0  11 and p 0  2, the PS & CS will be :
x0
PS  P0 X 0   (S x )dx
0
5
 2(5)   (1  0.2 x )dx
0

5
 10  [ x  0.1x 2 ] 0
 10  [5  0.1(5) 2 ]  [0  0.1(0) 2 ]
 10  7.5  0
 10  7.5
 2.5
x0
CS   ( Dx )dx  P0 X 0
0

12
5
 ( )dx  P0 X 0
0 x 1

 12 ln( x  1)0  10
5

 12(ln 6  ln 1)  10
 12(ln 6  0)  10
 12(ln 6)  10
 12 ln 6  10

123
Summary
 Integration is the reverse process of differentiation.
 Definite integral is an integral that exists or an Integral a to b given that a function is a
continuous function on a closed interval [a,b] where as indefinite integral is also
defined as an integral which has no specific numerical value.
 A function to be a definite integral firstly both the lower and upper limits must be
finite and the function must be continuous and bounded on an interval [a,b]. However,
if at least one of such requirements is not satisfied, the function is said to be improper
integral.
 Multiple integral is an integral which needs a multiple integration of a function. For
instance, if you integrate a function twice the function is said to be double integral
function.

124
 Self test Exercise 6
1. Integrate the following functions with respect to x

10 2
a) x dx e)  2  x dx
b)  xdx f ) e 3 x  2 dx
4 a
c)  (5 x  4 ) dx g)  (x  x b )dx
1 x5 2
d)  dx h )  ( x  2 x  )dx
9  4x 5
2. Evaluate the following integrals
 2x
a)  dx
1 ( x  1) 2
2

0
b)  (5  x ) 2 dx


c)  3 x 2 dx
1

3. If the marginal cost of the product is given by 36-20x+6x2 and the initial Cost is $20,
find the total cost and average cost functions.
6
4. If the marginal revenue function for output x is given by  5, find the total
( x  2) 2
revenue function and the demand function
5. If the demand function for a good is p=110-x2 and the supply function of a good is
6 1
p 2 x  x 2 , then find the consumer surplus.
5 5

125
 CHAPTER SEVEN
7. DIFFERENTIAL AND DIFFERENCE EQUATIONS
7.1 Introduction
Dear learner, in the preceding chapters differentiation and integration were discussed with
their economic applications. In this chapter, however, the concepts of differential and
difference equations with their application in economics will be elaborated. Differential and
difference equations are the more advanced concept of calculus most commonly and
frequently used in dynamic economics.

Objectives
When you have completed this chapter, you should be able to
 Define both the differential and difference equations
 Explain the distinction between differential and difference equations
 Solve problems using the concepts and techniques of differential and difference
equations

7.2 Differential Equations

Overview
Dear learner, this section helps you to be introduced with the concepts of differential
equations. An equation involving derivatives of differentials is known as a differential
equation. If an equation contains derivatives with respect to (with respect to) only one
independent variable, it is known as an ordinary differential equation. On the other hand, if
it contains partial derivatives of a function of two independent variables, it is known as
partial differential equation.

Differential equations are used to determine the conditions for dynamic stability in
microeconomic models of market equilibrium and to trace the time path of economic
variables under various conditions. Differential equations are applied in different economic
problems such as to find the function whose growth rate is given, to compute the elasticity
of demand and to estimate the demand function. They are also used to estimate the total cost

126
and total revenue functions from marginal cost and marginal revenue functions. The
following are some of the examples of ordinary differential equations:
dy
 6x  2 .
dx
d2y
 2y  8
dx 2
5 3
 d2y   d3y 
 2    3   y  x
 dx   dx 
2 3
d y  dy 
    6y  x
dx 2  dx 
How the order and degree of differential equations are identified? And can you solve
differential equations?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Note that the order and degree of differential equation are the order and the degree (of the
power) of the highest derivative occurring in the differential equation, respectively. For
examples, the first three ordinary differential equations above are represented by first order
& first degree, second order & first degree and third order & third degree, respectively.

Indeed, there are no general rules for solving all differential equations. However, there are
certain standard methods of solving certain types of simple differential equations. To this
end, the general solution (of complete solution) of a differential equation is that which
contains as many arbitrary constants as the order of the equation. A particular solution of a
differential equation is that which is obtained from the general solution by giving particular
values to the arbitrary constants. For instance, the general form of solution for of first order
linear differential equations is:
dy
f ( x )dx    y dy  0 or  f ( x).d ( y )
dx

127
Rule to solve:
dy
i. Consider the equation  xy
dx
dy
ii. Separating the var iables  dx..x
y
iii. Integrating both sides
dy
   xdx  c
y
This is the required solution, where c is an arbitrary constant. Note that you never forget to
add an arbitrary constant on one side.

dy 1  y
Example 1 Solve 
dx 1  x
Solution:
dy 1  y
Given 
dx 1  x
Separating the variables, we have
dy dx

1 y 1 x
Now, integrating both sides of the equation, we have
dy dx
1 y  1 x  c
or log(1  y )  log(1  x)  c
or log(1  y )  log(1  x )  c
1 y
or log c
1 x
1 y
or  e c  c1 ( As c is an arbitrary cons tan t e c  c1 is also anarbitrar y cons tan t )
1 x
1 y
  c1 is the required solution
1 x

dy
Example 2 Solve the differential equation  e x y  x 2 e  y
dx
Solution:

128
The given equation is
dy
 e x y  x 2 e  y
dx
dy
or  e  y (e x  x 2 )
dx
Separating the variables, we have
dy
ey.  ex  x2
dx
or e y dy  (e x  x 2 )dx
Integrating both sides, we get
y
e dy   (e x  x 2 ) dx  c where c is an arbitrary cons tan t

x3
ey  ex  c
3
This is the required solution.

Alternatively, the formula for the general solution for the first order linear differential
equations, say dy/dt, is given by:
dy
The differential equation:  vy  z
dt
Where v and z may be constants or functions of time t. thus, the general solution is:

y(t )  e  ( A   ze  dt )
 vdt vdt

Where A is an arbitrary constant.

dy
Example 3 Solve the differential equation  4 y  12
dt
Solution:
Since v=4 and z=12, substituting in the above general formula, we have

129
y (t )  e  ( A   12e  dt )
 4 dt 4 dt

 4dt  4t  c  4t (ignoring the cons tan t c )

 ( 4t  c ) dt  3e 4t  c  3e 4t (ignoring the cons tan t c )
 12e
y (t )  e  4t ( A  3e 4t )  Ae 4t  3, (e  4t e 4t  e 0  1)

7.3 Difference Equations

Overview
An equation that shows the relation between the independent variable x, the dependent
variable y and its finite differences is called a difference equation. The finite difference
between two successive values of x starting from x, will be x, x+1, x+2. Importantly, As x
changes from x to x+1, x+2…., the corresponding values of y are y(x), y(x+1), y(x+2)….. ,
may be denoted by the successive values of y written as y x , y x 1 , y x  2 .... Difference equations

are widely used in economics to determine the conditions of dynamic stability in lagged
economic models such as Cobweb Model, Harrod-Domar Model and Lagged Income
Determination Model. In short, the difference equation expresses a relationship between a
dependent variable and lagged independent variable. The following are examples of the
difference equations:
y x  2  y x 1  y x  2
y x  2  2 y x  y x 1  1

What do you understand about difference equation? How it does differ from the differential

equation? How the order and degree of difference equations are identified?
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________

Note that the order of the difference equation is the order the maximum difference of the
difference intervals. In other words, the order of a difference equation is the difference

130
between the largest and the smallest arguments occurring in the difference equation divided
by the unit of increment.

The above first difference equation is of the second order:

l arg est arg ument  smallest arg ument  x  2   x
 2
Unit of increment 1
and above second difference equation is of the third order :
x  2  x  1  3
1
On the other hand, the degree of a difference equation is the degree (of power) of the highest
order difference contained in the equation. For example,
y x  2  y x 1  y x  0 is of deg ree 1 and order 2
2
but  y x  2   y x 1  y x  0 is of deg ree 2 and order 2

To solve for the first order linear difference equation, y t  byt 1  a , the following general

formula or solution could be adopted. That is,

y t  Ab t  c
a a
where A  y 0  and c  ; b 1
1b 1 b

Note that if b=1 the general solution could be written as

y t  y 0  at

Example 1 Solve the difference eqaution y t  7 y t 1  16 given y 0  5.

Solution:
sin ce b  7, which is different from one and a  16, use the first alternative formula
a 16 16
y t  Ab t  c, A  y 0  5  5  2  3 and c  2
1 b 1 7 1 7
y t  Ab t  c  3(7) t  2

Example 2 Solve the difference eqaution y t  y t 1  17

Solution:

131
sin ce b  1, and a  17, use the sec ond alternative formula
a 17
y t  y 0  at , A  y 0   y0   y0
1 b 11
y t  y 0  at  A  17t

7.4 Economic Applications of Differential and Difference Equations

The concepts you have learned in differential and difference equations are widely used both
in microeconomics and macroeconomics theories. In this section you will see two economic
applications of differential and difference equations. These are microeconomic theory of
market equilibrium analysis using differential equation and macroeconomic theory of the
Harrod growth model using difference equation.

7.4.1 Market Equilibrium Analysis

Given the following demand and supply functions:
Demand function: Qd = c+ bP
Supply function = Qs = g + hP
The equilibrium price is:
cg
P
hb
Assume the rate of change of price in the market dp/dt is positive linear function of excess
demand Qd-Qs such that

= ( − )

The condition for dynamic price stability in the market, that is, under what conditions ( )
will converges to P as t→ ∞, can be calculated as follows. Substituting the given
parameters for Qd and Qs.

= ( + )−( +ℎ )= ( + − −ℎ )

Rearranging to fit the general format

= (ℎ − ) = ( − )

Letting V= m (h-b) and z = m (c-g)

132
 ∫ ∫
p ( t) = (A + ∫ = ( )= ( +∫ dt)
2
p ( t) = [A + ]= ( +
V
z 2
= 0, (0) = + = (0) −
V
Up on substitution:
z z
( ) = [ (0) − ] +
V
Finally replacing v = m (h-b) and z = m (c-g)
c−g ( )
c−g
( ) = [ (0) − ] +
ℎ− ℎ−
The time path is:
( ) = [ (0) − P ] ( )
+ P

7.4.2 The Harrod Growth Model

The dynamics of the growth of the economy is one of the important issues of
macroeconomic theory. The Harrod model tries to explain the relationship between saving
and growth in income as
=
Where s is a constant equal to both marginal propensity to save (MPS) and average
propensity to save (APS). It also assumes the accelerator principle, that is, investment is
propositional to the rate of change of national income over time.

= ( )
Where a is a constant equal to both the marginal and average capital output ratios in
equilibrium. Therefore,
=( )=
( − )
Dividing through by (a-s)
a
= [ ]
−
a a
= ( − 0) +0 =
− −

133
The stability of the time path thus depends on a/ (a-s). Since a is equal to the capital- output
ratio, which is normally greater than 1, and since s=MPS which is greater than 0 and less
than 1, the base a/ (a-s) will be larger than 0 and usually greater than 1. Therefore, y is
explosive but non oscillating. Income will expand indefinitely, which means it has no
bounds.

Summary
 If an equation contains derivatives with respect to independent variable, the equation
is said to be differential equation.
 The order and degree of differential equation are the order and the degree of the
highest derivative occurring in the differential equation.
 The difference equation is defined as the relationship between a dependent variable
and lagged independent variable.
 The order of the difference equation is the difference between the largest and the
smallest arguments occurring in the difference equation divided by the unit of
increment where as the degree of a difference equation is the degree of the highest
order difference contained in the equation.

134
 Self Test Exercise 7
1. Identify the degree and order of the following differential equations
4
 dy 
a )    5t 5  0
 dt 
2
 d 2 y  3d 2 y
b)  2   1  0
 dx  dx 2

2. Identify the degree and order of the difference y x 3  y x  2  y x 1  5

3. Solve the following differential equations
dy
a)  x log x
dx
dy
b)  2e y
dx
c ) (1  x )dy  (1  y )dx  0
4. Solve the following difference equations
1
a ) yt  y t 1
8
b) y t  3 y t 1 given y o  2
c ) 2 y t  y t 1  18

135
 Answers for Self Test Exercises
Exercise 1
1. P = 3 and Q = 12
2. a) 40Q-200,000
b) 5000
3. p = 2 and Q = 3
4. a) 8
b) 4(400%)

Exercise 2
1. a) The limit exist, i,e., 20
b) The limit exist, i.e., 1/2
2. a) f(3)=30 and it exists
b) f(g) is not defined and it is discontinuous
3. a) 14/5 c) 10 e) 1/4 g) 2
b) 7 or -7 d) does not exist f) 0 h) 1/9
4. a) Continues, 7
b) Discontinuous, f(1) is undefined
c) Discontinuous, the two side limits are not equal
d) Continuous, f(4) = 40
e) Discontinuous, f(3) is not defined
5. a) f(x) is continuous for all x since it is a polynomial function
b) Since n=2 is even x-2 is continuous and non negative for all x  2 on the interval
[2,)

Exercise 3
1. a) 3 b) -1/x2 c) 4x2-4 d) 2x+2
3 2 3
2. a ) f ( x )  0 b) f ( x )  x  3
2 2 x
3. a ) f ( x )  6 x 2  6 x  2 b) f ( x )  6 x (5 x 3  2 x 2  3x  1)

136
 11x 2  10 x  7 ax 2  6
c ) f ( x )  d ) f ( x ) 
( 2 x 2  5 x  1) 2 cx 2
dz dz
4. a)  24 x  60 b)  25 y 24  25( x 2  5 x  3) 24
dx dx
( H int : Z  y 25 & y  x 2  5 x  3)
5. a) Monophonic, because dy/dx=X+3>0 (y always increase for all x) and then it is
monotonically increasing function. The derivative of the inverse becomes
1 dx 1
 
dy / dx dy x  3
b) Not Monotonic, because its inverse exist but not a one to one mapped function, i.e.
1 2
1 dx 1 3
1
y / x  3 3
y  y . So, the derivative of f will be  x 
dy 3 33 y 2

6. a )  b) 1

10e sx
7. a ) 3e 2 x (2 x  1) b)
( e 5 x  1) 2
4 6 x
8. a ) b) c) 2
4x  7 1 x ( x  7) ln a

9. a ) ( 0,3) , min imum b) (1, 31 3) , inf lection

10. a ) y  x  3 1 3
b) y  x  x 2  x  10 c) y  x 3
3

Exercise 4
1. a ) AC  Q 2  5Q  60 MC  2Q 2  10Q  60
b) Critical value : q  2.5 Minimum AC  53.75
2. a ) Q  21 & 20
b)   15,850
12
3.
7

137
Exercises 5
 35 y  35 x
1. a) Z x  , Zy 
(6 x  7 y ) 2 (6 x  7 y ) 2

b) Z w  18w 2  4 x
Z x  4w  6 x  7 y
Z y  7 x  16 y
3
c) Z x   x( x 2  y 2 ) 2

3
Z y   y( x 2  y 2 ) 2

d ) Z w  15(5w  4 x  7 y ) 2
Z x  12(5w  4 x  7 y ) 2
Z y  21(5w  4 x  7 y ) 2

 (266 y 2  304 xy )
e) Z x 
(5 x  2 y ) 3
304 x 2  266 xy
Zy 
(5 x  2 y ) 3

2. a) Z xy  640(8 x  4 y ) 3
b) f xx  60 xy 2 Z 4 f yy  20 x 3 Z 4 f zz  120 x 3 y 2 Z 2

x2
3. Mu x1  5 x 2 ; Mu x 2  5 x1 ; MRS xy 
x1

q2
4. Slope of IC  3 , Slope of IC at q1 = 20 & q 2 = 30 is - 2
q1
2k
5. Slope of isoquant 
L
4
6. a ) dy  dy
5x 2
b) dz  (72 x 2  42 xy ) dx  21x 2 dy
c ) dz dw  70 x  32 y
7. Minimum and inf lection po int at critical po int s (1,1) and (0,0) respectively
2 8 4 4
8. x1  ; x 2  , z  and  
17 17 17 17

138
Exercise 6
x11
1. a) c e) 2 log(2  x )
11
2 32 e3 x  2
b) x c f)
3 3
1 x a 1 x b 1
c) (5 x  4 ) 5  c g) 
25 a 1 b 1
1 x2 2 3 1 6
d) 9  4x   c h)  x  x
2 2 3 30
1 1
2. a) b) c )3
2 5
3. TC  36 x  10 x 2  2 x 3  20
20
AC  36  10 x  2 x 2 
x
6
4. TR  3   5x
x2
3
p 5
x2
5. 666.67

Exercise 7
1. a) first order, fourth degree
b) second order, second degree
2. Second order, first degree
x2 1
3. a ) y  log x  x 2  c1
2 4
y
b) e  2 x  c
c) (1  x )(1  y )  c
t
1
4. a ) y t  A 
8
b) yt  c(3) t
t
1
c) y t  A   18
8

139
 References
Barnet R.A. and M.R. Ziegler, (1994), Applied Mathematics for Business Economics,
Life sciences and Social Sciences, 4th edition, MacMillan College Publishing Company
Chiang A.C, (1984), Fundamental Methods of Mathematical Economics, McGraw Hill,
Inc.
Knut Sydsæter and Peter Hammond: Mathematics for Economics I and II. Ethiopian
Edition

Yamane T. (1978), Mathematics for Economists: An elementary Survey, 2nd edition,

prentice- Hall
Dowling E.J.T., (1980), Mathematics for Economists, Schaum’s outline series, Mc Graw
Hill, Inc.
Henderson and Quandt, Microeconomics Theory: A mathematical Approach
Allen R.G.D. (1963), Mathematical Economics, 2nd edition Macmillan, New York
Mabbett, A. J., (1963) Mathematics for Economists

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