ECON 1003 Mathematics for Social Sciences I

UNIT FIVE

DIFFERENTIATION

Increments

If a variable x changes from x = 4 to x = 4.5 , the increment in x is 0.5.

Similarly, if x changes from x = 6 to x = 4, the increment is -2.

In general, the increment of a variable x is the change in x as it increases or decreases from one
value, x = x0 to another value x = x1.

If the increment in x denoted by δx, then δx = x1 – x0.

Suppose y = f(x) = x2 and x changes by 2 units from x = 4 to x = 6 (i.e. there is an increment of 2

in x); then y changes from 16 (y = 42) to 36 (y = 62), giving an increment of 20 in y (36 – 16).
Thus if the variable x changes from x = x0 to x = x0 + δx and y = f(x), then y is given an
increment δy = f (x0 + δx) – f (x0).

 y change in y
The Quotient  is called the average rate of change of the function on the
 x change in x
interval between x = x0 and x = x0 + δx.

Example 5.0:

If y = f(x) = 2x2 + x + 3 and x is given the increment δx = 0.5 from x = 2. Find the increment in
y and the average rate of change of y on the interval between x = 2 and x = 2.5.

Solution:

δy = f(x0 + δx) – f(x0) where x0 = 2

x0 + δx = 2.5

δy = f(2.5) – f(2) = {2(2.5)2 + 2.5 + 3} – {2(2)2 + 2 + 3} = 18 – 13 = 5 is the increment in y.

y 5
Average rate of change in y    10 .
 x 0.5

Note: The average rate of change from x0 to x1 can be defined as the change in the
dependent variable divided by the change in the independent variable.

80
ECON 1003 Mathematics for Social Sciences I

 y y y1  y0 f  x1   f  x0 
Average rate of change     .
 x x x1  x0 x1  x0

Or using the notation stated earlier:

 y f  x0   x   f  x0 
Average rate of change   .
x x

The Concept of the Derivative (Using Figure 5.0)

(x1 + Δx, y + ΔY)

B

Δy

A Δx D

x (x1 + Δx)

Figure 5.0

Often we require the rate of change of y with respect to x at the point A and not over the range of
values AD. To obtain this, let Δx (the change in x) tend to zero. If smaller and smaller values of
Δx are taken, the point B approaches the point A, and the average rate of change over the range
AD approaches the rate of change A.

The limiting value of this process is called the derivate of y with respect to x and the process
itself is referred to as differentiation.

Hence the derivative measures the instantaneous rate of change of a function, i.e., how the
dependent variable changes for a very small unit change in the independent variable.

Formal Notation

dy
Given a function y = f(x), the derivative of the function f at x, written f ( x ) or , is defined as
dx
dy f ( x  x)  f ( x) f ( x  h)  f ( x )
f ( x)   Lim if the limit exists or Lim . Note: h = Δx.
dx x0 x h 0 h

81
ECON 1003 Mathematics for Social Sciences I

dy
f ( x) is read “the derivative of y with respect to x” or “f prime of x” (and spoken as “dee y
dx
by dee x”).

dy
The derivative of a function, f ( x ) or , is itself a function which measures the slope and the
dx
instantaneous rate of change of the original function f(x) at a given point. The process of finding
a derivative is called differentiation.

This approach to derivatives is known as first principles or using the definition of a derivative.

Note: In the case of a linear function, the rate of change of y with respect to x, the slope of
the line, and the derivative are identical.

Additional definitions and notations

The gradient of a function charges as you move along the curve, however for a linear function
the gradient remain as you move along the line.

Example: y  3x  5 the gradient is 3

Example y  2 x3  4 x  6 the gradient changes as you move along the x-axis.

This mean that if the equation of the curve is y=f(x), then the gradient at the point (x,y) is
dependent on x.

So associated with any function y=f(x) is a corresponding function, the gradient function for that
curve, y  f ( x) .

Since the gradient function is derived from the original function it is also commonly known as
the derived function or the (first) derivative or it may be called the differential coefficient.

The process of finding the gradient is called differentiation [the process of differentiation can be
performed again and again to the same function producing the second derivative, third
derivative, etc].

dy
As well as f ( x ) the gradient function is often represented by the symbol (read as dee y by
dx
dee x), the derivative of y w.r.t (with respect to) x.

82
ECON 1003 Mathematics for Social Sciences I

d
Note: that is not a fraction, it is an operator which is applied to the function y  f ( x)
dx
and tells you to differentiate w.r.t x. For the second derivative the symbol
 d  dy  d 2 y

f ( x) and     2 (dee two y by dee x squared) are used and so on for
 dx  dx  dx
higher derivative.

dy
The notation is useful because it makes plain that it is the change in y that is being measured
dx
with the change in x.

Example 5.1:

Find the derivative of the function f(x) = x2 – x using the definition of the derivative.

Solution:

f(x) = x2 – x
f(x + Δx) = (x + Δx)2 – (x + Δx)
= x2 + 2xΔx + (Δx)2 – x – Δx.

Using the definition:

dy f ( x  x)  f ( x)
 f ( x)  Lim
dx x  0 x
dy
 Lim

x  2 xx  (x)2  x  x  x 2  x
2
  
dx x0 x

x 2  2 xx  (x) 2  x  x  x 2  x
 Lim
x 0 x
2 xx  (x)  x
2
 Lim
x 0 x

x  2 x  x  1
 Lim  2x 1
x 0 x

83
ECON 1003 Mathematics for Social Sciences I

Note:

(1) Since the derivative is a limit, the former is defined only if the limit exists. If the
dy dy
Lim does not exist at a point, then is not defined at that point.
x  0 dx dx

(2) Notation: If y = f(x) the derivative of this function may be denoted by any of the
dy df d
following symbols: ; ; f ( x); y  or f ( x) .
dx dx dx

dy
(3) Since is simply the slope of a function, the sign of its value at any point indicates
dx
whether f is increasing, decreasing or stationary, as f(x) passes through that point.

(a) f ( a )  0 indicates f is increasing at the point x = a

(b) f ( a )  0 indicates f is stationary at the point x = a

(c) f ( a )  0 indicates f is decreasing at the point x = a.

Interpretations of f ( x0 ) - The Value of the Derivative

(1) f ( x0 ) is also called the gradient of the function f(x) at the point x = x0.

(2) f ( x0 ) is also called the instantaneous rate of change of f(x) at the point x = x0.

The mathematical concept of the derivative has a relationship to the economic concept of
“the margin”. In economics one’s focus is on the effects of very small or “marginal
changes”. This is reflected in economics by many terms used, such as marginal revenue,
marginal productivity and marginal propensity to consume.

(3) In economics, the (instantaneous) rate of change of the total production cost with respect
to the number of units produced is called the marginal cost.

This cost is measured in dollars per unit and is quite often a good approximation to the
cost of producing 1 additional unit.

84
ECON 1003 Mathematics for Social Sciences I

Example: Assume a firm which produces pens known that in order to produce q pens
it will have to pay out C(q) dollars in wages, materials and other fixed or
variable costs. Let C(q) represent the cost function. Hence a change in
production from q to q + 1 pens is relatively small and may be consider to
be marginal. The corresponding increase in cost is C (q + 1) – C(q) and is
referred to as the marginal cost of making one more pen when the level of
production is q.

(4) Using the change (Δ) notation from the example above, we note that the change in the
level of production can be written as Δq where Δq= 1. Hence the corresponding change
in cost can be written as Δc where Δc = C ( q + 1) – C(q).

Hence the marginal cost function can be defined as the derivative of the cost function,
C
which can be written as C (q )  .
q

(5) If f(x) is a revenue function when considered in terms of a firm that sells x units of a
product, f ( x0 ) is called the marginal revenue from the sale of x0 units of the product.

(6) Also if f(x) is a profit function in the context of a firm that produces and sells x units of a
product, f ( x0 ) is called the marginal profit from the production and sale of x0 units.

Rules of Differentiation

Differentiation refers to the process of finding the derivative of a function. In outlining the rules
of differentiation for a function y = f(x), other functions such as g(x) or u and h(x) = v are
frequently used, where g or u and h or v are both unspecified functions of x.

(1) The Derivative of a Constant

The derivative of a constant y = f(x) = k where k is any constant. Given y = k then

dy
 0.
dx

dy
Example 5.2: Given y =25, 0
dx

(2) The Derivative of a Power Function

dy
The derivative of a power function y = xn where n is any real number, then  nx n 1 .
dx

85
ECON 1003 Mathematics for Social Sciences I

dy
Example 5.3: Given y = x4,  4 x3 .
dx

dy
Example 5.3b: Given y = x-3,  3 x 31
dx
 3x 4

(3) The Derivative of a Constant Times a Function

The derivative of a constant times a function y = k g(x), where k is a real number and g(x)
dy
is a differentiable function of x, then  k g ( x) .
dx

dy
Example 5.4: Given y = 2x-4,  2(4) x 41  8 x 5 .
dx

(4) The Rule for a Sum and/or Difference

The derivative of a sum or difference of two or more functions y  f ( x)  g ( x)  h( x) or

f ( x)  u  v where g(x), h(x), u and v are all differentiable functions of x is given as:

dy du dv
 f ( x)  g ( x)  h( x) or  .
dx dx dx

dy
Given y  3x4  x 2  x  2 . Find
1
Example 5.5: .
dx

Solution:

dy 1 1
 3(4) x 41  x 2 1  1x11  0
dx 2

dy 1 1
 12 x 3  x 2  1 .
dx 2

86
ECON 1003 Mathematics for Social Sciences I

1
 3
Example 5.5b: y  2x  4x
3 2
  2x 1
x
1

First write y  2 x3  4 x 2
 3 x 1  2 x  1
dy 1  1 1
Hence  2(3) x31  4( ) x 2  3(1) x 11  2
dx 2
3

 6x  2x
2 2
 3 x 2  2

Note: For a linear function the derivative is the coefficient of the variable. Given y = 2x,
dy
 2.
dx

(5) The Derivative of a Product (Product Rule)

The derivative of a product f ( x)  g ( x)  h( x) or y  u  v where g(x), h(x), u and v are

dy dv du
differentiable functions of x then f ( x)  g ( x)  h( x)  h( x)  g ( x) or u v .
dx dx dx

dy
Example 5.6: Given y = (3x4 + 3) (x-1 + x). Find .
dx

Solution:

Let u  3x 4  3 v  x 1  x
du dv
 12 x 3   x 2  1
dx dx

dy dv du
Hence u v
dx dx dx

dy
dx
   
 3 x 4  3  x 2  1  x 1  x 12 x 3 

87
ECON 1003 Mathematics for Social Sciences I

Example 5.7: Given f ( x)  2 x3 (3x 2  2 x  3) .

Solution:

Let u  2 x3 v  3x 2  2 x  3
du dv
 6x2  6x  2
dx dx

du dv
Hence f ( x)  u v
dx dx
 2 x (6 x  2)  (3x 2  2 x  3)6 x 2
3

 12 x 4  4 x 3  18 x 4  12 x 3  18 x 2  30 x  16 x 3  18 x 2

(6) The Derivative of a Quotient (Quotient Rule)

g ( x) u
The derivative of a quotient f ( x)   where g(x), h(x), u and v are differentiale
h( x ) v
du dv
v  u
h( x) g ( x)  g ( x)h( x) dx dx .
functions of x then f ( x)  or
 h( x ) 
2 2
v

x3 dy
Example 5.8: If y  . Find .
x 3
2
dx

Solution:

Let u  x3 v  x2  3
du dv
 3x 2  2x
dx dx

du dv
v u
dy
Hence  dx 2 dx
dx v
dy ( x  3)3x 2  x3 (2 x)
2

dx ( x 2  3) 2

3x 4  9 x 2  2 x 4

( x 2  3) 2

88
ECON 1003 Mathematics for Social Sciences I

dy x 4  9 x 2

dx ( x 2  3) 2

(7) Power Function Rule

The derivative of a function raised to a power such as f(x) = [g(x)] n or y = [f(x)] n where
g(x) and f(x) are differentiable functions of x and n is any real number is given by
dy
f ( x)  n[ g ( x)]n 1 g ( x) or  n[ f ( x)]n 1 f ( x) .
dx

dy
Example 5.9: Given y = (x2 + 2x)4. Find .
dx

Solution:

Let f ( x)  x 2  2 x
f ( x)  2 x  2

   2x  2
dy 4 1
Hence  4 x2  2x
dx

 4(2 x  2)( x 2  2 x)3

dy
 (8 x  8)( x 2  2 x)3
dx

(8) Derivative of a Composite Function (Chain Rule)

The derivative of a composite function f(x) = g[h(x)] when both h(x) and g(x) are
differentiable functions of x is equal to f ( x)  g [h( x)]  h( x) .

The chain rule is also known as the composite function rule or the function of a function
rule.

If we let y = u(x) where u and x are differentiable function of x then using the rule we get
dy dy du
  .
dx du dx

89
ECON 1003 Mathematics for Social Sciences I

Given y   3 x 2  4 x  1 . Find
1
2 dy
Example 5.10: .
dx

Solution:

u  3x 2  4 x  1 y  u2
1
Let

du dy 1  12
 6x  4  u
dx du 2

dy dy du 1  12
Hence    u  (6 x  4)
dx du dx 2
1 1
 (6 x  4)u 2
2
 
 12
 (3 x  2) 3 x 2  4 x  1

Note: This function could also be solved with the rule (7) the power function rule which is
simply a specialized use of the chain rule.

Using rule 7.

Given y   3 x 2  4 x  1
1
2

Solution:

   6x  4
dy 1 1
Let  3x 2  4 x  1 2
dx 2

 
1 
 3x  4 x  1 2 (6 x  4)
2

2
1

 
1 
 (6 x  4) 3x 2  4 x  1 2
2
 
 12
 (3 x  2) 3 x 2  4 x  1

90
ECON 1003 Mathematics for Social Sciences I

(9) The Derivative of the Exponential Function (ex)

Note: The number e is irrational, i.e. it cannot be given an exact numerical value
but to 4 significant figures, e  2.718 .

a x (a  0) is an exponential function.

e x  e ; 2.718 is the exponential function.

(The graph is seen in Appendix 2).

dy
If y = ex then  ex .
dx

dy
Example 5.11: Given y = e3x. Find .
dx

Solution: By use of the Chain Rule.

Let t = 3x Hence y = et

dt dy
3  et
dx dt

dy dy dt
Therefore  
dx dt dx

 et (3)  3et
dy
 3e3 x
dx

91
ECON 1003 Mathematics for Social Sciences I

dy
Given y  e2 x  4 x 1 . Find
3
Example 5.12: .
dx

Solution:

Let t  2 x3  4 x  1 y  et

dt dy
 6x2  4  et
dx dt

Hence
dy dy dt
   et 6 x 2  4
dx dt dx
 


 6 x 2  4 et 
 6x 2
 4 e 2 x3  4 x 1

(10) The Derivative of ln x

Note: Logarithms with base e are called natural or Naperian. Common logarithms
have a base 10. To avoid confusion we denote logarithms to base e as ln. (See
Appendix 3 for additional information).

dy 1 dy 1
The derivative of y = ln x is given by  . Given y = ln t  .
dx x dt t

dy
Example 5.13: Given y = ln (x2 + 3). Find .
dx

Solution:

Let t  x2  3 y  ln t

dt dy 1
 2x 
dx dt t

92
ECON 1003 Mathematics for Social Sciences I

dy dy dt 1
Hence    (2 x)
dx dt dx t

2x

t

dy 2x
 2
dx x  3

(11) The Derivative of ax when a is a Constant

dy
Given y = ax then  a x ln a .
dx

This is derived from y = ax by taking logarithm to base e.

ln y = ln ax
ln y = x ln a hence differentiating y with respect to x gives

1 dy
 ln a
y dx

dy
 y ln a
dx

dy
 a x ln a
dx

(12) Derivative of Trigonometric Functions are given in Appendix 4.

93
ECON 1003 Mathematics for Social Sciences I

Rates of Change
The derivative of a function y = f(x) at the point x = x0 gives the gradient of f(x) at x0.

Example 5.14:

Find the gradient of f(x) = 2x3 – 4x + 5 at the point (0,1).

Solution:

At point (0, 1) means x = 0, y =1

Hence to find the gradient at this point we must substitute for x=0 in the first derivative.

f ( x)  6 x 2  4

When x=0 f (0)  6(0) 2  4

 4
Hence the gradient (0, 1) is -4.

Note: The function f(x) would be decreasing at this point (0, 1), since the gradient (slope) is
negative.

Example 5.15:

A firm has a cost function C(x) = 0.025x2 + 25000. Find the rate at which its cost is changing
when production is (i) 10 units; (ii) 100 units; (iii) 1000 units.

Solution:

C ( x)  0.050 x

(i) C (10)  0.050(10)  $0.50

(ii) C (100)  0.050(100)  $5
(iii) C (1000)  0.050(1000)  $50 .

Note: When 10 units are produced then the change in costs is $0.50which means it costs
approximately 50 cents to produce the 11 units for this firm. Also when 100 units
produced the approximate cost of producing the 101st unit is $5.

94
ECON 1003 Mathematics for Social Sciences I

Example 5.15b:

Determine whether the function f ( x)  3x 3  4 x  3 is increasing, decreasing or stationary at the

 2 11 
points indicated (0, 3), (1, 2) and  ,  .
3 9 

Solution:

The derivative function is required hence f ( x)  9 x 2  4 .

(i) At (0,3) the gradient is f (0)  90(0) 2  4  4 which is negative, hence f(x) is
decreasing at (0, 3) i.e: x=0 y=3

(ii) At (1, 2), note x=1; y=2 f (1)  9(1) 2  4  5 which is positive, hence f(x) is
increasing at (1, 2).

 2 11 
(iii) At  , 
3 9 
2
2 2 4
f    9   4  9   4  4  4  0
3 3 9
 2 11 
hence f(x) is stationary at this point  ,  .
3 9 

Higher Order Derivatives

If y = f(x), then one can differentiate the first derivative of y with respect to x,  f ( x)  , to obtain
the second derivative of y with respect to x, f ( x) .

The second derivative can also be differentiated to find f ( x ) etc.

These higher order derivatives can be denoted by:

d2y
 The second derivative f ( x )  .
dx 2

d3y
 The third derivative f ( x)  , and
dx3

dny
 The n derivative f ( x)  n .
th n

dx

95
ECON 1003 Mathematics for Social Sciences I

dy d3y
Example 5.16: Given y = 2x4 – x2 + 3x – 6. Find and .
dx dx 3

Solution:

y = 2x4 – x2 + 3x – 6

dy
 8 x3  2 x  3
dx

d3y d2y d2y

To find 3
we must first find 2
. Hence 2
 24 x 2  2 .
dx dx dx

d3y
Therefore  48 x .
dx 3

Application of Derivatives

Marginal Analysis
As outlined earlier in the interpretation of the derivative, “marginal” is used to indicate a
derivative (that is a rate of change).
Hence the marginal cost is the average cost per extra item when a very small change is made in
the amount produced.

The marginal cost is therefore the derivative of the cost function with respect to the amount
produced.

Given cost function C(x), marginal cost is C ( x ) .

Given revenue function R(x), marginal revenue is R ( x ) .

Profit function is P(x) = R(x) – C(x).

Marginal profit P ( x ) represents the additional profit per item if the production changed by a
small amount.

96
ECON 1003 Mathematics for Social Sciences I

Example 5.17:

For the cost function C(x) = 0.001x3 – 0.3x2 + 40x + 100 determine the marginal cost as a
function of x. Evaluate the marginal cost when the production is given by x = 50, x = 100.

Solution:

C ( x)  0.001x3  0.3x 2  40 x  100

C ( x)  0.003x 2  0.6 x  40

x  50  C (50)  0.003(50) 2  0.6(50)  40  17.5

x  100  C (100)  0.003(100)2  0.6(100)  40  10

Hence approximately $17.50 to produce the 51st item and $10 to produce the 101st item.

Example 5.18:

The demand equation for a certain item x is:

P + 0.1x = 80

and the cost function is:

C(x) = 5000 + 20x

Compute the marginal profit when 150 units are produced and sold when 400 units are produced
and sold, also the level of demand that maximizes profit and the amount of profit obtained.

Solution:

The revenue function is given by:

R(x) = xP = (no of items sold) (price per item)

= x (80 – 0.1x)
= 80x – 0.1x2

Cost function:

C(x) = 5000 + 20x

97
ECON 1003 Mathematics for Social Sciences I

The profit from producing and selling x items:

P(x) = R(x) – C(x)

= (80x – 0.1x2) – (5000 + 20x)
P(x) = -0.1x2 + 60x – 5000

Marginal profit:

P ( x ) = -0.2x + 60

When x = 150 P  (150) = -0.2(150) + 60 = 30.

Hence when 150 items are being produced, the marginal profit (the extra profit per additional
item) when the production is increased by a small amount is $30.

When x = 400, the marginal profit P  (400) = 60 – 0.2(400) = -20.

Hence when 400 units are being produced a small increase in production results in a loss of $20
per additional unit.

dp
Profit is maximized when 0.
dx

Since P(x) = -0.1x2 + 60x – 5000

dp
= -0.2x + 60
dx

dp
Putting 0
dx

Gives –0.2x + 60 = 0
x = 300

d2 p
Note:  0.2( 0) showing that x = 300 gives a maximum profit.
dx 2

When x = 300

P(300) = -0.1(300)2 + 60(300) – 5000

= -9000 + 18000 – 5000
= 4000

Hence maximum profit is $4000 when demand is 300.

98
ECON 1003 Mathematics for Social Sciences I

Differentials
Let y = f(x).

dx is called the differential of x and is defined by dx =  x. Similarly, dy is called the differential

of y and is defined as dy = f  (x) dx.

If dx =  x is relatively small when compared with x, dy is a fairly good approximation of  y.

Example 5.19:

Given y = x2 + x + 1 and let x change from 2 to 2.01. The actual change in y is:

 y = f(x +  x) – f(x) when x = 2 and f(x +  x) = 2.01

 y = f(2.01) – f(2)
= {(2.01)2 + 2.01 + 1} – {22 + 2 + 1} = 0.050

The approximate change in y, obtained by taking x = 2 and dx = 0.01 is:

dy = f  (x) dx
= (2x + 1) dx
= (2(2) + 1) (0.01) = 0.05.

Relative Maxima and Minima

Definition: A function f(x) is said to have maximum at x = a if f(a)  f(x) for all x in an
interval around a.

Definition: A function f(x) is said to have a relative minimum at x = a if f(a)  f(x) for all
x in an interval around a.

99
ECON 1003 Mathematics for Social Sciences I

y = f(x)

Max
f ( x)  0
f ( x )  0

f ( x)  0 Min
f ( x )  0
Min

x0 x1 x2 x

Figure 5.1

In Figure 5.1, f(x) has relative maximum at x = x1 and relative minima at x = x0 and x = x2.

Theorem: If f has a relative maximum or relative minimum at x = x0 then f  (x0) = 0,

that is, x0 is a critical value of f.

A necessary condition for a function y = f(x) to have a stationary (critical) point at x = x0 is

f  (x0) = 0.

Theorem: Let a be a critical value of the function f, that is f  (a) = 0.

(1) If f  (a) changes sign from positive to negative as x increases a, then f has a relative
maximum at x = a.

(2) If f  (x) changes sign from negative to positive as x increases through a, then f has a
relative minimum at x = a.

(3) If f  (x) does not change sign as x increases through a, then f has neither a relative
maximum nor a relative minimum at x = a.

Summarizing, we have the first derivative test for the relative maxima and minima of the
function f.

100
ECON 1003 Mathematics for Social Sciences I

First Derivative Test for Maxima and Minima

dy
Step (1) Find f ( x)
dx

Step (2) Solve f ( x )  0 for the critical points

Step (3) For each critical value a, determine whether f  (x) changes sign as x increases
through a.

f(a) is a relative maximum (relative minimum) if f  (x) changes from positive to negative
(negative to positive).

f(a) is neither a relative maximum nor minimum if f  (x) does not change sign, i.e. point of
inflection (P.O.I.).

Example 5.20:

Use the first derivative test to find all relative maxima and minima for the function given by:

1 2
f ( x)  x3  x  2x 1
2

Solution:

f ( x)  3x 2  x  2

Setting f ( x)  0  (3 x  2)( x  1)  0
2
x x  1
3

2 2 5 
The values 1 and are the critical values  1, 2.5  and  ,  are the critical points.
3  3 27 

101
ECON 1003 Mathematics for Social Sciences I

Using the critical values

2 2
x  1 1  x  x
3 3

2
1
3
If x < -1, then f  (x) > 0.

2
If –1 < x < , then f  (x) < 0.
3

2
If x > , then f  (x) > 0.
3

We can conclude that f has a relative maximum at x = -1 since f  (x) changes sign from positive
2
to negative. Also f has a relative minimum at x = since f  (x) changes sign from negative to
3
positive.

Second Derivative Test for Relative Maxima and Minima

The second derivative can often be used as a simple test for relative maxima and minima. The
technique of examining the second derivative at points where the first derivative is 0 is called the
second derivative test for relative maxima or minima.

Theorem: Let f be a function such that f  (a) = 0.

(1) If f ( a )  0 then f has a relative maximum at x = a.

(2) If f ( a )  0 , then f has a relative minimum at x = a.

(3) If f ( a )  0 and f ( a )  0 when f (a ) exists, then f(a) is a point of inflection (P.O.I.).

Using Example 5.20:

1 2
f ( x)  x3  x  2x 1
2

102
ECON 1003 Mathematics for Social Sciences I

f ( x)  0  3x 2  x  2  0

2
Giving values x  1, .
3

To classify these values, we find the second derivative

f ( x)  6 x  1

When x  1  f (1)  6(1)  1  0 hence x = -1 is a maximum.

2 2 2 2
When x   f     6    1  0 hence x  is a minima.
3 3 3 3

Example5.20a:

Find and classify the stationary points/critical points of the function y  f ( x)  2 x 3  4 x 2  2

Solution: y  2 x3  4 x 2  2
dy
 6 x2  8x
dx
dy
At stationary points  0, hence
dx
6 x2  8x  0
x(6 x  8)  0
x  0; 6 x  8  0
8 4
x 
6 3

4
Hence stationary points are x  0; x 
3
d2y
To classify, find
dx 2
d2y
 12 x  8
dx 2

4 d2y 4
When x   2  12    8  8  0
3 dx 3

4
Hence a minimum at the point x 
3

103
ECON 1003 Mathematics for Social Sciences I

Note: The y value of the points are not required. You can state only the x ordinate.

Example 5.21:

A worker’s productivity is given by f(t) = -0.05t2 + 1.8t + 150 when t is the number of years the
worker has been on the job and f(t) is the dollar value of the worker’s production in year t.

Find the interval on which the worker’s productivity is increasing and those on which it is
decreasing.

Find the worker’s maximum productivity and the year in which it occurs.

Solution:

Find the critical value (point), classify and evaluate the results.

f (t )  0.1t  1.8

f (t )  0.1

For critical value f (t )  0  0.1t  1.8  0

t  18

When t  18, f (18)  0.1  Max at t  18 .

Between 0 < t < 18, f (t ) is positive hence f(x) is increasing in this interval.

When t > 18, f (t ) is negative hence f(t) is decreasing when t > 18.

The worker’s maximum productivity is found in the 18th year.

f(18) = -0.05(18)2 + 1.8(18) + 150

= 166.2 is the maximum productivity.

Curve Tracing
It is often useful to be able to make a rough sketch of a curve without going through the process
of plotting a large number of the points.

The following procedure can be applied:

(1) Find all the critical (stationary) points of the function.

(2) Classify these points (max, min, P.O.I.).

104
ECON 1003 Mathematics for Social Sciences I

(3) Find where the curve cuts the co-ordinate axes.

(4) Determine what happens to y when x   .

(5) Determine if there are points where y is undefined (values where f(x) is discontinuous).

Example 5.22:

Sketch the curve y = x4 – 6x2 + 8x + 10.

Solution:

dy
(1)  4 x 3  12 x  8
dx

d2y
2
 12 x 2  12
dx

dy
For critical points 0
dx

Hence 4x3 – 12x + 8 = 0

x3 – 3x + 2 = 0

f(1) = 1 – 3 + 2 = 0  x – 1 is a factor.

x3 – 3x + 2 = (x – 1) (x2 + x – 2) = 0
(x – 1) (x – 1) (x + 2) = 0

x = 1 twice x = -2.

dy 2 d3y
When x = 1 = 0 and since exists then there is a P.O.I. at x = 1.
dx 2 dx 3

y = 14 – 6(1)2 + 8(1) + 10 = 13 P.O.I. (1, 13)

d2y
When x = -2 = 12(-2)2 – 12 = 36>0 hence min at x = -2
dx 2

y = (-2)4 – 6 (-2)2 + 8 (-2) + 10 = -14 min (-2, -14).

105
ECON 1003 Mathematics for Social Sciences I

d2y
Other P.O.I. when 0
dx 2

Hence 12x2 – 12 = 0
x2 = 1
x= 1

P.O.I.s are (-1, -3).

(2) Where the curve cuts the axes.

When x = 0 y = 10 (0, 10)

When y = 0  x4 – 6x2 + 8x + 10 = 0

It is not convenient to find where f(x) cuts the x-axis hence we can sketch without this
information.

(3) As x   y   using the highest power of x (x4)

As x   y   .

106
ECON 1003 Mathematics for Social Sciences I

Sketching the function gives:

y = f(x)

20

15

10

-3 -2 -1 1 2 3 4 5 x

-5

-10

-15

Figure 5.2

107
ECON 1003 Mathematics for Social Sciences I

Additional Examples

Example 5.23:

A manufacturer knows that if x (hundred) products are demanded in a particular week:

(i) the total cost function in ($000) is 14 + 3x and

(ii) the total revenue function ($000) is 19x-2x2

(a) Determine the (total) profit function

(b) Find the profit break-even points
(c) Calculate the level of demand that maximizes profit (i.e. maximum profit point) and the
amount of profit obtained.

Solution:

The total cost function C ( x)  14  3 x and the total revenue function R( x)  19 x  2 x 2

(a) Therefore, total profit function

P( x)  R( x)  C ( x)
 19 x  2 x 2  (14  3x)
P( x)  16 x  2 x 2  14

(b) The profit break-even points are the levels of demand which makes P ( x )  0 OR
where C ( x)  R( x)

P( x)  0 when 16 x  2 x 2  14  0
8 x  x 2  7  0 (divided throughout by  2)
x2  8x  7  0

Solve the quadratic equation

( x  1)( x  7)  0
hence x  1 and 7

Thus, the profit break-even points are when the demand is 100 or 700 products.

108
ECON 1003 Mathematics for Social Sciences I

dp
(c) Profit is maximized when 0
dx
dp
Since P ( x) 16 x  2 x 2  14  0  16  4 x
dx

dp
0 gives 16  4 x  0
dx
16  4 x
x4

d2 p
Note that  4( 0) showing that x  4 gives the maximum profit
dx

When x  4 P  16(4)  2(4) 2  14  18

Hence the maximum profit is $18000 is realized when the weekly demand is 400.

Example 5.24:

A firm’s total revenue function (in thousands of dollars) is given by R( x)  22 x  x 2  250 where
x represents the level of demand for its product.

(i) Write down an expression for the marginal revenue function.

(ii) Hence find the marginal revenue where the demand x=10.

The firm’s total cost function is given by C ( x)  0.25 x 2  9.5 x  50

(iii) Show that the firm’s profit function is given by P( x)  1.25 x 2  12.5 x  200
(iv) Find an expression for the marginal profit.
(v) Compute the marginal profit when the demand x=4.
(vi) Find the level of demand that maximizes the firm’s profit.

Solution:

(i) Marginal Revenue = R( x)  22  2 x

(ii) Marginal Revenue when x=10
R(10)  20  2(10)  2 hence $2000

109
ECON 1003 Mathematics for Social Sciences I

(iii) Profit = P ( x)  R( x)  C ( x)
 22 x  x 2  250  (0.25 x 2  9.5 x  50)
 22 x  x 2  250  0.25 x 2  9.5 x  50
 1.25 x 2  12.5 x  200

(iv) Marginal Profit P( x)  2.5 x  12.5

(v) Marginal profit when x=4

P(4)  2.5(4)  12.5  2.5 ie $2500

(vi) Max. Profit P( x)  0  2.5 x  12.5  0

x5

Note P( x)  2.5  0 when x  5  P( x) is a Max.

Additional Practice Question

(1) Differentiate the following with respect to x.

1
(a) y  3 x  6 x  2 x  3.
2 2

(b) y  (4 x3  6 x 2  x) 2 .

e4 x
(c) y 
2 x3  x

(d) y  (3x 2  2 x)(4  3x 2 ).

(2) Find and classify all the critical points of the function f ( x)  2 x3  4 x 2  3.

(3) A firm’s total revenue function is given by R( x)  22.2 x  1.2 x 2  1000 where x
represents the level of demand for its product.

(i) Show that the marginal function is given by R( x)  22.2 x  2.4 x

(ii) Hence find the marginal revenue when the demand x=5.

110
ECON 1003 Mathematics for Social Sciences I

The firm’s total cost function is given by C ( x)  0.4 x 2  3x  40

(iii) Find an expression for the firm’s profit function

(iv) Find and expression for the marginal profit
(v) Compute the marginal profit when the demand x=10.
(vi) State whether profit is increasing or decreasing when the demand x=10.
(vii) Find the level of demand that maximizes the firm’s profit and verify the result.

(4) For a firm the demand for a certain item x is given by P  0.1x  80 and the cost function
C ( x)  5000  20 x.

Compute the firm’s

(i) Marginal revenue function

(ii) Marginal profit function
(iii) The marginal profit when 100 units are produced and sold.
(iv) The level of demand that maximizes profit and the amount of profit obtained.
(v) Verify that the level of demand in (iv) is a maximum.

(5) Find the gradient of the function f ( x)  2 x3  3x  2 at the indicated ordinates (i) x=0 (ii)
x=-1 (iii) x=3.

Indicate whether f(x) is increasing, decreasing or stationery at these points.

(6) Given the demand function

Pr  10.4  1.3x ( where x is in hundreds)

Find the level of production (i.e. value of x) which maximizes total revenue.

111