Chapter 1

Functions and
Linear Models
Sections 1.3 and 1.4

Linear Function
A linear function can be expressed in the form

f ( x) mx b

Function notation

y mx b

Equation notation

where m and b are fixed numbers.

Graph of a Linear Function

The graph of a linear function is a straight line.
This means that we need only two points to
completely determine its graph.

y f ( x) mx b
m is called the slope of the line and
b is the y-intercept of the line.

Example: Sketch the graph of f (x) = 3x 1

y-axis

Arbitrary point
(1,2)
(0,-1)

y-intercept

x-axis

Role of m and b in f (x) = mx + b

The Role of m (slope)
f changes m units for each one-unit change in x.
The Role of b (y-intercept)
When x = 0, f (0) = b

Role of m and b in f (x) = mx + b

To see how f changes, consider a unit change in x.

f ( x) mx b

f ( x 1) m( x 1) b

Then, the change in f is given by

f ( x 1) f ( x) m( x 1) b (mx b)
f ( x 1) f ( x) mx m b mx b
f ( x 1) f ( x) m

Role of m and b in f (x) = mx + b

Role of m and b in f (x) = mx + b

Role of m and b in f (x) = mx + b

The graph of a Linear Function:

Slope and y-Intercept
Example: Sketch the graph of f (x) = 3x 1
y-axis

(1,2)

Slope = 3/1
x-axis

y-intercept

Graphing a Line Using Intercepts

Example: Sketch 3x + 2y = 6
y-axis

x-intercept
(y = 0)
x-axis

y-intercept
(x = 0)

Delta Notation
If a quantity q changes from q1 to q2 , the change
in q is denoted by q and it is computed as

q q2 q1
Example: If x is changed from 2 to 5, we write

x x2 x1 5 2 3

Delta Notation
Example: the slope of a non-vertical line that
passes through the points (x1 , y1) and (x2 , y2) is
given by:

y y2 y1
m
x x2 x1

Example: Find the slope of the line that passes through

the points (4,0) and (6, -3)

y 3 0 3
3
m

x 6 4 2
2

Delta Notation

Zero Slope and Undefined Slope

Example: Find the slope of the line that passes
through the points (4,5) and (2, 5).
y 5 5 0
m
0
x 2 4 2

This is a horizontal
line

Example: Find the slope of the line that passes

through the points (4,1) and (4, 3).
y 3 1 2
m

x 4 4 0

Undefined

This is a vertical
line

Examples
Estimate the slope of all line segments in the
figure

Point-Slope Form of the Line

An equation of a line that passes through the point
(x1 , y1) with slope m is given by:

y y1 m x x1
Example: Find an equation of the line that passes
through (3,1) and has slope m = 4
y y1 m x x1
y 1 4 x 3
y 4 x 11

Horizontal Lines
Can be expressed in the form y = b
y=2

Vertical Lines
Can be expressed in the form x = a
x=3

Linear Models:
Applications of linear
Functions

First,
General Definitions

Cost Function
A cost function specifies the cost C as a
function of the number of items x produced.
Thus, C(x) is the cost of x items.
The cost functions is made up of two parts:
C(x)= variable costs + fixed costs

Cost Function
If the graph of a cost function is a straight
line, then we have a Linear Cost Function.
If the graph is not a straight line, then we
have a Nonlinear Cost Function.

Linear Cost Function

Dollars

Dollars
Cost

Units

Cost

Units

Non-Linear Cost Function

Dollars

Cost

Units

Dollars

Cost

Units

Revenue Function
The revenue function specifies the total payment
received R from selling x items. Thus, R(x) is the
revenue from selling x items.
A revenue function may be Linear or Nonlinear
depending on the expression that defines it.

Linear Revenue Function

Dollars

Revenue

Units

Nonlinear Revenue Functions

Dollars

Revenue

Units

Dollars

Revenue

Units

Profit Function
The profit function specifies the net proceeds P.
P represents what remains of the revenue when
costs are subtracted. Thus, P(x) is the profit from
selling x items.
Profit = Revenue Cost

A profit function may be linear or nonlinear

depending on the expression that defines it.

Linear Profit Function

Dollars
Profit

Units

Nonlinear Profit Functions

Dollars

Dollars
Profit

Units

Profit

Units

The Linear Models are

Cost Function:

C ( x) mx b

** m is the marginal cost (cost per item), b is fixed cost.

Revenue Function:

R( x) mx

** m is the marginal revenue.

Profit Function: P ( x) R ( x) C ( x)
where x = number of items (produced and
sold)

Break-Even Analysis
The break-even point is the level of production that
results in no profit and no loss.
To find the break-even point we set the profit function
equal to zero and solve for x.

P( x) 0
R( x) C ( x) 0

Break-Even Analysis
The break-even point is the level of production that
results in no profit and no loss.
Profit = 0
Dollars

means

Revenue = Cost
Revenue
profit

Break-even
Revenue

loss

Cost
Units
Break-even point

Example: A shirt producer has a fixed monthly cost of

$3600. If each shirt has a cost of $3 and sells for $12
find:
a.

The cost function

C (x) = 3x + 3600 where x is the number of
shirts produced.

b.

The revenue function

R (x) = 12x where x is the number of shirts
sold.

c.

The profit from 900 shirts

P (x) = R(x) C(x)
P (x) = 12x (3x + 3600) = 9x 3600
P(900) = 9(900) 3600 = $4500

Example: A shirt producer has a fixed monthly cost of

$3600. If each shirt has a cost of $3 and sells for $12
find the break-even point.
The break even point is the solution of the equation
C (x) = R (x)

12 x 3 x 3600
x 400

and R (400) 4800

Therefore, at 400 units the break-even revenue is $4800

7000

C, R, P in $
C(x)

6000
5000
4000
3000
2000
1000
-200
-1000
-2000
-3000
-4000

x
200

400

600

800

1000 1200 1400

x = number of shirts sold

7000

C, R, P in $

R(x)
C(x)

6000
5000
4000
3000
2000
1000
-200
-1000
-2000
-3000
-4000

x
200

400

600

800

1000 1200 1400

x = number of shirts sold

7000

C, R, P in $

R(x)
C(x)

6000
5000

P(x)

4000
3000
2000
1000
-200
-1000
-2000
-3000
-4000

x
200

400

600

800

1000 1200 1400

x = number of shirts sold

Demand Function
A demand function or demand equation expresses
the number q of items demanded as a function of
the unit price p (the price per item).
Thus, q(p) is the number of items demanded when
the price of each item is p.
As in the previous cases we have linear and
nonlinear demand functions.

Linear Demand Function

q = items
demanded

Price p

Nonlinear Demand Functions

q = items
demanded

q = items
demanded

Price p

Price p

Supply Function
A supply function or supply equation expresses
the number q of items, a supplier is willing to
make available, as a function of the unit price p
(the price per item).
Thus, q(p) is the number of items supplied when
the price of each item is p.
As in the previous cases we have linear and
nonlinear supply functions.

Linear Supply Function

q = items
supplied

Price p

Nonlinear Supply Functions

q = items
supplied

q = items
supplied

Price p

Price p

Market Equilibrium
Market Equilibrium occurs when the quantity produced
is equal to the quantity demanded.
supply
curve

q
shortage

surplus
demand
curve
p

Equilibrium Point

Market Equilibrium
Market Equilibrium occurs when the quantity produced
is equal to the quantity demanded.
q

supply curve
surplus
shortage

Equilibrium
demand

demand curve
p
Equilibrium price

Market Equilibrium
To find the Equilibrium price set the demand
equation equal to the supply equation and solve
for the price p.
To find the Equilibrium demand evaluate the
demand (or supply) function at the equilibrium
price found in the previous step.

Example of Linear Demand

The quantity demanded of a particular computer game
is 5000 games when the unit price is $6. At $10 per
unit the quantity demanded drops to 3400 games.
Find a linear demand equation relating the price p, and
the quantity demanded, q (in units of 100).

( p1 , q1 ) (6,50) and ( p2 , q2 ) (10, 34)

q q2 q1 34 50 16
m

4
p p2 p1 10 6
4
q 50 4( p 6)

q 4 p 74

Example: The maker of a plastic container has determined

that the demand for its product is 400 units if the unit price
is $3 and 900 units if the unit price is $2.50.
The manufacturer will not supply any containers for less
than $1 but for each $0.30 increase in unit price above the
$1, the manufacturer will market an additional 200 units.
Assume that the supply and demand functions are linear.
Let p be the price in dollars, q be in units of 100 and find:
a. The demand function
b. The supply function
c. The equilibrium price and equilibrium demand

a. The demand function

p1 , q1 3, 4

q
94
m

10
p 2.5 3

and p2 , q2 2.5,9 ;
q 4 10 p 3

q 10 p 34

b. The supply function

p1 , q1 1, 0

and p2 , q2 1.3, 2 ;

q 2 0 20
m

p 1.3 1 3

20
20
q
p
3
3

c. The equilibrium price and equilibrium demand

Demand Supply
10 p 34 (1/ 3)(20 p 20)
30 p 102 20 p 20
p 2.44

q 10(2.44) 34 9.6
The equilibrium demand is 960 units at a price of
$2.44 per unit.

Linear Change over Time

A quantity q, as a linear function of time t:

q (t ) mt b
Rate of
change of q

Quantity at
time t = 0

If q represents the position of a moving object,

then the rate of change is velocity.

Linear Regression
We have seen how to find a linear model given
two data points. We find the equation of the line
passing through them.
However, we usually have more than two data
points, and they will rarely all lie on a single
straight line, but may often come close to doing
so.
The problem is to find the line coming closest to
passing through all of the points.

Linear Regression
We use the method of least squares to determine a
straight line that best fits a set of data points when
the points are scattered about a straight line.

least squares
line

The Method of Least Squares

Given the following n data points:
( x1 , y1 ), ( x2 , y2 ),..., ( xn , yn )
The least-squares (regression) line for the data is given
by y = mx + b, where m and b satisfy:
m

and

n xy x y
n

x x
2

y m x

b
n

Example: Find the equation of least-squares for

the data (1 , 2), (2 , 3), (3 , 7).
The scatter plot of the points is

Solution: We complete the following table

Sum:

m
b

x
1
2
3

y
2
3
7

xy
2
6
21

x2
1
4
9

12

29

14

3 29 6 12
3 14 6

12 2.5 6
3

2.5

y 2.5 x 1

Example: Find the equation of least-squares for

the data (1 , 2), (2 , 3), (3 , 7).
The scatter plot of the points and the least squares line
is

y 2.5 x 1

Coefficient of Correlation
A measurement of the closeness of fit of the least
squares line. Denoted r, it is between 1 and 1, the
better the fit, the closer it is to 1 or 1.
n xy x y

r
n

x x
2

y y
2

Example: Find the correlation coefficient for

the least-squares line from the last example.
Points:

n xy x y

r
n

(1 , 2), (2 , 3), (3 , 7)

x x
2

y y
2

3 29 6 12
3 14 6 3 62 12

= 0.9449