Business Calculus - Lecture Notes

CHAPTER FOUR

by
Dr. Eman Aldabbas

Mrs. Imane Aldarwai

Mrs. Asma’a Alhabees

Department of Mathematics
The University of Jordan
Chapter 4

4.1 The Derivative of a Function

Definition 4.1. Let y = mx + b be the straight line that passes through the points
∆y y2 − y2
(x1 , y1 ) and (x2 , y2 ). Then the slope of the line is given by m = = .
∆x x2 − x1

Examples: Find the slope of the straight line passing through:

1. A(1, 2) and B(3, 4).

2. A(1, 2) and B(5, 2).

3. A(1, 2) and B(4, 1).

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Chapter Four

Definition 4.2. If the point (a, f (a)) lies on the curve of y = f (x), then the slope of
the function y = f (x) at x = a is called the derivative of the function f at x = a and is
denoted by f ′ (a). The derivative of the function y = f (x) at any point x is denoted by
dy
f ′ (x) = .
dx

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Chapter Four

4.2-4.4 Differentiation Rules

f (x) f ′ (x)

k = constant 0

xn nxn−1

kg(x) kg ′ (x)

 
g ± h (x) g ′ (x) ± h′ (x)

gh(x) g ′ (x)h(x) + h′ (x)g(x)

g g ′ (x)h(x) − h′ (x)g(x)
(x)
h h2 (x)

Example: If f (x) = x3 , find:

1. f ′ (x)

2. f ′ (−1).

3. f ′ (0)

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Chapter Four

Example: Find the second derivative of f (x) = 3x4 + 4x−2 − 2x − 4.

Example: Differentiate

1. y = x5

2. y = x−6

4
3. y =
x2

1
4. y =
x

5. y = x3 + 2x + 4

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Chapter Four

3 √
6. y = 4x7 + −2 x+6
x

7. y = (x5 + 2x2 − 4)(3x − 4)

x2
8. y =
2 − x3

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Chapter Four

4.3-4.5 Marginal functions and Elasticity

Definition 4.3. The Marginal Revenue function (MR) is given by:

d(T R)
MR =
dQ

The Marginal Cost function (MC) is given by:

d(T C)
MC =
dQ

Example: Let the demand function be P = 60 − QD . Find:

1. Total revenue when Q = 50.

2. Total revenue when Q = 51.

3. Marginal revenue when Q = 50.

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Chapter Four

Example: If T R = 1000Q − 4Q2 , find the marginal revenue (M R).

100
Example: Let the average cost function AC = + 2. Find M C.
Q

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Chapter Four

Elasticity
Elasticity is an economic concept used to measure the change in the aggregate quantity de-
manded of a good or service in relation to price movements of that good or service.

Definition 4.4. Price Elasticity of Demand. Given the demand function P = f (Q).
Then the Price Elasticity of Demand when the price change from P1 to P1 is given by:

%∆QD  P  dQD 
ED = . =
%∆P Q dP

Examples:

1. Given the demand function P = −Q2 − 10Q + 150. Find the price elasticity of demand
when Q = 4.

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Chapter Four

Definition 4.5. Price Elasticity of Supply. Given the supply function P = f (Q).
Then the Price Elasticity of supply when the price change from P1 to P1 is given by:

%∆QS  P  dQS 
ES = . =
%∆P Q dP

√
Examples: Given the supply function P = 10 + Q. Find the price elasticity of supply
when Q = 100.

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Chapter Four

Definition 4.6. Production Function The production function Q is defined as Q =

dQ
f (k, L), where k is the capital and L is the labour. If k is constant, then M PL = is
dL
the marginal product of labour.

√
Example: Let Q = 300 L − 4L be the production function, where Q denotes the output
and L denotes the size of workforce. Evaluate the M PL when:

1. L = 1.

2. L = 100.

3. L = 2500

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Chapter Four

Definition 4.7. Consumption and Saving Functions Let Y denotes the income, C
denotes the consumption and S denotes the saving. Then

Y = C + S.

dC dS
If M P C = and M P S = , then
dY dY

1 = C + S.

Example: If the consumption function is given by C = 0.01Y 2 + 0.2Y + 50, find:

1. M P C when Y = 30.

2. M P S when Y = 30.

3. the formula for S in terms of Y .

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Chapter Four

4.4 Further Rules of Differentiation

 n
The Chain Rule: Let y = f (x) . Then

dy  n−1
= n f (x) f ′ (x).
dx

Example: Diffrentiate: Example: Differentiate:

 4
2
1. y = 3x − 5x + 2

p
2. y = (x2 + 1)

p
3. y = x (6x + 1)

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Chapter Four

4.8 The Derivative of The Exponential Function and

Natural Logarithmic Function

f (x) f ′ (x)

emx memx

ex ex

eg(x) g ′ (x) eg(x)

1
ln( x)
x
1
ln( mx)
x
g ′ (x)
ln( g(x))
g(x)

Example: Differentiate:

1. y = e−3x

2. y = e2x

3 +3x
3. y = e−2x

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Chapter Four

2
4. y = ex

5. y = ln 2x

6. y = ln(398)

7. y = ln(x2 + 2x + 1)

8. y = ln(x(x + 4))

 x 
9. y = ln √
x+5

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Chapter Four

4.7 Optimization of Economic Functions

Question: Find and classify the stationary point(s)?

Answer:

1. To find the stationary point(s) solve f ′ (x) = 0.

2. Classify the stationary point(s) according to the following rule:

1. If f ′′ (x) > 0, then the function has a minimum value.

2. If f ′′ (x) < 0, then the function has a maximum value.

3. If f ′′ (x) = 0, then test fails.

Example: Find and classify the stationary point(s)?

1. f (x) = 3x2 + 12x − 35.

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Chapter Four

2. f (x) = −2x3 + 15x2 − 36x + 27.

3. f (x) = xe−x .

4. f (x) = ln x − x

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Chapter Four

Example: If Q = 300L2 − L4 is the production function. Find the size of the workforce
that maximize the average product of labour.

Example: If the demand function P + 2Q = 20 and T C = Q3 − 8Q2 + 20Q + 2, find:

• The level of output that maximizes the total revenue.

• The maximum profit.

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Chapter Four

Example: Let P = QS + 8 and P = −3QD + 80. If the government decided to impose a

tax, t, per unit, find the value of t that maximizes the total tax revenue on the assumption
of equilibrium conditions

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