International

University Math for Business

FINAL REVISION
Chapter 4: Differentiation
4.1: The derivative of a function
∆"
• Slope =
∆#
• Tangent: A straight line which passes through a point on a curve and
which just touches the curve at this point.
• 𝑓 % (𝑎): f dashed of a: the slope of the graph of a function f at 𝑥 = 𝑎.
+"
• Derived function:
+#
+"
• 𝑓 𝑥 = 𝑥 then 𝑓 𝑥 = 𝑛𝑥 ,./ or 𝑦 = 𝑥 , then
, %
= 𝑛𝑥 ,./
+#
• Differentiation: the process of finding derived function symbolically.
Ex: 1,6 page 257
4.2: Rules of differentiation
• The constant rule: differentiate the function and multiply by the constant.
─ Constant differentiate to zero.
• The sum rule: differentiate each function separately and add.
• The difference rule: differentiate each function separately and subtract.
+4"
• 𝑓 %% 𝑥 𝑜𝑟 : second-order derivative.
+# 4
• Convex: upward curve.
• Concave: downward curve.

• 𝑓 𝑥 = 𝑎𝑥 5 + 𝑏𝑥 + 𝑐
─ If 𝑎 > 0 then 𝑓′′(𝑥) > 0 so the parabola is convex.
─ If 𝑎 < 0 then 𝑓 %% 𝑥 < 0 so the parabola is concave.
Ex: 6 page 268

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4.3: Marginal functions
• Marginal revenue: the derivative of total revenue with respect to demand
+(?@)
─ 𝑀𝑅 =
+A
─ ∆(𝑇𝑅) ≅ 𝑀𝑅×∆𝑄 : change in total revenue = marginal revenue x change
in demand.
• Monopolist: 𝑃 = 𝑎𝑄 + 𝑏 , 𝑎 < 0, 𝑏 > 0: a single firm or a cartel is
assumed to be the only supplier of a product and has controlled over the
market. Price raises, demand falls.
─ 𝑇𝑅 = 𝑎𝑄 5 + 𝑏𝑄
?@
─ 𝐴𝑅 = = 𝑃
A

• Perfect competition: 𝑃 = 𝑏: a large number of firms all selling a product,

no barriers to entry to the industry.
─ 𝑇𝑅 = 𝑏𝑄

• Marginal cost: the derivative of total cost with respect to output

+(?J)
─ 𝑀𝐶 =
+A

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─ ∆(𝑇𝐶) ≅ 𝑀𝐶×∆𝑄
• Marginal product of labor: the derivative of output with respect to labor.
+A
─ 𝑀𝑃K =
+K
─ Law of diminishing returns: the increase in output due to a 1 unit increase
in labor will eventually decline.
+J
• Marginal propensity to consume: 𝑀𝑃𝐶 = : the derivative of
+L
consumption with respect to income.
+N
• Marginal propensity to save: 𝑀𝑃𝑆 = : the derivative of savings with
+L
respect to income.
─ 𝑀𝑃𝐶 + 𝑀𝑃𝑆 = 1
4.4: Further rules of differentiation
• The chain rule: differentiate the outer function and multiply by the
derivative of the inner function.
+" +" +P
─ = ×
+# +P +#
• The product rule: multiply each function by the derivative of the other and
add.
+" +S +P
─ If 𝑦 = 𝑢𝑣 then =𝑢 +𝑣
+# +# +#
• The quotient rule: bottom times derivative of top, minus top times
derivative of bottom, all over bottom squared.
TUV VUT
P +" .
UW UW
─ If 𝑦 = then =
S +# S4

Ex: 1abgf, 2c, 3c page 292, 1a, 2a, 3a, 4b page 293.
4.5: Elasticity
YZ[\Z,] \^_,`Z a, +Zb_,+
• Price elasticity of demand: 𝐸 =
YZ[\Z,] \^_,`Z a, Y[a\Z
• Demand is said to be:
─ Elastic if 𝐸 > 1
─ Unit elastic if 𝐸 = 1
─ Inelastic if 𝐸 < 1
• Arc elasticity (2 points):
c ∆A cd ec4 Ad eA4
𝐸= × where 𝑃 = ,𝑄 =
A ∆c 5 5

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• Point elasticity (1 point):

𝑃 𝑑𝑄
𝐸= ×
𝑄 𝑑𝑃
+A
**Note: → 𝑄 = 𝑓(𝑃)
+c
YZ[\Z,] \^_,`Z a, hPYYi"
• Price elasticity of supply: 𝐸 =
YZ[\Z,] \^_,`Z a, Y[a\Z
/
• 𝑀𝑅 = 𝑃(1 + j )
c
─ In monopoly, 𝐸= → Elasticity is therefore independent of the
c.k
slope of linear demand curves.

4.6: Optimization of economic functions

𝑓 𝑥 = 𝑎𝑥 5 + 𝑏𝑥 + 𝑐
• At stationary point: 𝑓 % 𝑥 = 0 , include local maximum/minimum and
stationary point of inflection.
─ If 𝑓"(𝑥) > 0 then 𝑓(𝑥) has a minimum point at 𝑥 = 𝑎.
─ If 𝑓"(𝑥) < 0 then 𝑓(𝑥) has a maximum point at 𝑥 = 𝑎.
─ If 𝑓"(𝑥) = 0 then the point can not be classified using the available
information.
A
• Average product of labor (labor productivity): 𝐴𝑃K =
K
─ Marginal product of labor = average product of labor. (𝑀𝑃K = 𝐴𝑃K )

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─ Marginal revenue = marginal cost.
Ex: 3, 5, 7, 8 page 325, 326
4.7: Optimization of economic functions
• If a firm maximizes profit then 𝑀𝑅 = 𝑀𝐶.
• If a firm maximizes average product of labor then 𝑀𝑃K = 𝐴𝑃K .
• Economic order quantity (skip).
Ex: 1 page 339.
4.8: The derivative of the exponential and natural logarithm functions

+"
If 𝑦 = 𝑒 b# then = 𝑚𝑒 b#
+#
+" /
If 𝑦 = ln 𝑚𝑥 then =
+# #

Chapter 5: Partial Differentiation

5.1: Functions of several variables
z= f(x,y)= 𝒙𝟐 𝒚𝟑 + 𝒙𝟑 + 𝒚 + 𝟒
𝝏𝒛 𝝏𝟐 𝒛 𝝏𝟐 𝒛 𝝏𝟐 𝒛
fx = = 𝟐𝒙𝒚𝟑 + 𝟑𝒙𝟐 fxx = = 𝟐𝒚𝟑 + 𝟔𝒙 fxy = fyx = = = 𝟔𝒙𝒚𝟐
𝝏𝒙 𝝏𝒙𝟐 𝝏𝒙𝝏𝒚 𝝏𝒚𝝏𝒙

𝝏𝒛 𝝏𝟐 𝒛
fy = = 𝟑𝒙𝟐 𝒚𝟐 + 𝟏 fyy = = 𝟔𝒙𝟐 𝒚
𝝏𝒚 𝝏𝒚𝟐

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Implicit differentiation

Ex: 9/370, 12/371, 3/370

5.2: Partial elasticity and marginal functions
1. Elasticity
Q = f (P, PA, Y)
c 𝝏𝑸 c| 𝝏𝑸 L 𝝏𝑸
Ep = × Epa = × EY = ×
A 𝝏𝑷 A 𝝏𝑷𝑨 A 𝝏𝒀

l Epl < 1: inelastic Epa > 0: substitutable EY <0: inferior goods

l Epl > 1: elastic Epa<0: complementary EY >0: normal goods
l Epl < 1: unit elastic EY >1: superior goods

Ex: 2/384
2. Ultility
U = U(x1, x2)
𝝏𝑼 𝝏𝑼
Marginal ultilities: ,
𝝏𝒙𝟏 𝝏𝒙𝟐

Indifference curve level at (xo, yo): Uo = U(xo, yo)

€#5 𝝏𝑼 𝝏𝑼
MRCS = - = :
€#/ 𝝏𝒙𝟏 𝝏𝒙𝟐

3. Production
Q = f(K,L)
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𝝏𝑸 𝝏𝑸
MPL = MPK =
𝝏𝑳 𝝏𝑲

𝑴𝑷𝑳
MRTS =
𝑴𝑷𝑲

Ex: 3,6,7/384-385
5.3 Optimisation of f(x,y)
1. Unconstrained
Step 1: Solve fx = fy = 0 -> get (xo, yo)
Step 2: Verify
∆= fxx fyy - fxy2 at (xo, yo)
If ∆ < 0 => 𝑠𝑎𝑑𝑑𝑙𝑒 𝑝𝑜𝑖𝑛𝑡
If ∆ > 0 => fxx < 0 -> max
fxx >0 -> min
2. Constrained to 𝝋 𝒙, 𝒚 = 𝑴
1. If 𝝋 is simple (ax+by=M)
𝑴. 𝒃𝒚
=> x = -> replace x to f(x,y) -> F(x)
𝒂

F’(x) = 0 => xo => yo

2. Using Larrange function

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Ex: 3,7/412-413
4,5/414
4,5/425
9/439

Chapter 7: Matrices
7.1: Basic matrix operations
• A rectangular array of numbers surrounded by a pair of brackets is called
a matrix. Each number is an entry or element.
**Note: Square brackets.
• A 𝑚×𝑛 matrix has 𝑚 rows and 𝑛 columns.
• Row vector: 1 2 3
4
• Column vector: 5
6
• A 3 x 3 matrix is written:

𝑎// 𝑎/5 𝑎/‘

𝐴 = 𝑎5/ 𝑎55 𝑎5‘
𝑎‘/ 𝑎‘5 𝑎‘‘

𝑎// 𝑎5/ 𝑎‘/

• Transposition: 𝐴? = 𝐵 = 𝑎/5 𝑎55 𝑎‘5
𝑎/‘ 𝑎5‘ 𝑎‘‘

• Zero matrix = 0 = 0
• Addition and subtraction: only for matrices with same rows and columns.
─ Adding and subtracting each of the entries.
• Scalar multiplication: multiply each of the entries by the scalar.
─ Have the same rules with ordinary arithmetic.
• Matrix multiplication:

**Note: Row x Column, Multiply → Plus

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─ Have the same rules with ordinary arithmetic EXCEPT 𝑨𝑩 = 𝑩𝑨 (not

always true).
Ex: 1, 3, 5 page 490-491, 2, 6 page 492-493
7.2: Matrix inversion

2x2
1 0
• In a 2 x 2 matrix 𝐴𝐼 = 𝐴 where 𝐼 =
0 1
𝑎 𝑏 / 𝑑 −𝑏
• If 𝐴 = then 𝐴./ =
𝑐 𝑑 _+.k\ −𝑐 𝑎
𝑎 𝑏
Determinant of A = 𝑑𝑒𝑡(𝐴) = 𝐴 = = 𝑎𝑑 − 𝑏𝑐 ≠ 0: non-singular.
𝑐 𝑑

─ Remember to double check if 𝐴𝐴./ = 𝐼 𝑎𝑛𝑑 𝐴./ 𝐴 = 𝐼.

• To solve a system of linear equations:

𝑎𝑥 + 𝑏𝑦 = 𝑒
𝑐𝑥 + 𝑑𝑦 = 𝑓

─ Can be written as 𝐴𝑥 = 𝑏

𝑎 𝑏 # Z
where 𝐴 = ,𝑥 = ,𝑏 =
𝑐 𝑑 " —

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• Then 𝐱 = 𝐀.𝟏 𝐛

3x3

1 0 0
𝐼= 0 1 0
0 0 1

• The cofactor, 𝐴a› , is defined to be the determinant of the 2 × 2 matrix

obtained by deleting row 𝑖 and column 𝑗 of 𝐴, prefixed by a ‘+’ or ‘–’ sign
according to the following pattern:

+ − +
− + −
+ − +
𝑎// 𝑎/5 𝑎/‘
• For example with a matrix 𝐴 = 𝑎5/ 𝑎55 𝑎5‘
𝑎‘/ 𝑎‘5 𝑎‘‘

𝑎// 𝑎/5
𝐴5‘ = − 𝑎 𝑎‘5 = −(𝑎// 𝑎‘5 − 𝑎/5 𝑎‘/ )
‘/

**Note: Remember to check the pattern whether it is ‘+’ or ‘–’.

• Det(A) = multiplying the elements in any one row or column by their

corresponding cofactors and adding together.

Example: 𝐴 = 𝑎// 𝐴// + 𝑎/5 𝐴/5 + 𝑎/‘ 𝐴/‘

o If

𝑎// 𝑎/5 𝑎/‘

𝐴 = 𝑎5/ 𝑎55 𝑎5‘
𝑎‘/ 𝑎‘5 𝑎‘‘

Æ Then

𝐴11 𝐴21 𝐴31

1
𝐴./ = 𝐴12 𝐴22 𝐴32
𝐴 𝐴13 𝐴23 𝐴33

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─ Remember to double check if 𝐴𝐴./ = 𝐼 𝑎𝑛𝑑 𝐴./ 𝐴 = 𝐼.
• Can be used to solve system of three linear equations like 2 x 2 matrix.

Ex: 1, 2, 4, 5 page 510, 511, 5, 6 page 512

7.3: Crammer’s rule

Cramer’s rule for solving any 𝑛 × 𝑛 system, 𝐴𝑥 = 𝑏, states that the 𝑖 ]^ variable,
𝑥a , can be found from
det (𝐴a )
𝑥a =
det (𝐴)
where 𝐴a is the 𝑛 × 𝑛 matrix found by replacing the 𝑖 ]^ column of 𝐴 by the right
hand-side vector 𝑏.
Ex: 5 page 522, 7, 1 page 523

Chapter 8: Linear programming

8.1: Graphical solution of linear programming problems
• Basic concept to sketch an inequality:

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─ Where the red parts are eliminated.

• The remaining region is known as a feasible region.
Æ For example, the feasible region defined by
𝑥 + 2𝑦 ≤ 12
−𝑥 + 𝑦 ≤ 3
𝑥≥0
𝑦≥0

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• To sketch a feasible region:

─ Step 1: determine the region of x, y.
─ Step 2: determine the line of all 𝑎𝑥 + 𝑏𝑦 = 𝑐 equations by connecting 2
points of each equation in the same coordinate system.
─ Step 3: limit to the feasible region based on <, >, ≤, ≥.
• To find maximum, minimum in a feasible region:
─ Step 1: find the objective function 𝑎𝑥 + 𝑏𝑦
─ Step 2: find all of the available points inside the feasible region and try
each of them to find the maximum/minimum value.

Ex: 4,5 page 545

8.2: Application of linear programming
• Decision variable: the unknowns in a linear programming problem which
can be controlled.

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• Integer programming: a linear programming problem in which the search
for solution is restricted to points in the feasible region with whole-
number coordinates.
• Shadow price: the change in the optimal value of the objective function
due to a one unit increase in one of the available resources.

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