Concepts and applications of the first and second derivative

Isabella Quintana Ariza

AND
Emily Quintero Espinoza

Research work

Carlos A. Bedoya Parra

Mathematics teacher

Catholic University of Pereira

Faculty of Economic and Administrative Sciences
Business Administration Program

Pereira
2016

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 INDEX:

1. Concepts:..........................................................................................................................3
First derivative criterion for maximums and minimums:..........................................3
Second derivative criterion for concavities:.................................................................5
2: Accounting concepts in administration:.......................................................................6
2.1: Utilities:..........................................................................................................................6
2.2: Income:..........................................................................................................................7
2.3 Costs:..............................................................................................................................8
3. Applied concepts................................................................................................................9
4. Conclusions.......................................................................................................................10
References..............................................................................................................................11

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 Concepts and applications of the first and second derivative

1. Concepts:
First derivative criterion for maximums and minimums:

Among the values that a function f (x) can have, there may be one that is the
largest and another that is the smallest. These values are respectively called
the absolute maximum point and minimum point. If a continuous function is
ascending in an interval and from any point it begins to decrease, that point is
known as the relative maximum critical point, although it is commonly called just
the maximum. On the contrary, if a continuous function is decreasing in a
certain interval until a point at which it begins to ascend, we call this point the
relative minimum critical point, or simply minimum.
A function can have one, none, or multiple critical points. To know the
coordinates of the relative maximum and minimum critical points in a function it
is necessary:
 Obtain the first derivative.
 Set the first derivative equal to zero and solve the equation.
 The value or values obtained for the variable are where there could be
maximums or minimums in the function.
 Make intervals between the values obtained.
 Close values (smaller and larger respectively) are assigned to the
independent variable and substituted into the derivative. The results are
observed; When these go from positive to negative, it is a maximum point; If it
goes from negative to positive the critical point is minimal. When there are two
or more results for the independent variable, you must be careful to use values
close to each one and at the same time distant from the others, in order to avoid
errors when interpreting the results.
- When the derivative is positive the function increases.
- When the derivative is negative the function decreases.
- When the derivative is zero the function has a maximum or a minimum.
 Substitute in the original function f (x) the value(s) of the independent variable
(x) for which there was a change in sign. Each of the pairs of data thus obtained
corresponds to the coordinates of a critical point.

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Example:
f(x) = x3 − 3x + 2

f'(x) = 3x2 − 3 = 0

x = −1 x = 1.
(-∞, -1) (-1,1) (1, ∞)
Values: -2, 0, 2
F´(-2)= 9 (grows)
F´(0)= -3 (decreases)
F´(2)= 9 (grows)
R/ a maximum and a minimum
F(-1) = 4 (-1.4) maximum
F(1)= 0 (1.0) minimum

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Second derivative criterion for concavities:

It is based on the fact that at a relative maximum, the concavity of a curve is

downward and consequently, its derivative will be negative; while at a relative
minimum point, the concavity is upward and the second derivative is positive.
This procedure consists of:
 Calculate the first and second derivatives
 Set the first derivative equal to zero and solve the equation
 Substitute the roots (the value or values of x) of the first derivative into the
second derivative. If the result is positive there is a minimum. If the second
derivative turns out to be negative there is a maximum.
 If the result were zero, it cannot be stated whether or not there is a
maximum or minimum.
 Substitute the values of the roots of the first derivative in the original
function, to know the coordinates of the maximum and minimum points.

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 1.1 Curve layout

To draw curves it is necessary to take into account certain points, however

there will be functions in which not all of them apply. These are:
1: Domain: Set of values of x for which f(x) is defined.
2: Intersections: Cut points with both the Y and X axis.
3: Symmetries
4: Asymptotes: Locate both horizontal and vertical asymptotes.
5: Intervals of growth or decrease.
6: Maximum and minimum values.
7: Concavity.
8: Draw the curve

2: Accounting concepts in administration:

2.1: Utilities:

It is the interest , benefit or fruit that is obtained from something. The term also
allows us to name the useful quality ( that can serve or be used in some
sense ).

Although utility is a subjective concept that cannot be measured, it is possible to

simulate it using utility functions, which relate the "amount" of utility to the

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amount consumed of certain goods or services. This measure of utility is called
"cardinal" utility. That is, a utility function assigns numerical values (which can
be called "useful") to each quantity of goods consumed. A higher value of the
utility function is preferred to a lower value.

Given an economy in which a consumer can purchase n different goods (which

are assumed to be infinitely divisible or highly divisible), the utility function is
defined as:

Utility = Revenue – Cost

Breakeven point: Revenue = Cost

U = f (X1, X2, X3, ..., Xn) (1.1)

Where “U” is the level of utility and “Xi” are the goods and/or services consumed
by a given person.

The most notable characteristics of this curve are the following:

a) The utility increases but in a decreasing manner, which means that it is

concave downwards, therefore it will have a maximum value and from this the
utility will decrease.
b) If the consumption of “X” increases, total satisfaction increases; However,
small variations in utility are becoming smaller.
c) If we divide the horizontal axis into equal quantities and project them
vertically, the changes in utility (U) will become smaller and smaller until they
become zero.
d) If we make the changes in the consumption of good “X” infinitely small, we
will have a continuous curve that increases in a decreasing manner, which
means that marginal utility decreases as the consumption of “X” increases.

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2.2: Income:

Any item or operation that affects the results of a company by increasing profits
or reducing losses. It should not be used as a synonym for cash receipts, since
these refer exclusively to cash or its equivalent that is received in a company
without affecting its results. There may be entry without income, such as when
obtaining a bank loan. In this case, passive is being received and the results are
not affected. There may be income without entry, as in the case of a sale on
credit, where no money has yet been received and consequently the results are
only affected with the credit to Sales without having receipts, since no amount
has yet been received. Finally, receipts can coexist with income as in the case
of a cash sale. The debit to Banks records the entry and the credit to Sales
records in Income.
If f(x) is the revenue from selling x items at a price of m each, then Revenue is
the linear function f(x) = mx and the selling price m can also be called marginal
revenue .

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2.3 Costs:

The cost or cost is the economic expense represented by the manufacturing of

a product or the provision of a service. By determining the cost of production,
the public sale price of the good in question can be established (the public price
is the sum of the cost plus the profit).

The cost of a product is made up of the price of the raw material , the price of
the direct labor used in its production, the price of the indirect labor used for the
operation of the company and the amortization cost of the machinery and
buildings.
Specialists affirm that many businessmen usually establish their sales prices
based on the prices of their competitors, without first determining whether they
are able to cover their own costs. For this reason, a large number of businesses
do not prosper since they do not obtain the profitability necessary for their
operation. This reflects that cost calculation is essential for proper business
management.
The analysis of business costs allows us to know what, where, when, to what
extent, how and why it happened, which enables better management of the
future.
In other words, cost is the economic effort that must be made to achieve an
operational objective (paying salaries, purchasing materials, manufacturing a
product, obtaining funds for financing, managing the company, etc.). When the
desired objective is not achieved, a company is said to have a loss .

A cost function specifies the cost C as a function of the number of items x .

Consequently, C ( x ) is the cost of x items, and has the form
Cost = Variable cost + Fixed cost
In which the variable cost is a function of x and the fixed cost is constant. A cost
function of the form
C(x) = mx + b
It is called a linear cost function ; The variable cost is mx and the fixed cost is b.
The slope m, the marginal cost, measures the incremental cost per item.

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3. Applied concepts.

A. Having the utility function U(x) = 200x-2x²+150.

U´(x)= -4x+200 -4x +200= 0
U´(0)= 200 (GROWING) U´(52)= -8 (DECREASING) R/ Maximum in U(50),
COORDINATE: (50, 5150)
U´´(x)= -4 (CONCAVE DOWNWARD)

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 B. Taking into account the utility function: U(X)= -7x²+100x+3
U´(X)= -14X+100 -14X=-100 X=-100/-14 X=50/7
U´(0)= 100 (GROWING) U´(8)=-12 (DECREASING) R/ MAXIMUM IN
U(7.143), COORDINATE: (7.143, 360.143)
U´´(X)= -14X (CONCAVE DOWN)

4. Conclusions

We were able to realize that derivatives have different applications that will be
useful to us when practicing as professionals because they facilitate obtaining
some data when analyzing or making a graph. It is also important to keep in
mind that the functions are very commonly used in business fields, in
accounting for example, so it is important that we, as future administrators, have
this type of knowledge to practice in the best way.
When learning the criteria of the first and second derivative we were able to see
how the topics seen in calculus are related to each other, in this case we relate
Derivatives and Functions.

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 References

 Federico Anzil, Utility function, 2012. Recovered from:

http://www.econlink.com.ar/utilidad/funcion
 Elise Hernández, Applications of derivatives, 2006. Retrieved from:
http://www.mat.uson.mx/~jldiaz/Documents/Derivadas/Aplicaciones-der-
crica.pdf
 Fernando Núñez, Production profit and costs, 2009. Retrieved from:
http://www.esi2.us.es/~fnunez/Texto/3_ProdCostes.pdf

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