APPM1004 — Revision Lectures 1

Revision Lecture #1
Exponential Growth and Decay

Outcomes of this lecture

After studying this lecture and practising examples you will be able to:

1.) Derive the exponential model y = y0 ekt for a scenario given the necessary information.

ˆ Identify or derive the initial value, y0 .

ˆ Solve for the value of the growth/decay constant k.

2.) Assess whether a given exponential function models a growth or a decay situation.

3.) Use the model to estimate values of the function at different points from those used to
derive the function.

Pre-knowledge and Skills

You will need to be completely familiar with

1.) the algebra required to solve equations.

2.) the rules of exponents.

3.) the rules of logarithms, in particular

ˆ log am = m log

ˆ ax = b ⇒ x = loga b

ˆ loga a = 1

4.) the number e and natural log, ie. loge = ln.

ˆ e = 2, 718182 . . . is a mathematical constant.

ˆ x = ln b = loge b ⇒ ex = b
APPM1004 — Revision Lectures 2

Revision Lecture #1
Introduction - Linear Growth and Decay

You are already familiar with quantities that change at a constant rate. The equation
y = mx + c describes a situation where the values of y increase or decrease at a constant
rate of m for each unit increase in the value of x.

Of particular interest is how a quantity changes over time. For this reason the variable t is
often used instead of x, to represent units of time.

y = mt + c

We consider t = 0 to be the ”starting” point for any change in the value of y. Therefore the
”starting” value or ”initital value” of y occurs when t = 0.

t = 0 ⇒ y = m(0) + c ⇒ y = c is the initital value of y.

If m > 0 then the values of y increase. If m < 0 then the values of y decrease.

Given a scenario with sufficient information we can derive the model y = mt + c

APPM1004 — Revision Lectures 3

Revision Lecture # 1 Introduction - Linear Growth and Decay

Example 1
The unit price, y, of a commodity increases at a constant rate from R3 per unit in 2016 to
R10 per unit in 2020. If t is the number of years after 2016, then derive the model for the
unit price of the commodity over time and use it to estimate the unit price in 2018.

Since we are told that the price changes at a constant rate, we know that the model we
need to use is y = mt + c rands per unit.
To find the value of t for any particular year, subtract the ”zero” year, 2016.
It’s useful to organise the given information in a table.

year t y(unit price in rands)

2016 2016 − 2016 = 0 3
2018 2018 − 2016 = 2 ?
2020 2020 − 2016 = 4 10

Step(1.) y = 3 when t = 0 ⇒ c = 3 ⇒ y = mt + 3.
7
Step(2.) y = 10 when t = 4 ⇒ 10 = m(4) + 3 ⇒ m = .
4
Step(3.) Substituting the values of m and c into our model y = mt + c, gives

7
y = t + 3.
4

Step(4.) Substitute t = 2 into the model to estimate the unit price in 2018.

7
y = (2) + 3 = 6, 5
4

Note that we use the word ”estimate” because a model is never an exact representation of
reality. Even if it is a very good model there is always the possiblity of some variation.
APPM1004 — Revision Lectures 4

Revision Lecture #1
Exponential Growth and Decay

ˆ Rates of change are seldom constant. A commonly observed type of change is expo-
nential change, which occurs when the rate of change is proportional to the size of
the changing quantity.

ˆ An example of exponential growth is an amount of money in a savings account,

earning compound interest. Interest is earned as a percentage of the amount in the
account. As the amount increases so does the interest added after each time period.

ˆ An example of exponential decay is the change in the value of an asset like a

motor vehicle. The asset loses a percentage of its value each year. As the value of the
asset decreases so the amount lost each year also decreases.

ˆ The equation used to model a quantity that changes exponentially, is

y = y0 ekt .

ˆ The initital value of y when t = 0 is y0 .

t = 0 ⇒ y = y0 ek(0) = y0 e0 = y0 (1) = y0 .

ˆ The constant k, in the exponent of the exponential term, is the growth/decay constant.

If k > 0 then then the model If k < 0 then the model

describes exponential growth. describes exponential decay.
APPM1004 — Revision Lectures 5

Revision Lecture #1 Exponential Growth and Decay

Example 2
The unit price, y of a commodity increases at an exponential rate from R3 per unit in
2016 to R15 per unit in 2020. If t is the number of years after 2016, then derive the model
for the unit price of the commodity over time and estimate the unit price of the commodity
in 2018.

Organise the given information into a table,

year t y(unit price in rands)

2016 2016 − 2016 = 0 3
2018 2018 − 2016 = 2 ?
2020 2020 − 2016 = 4 15

The model that must be used is y = y0 ekt , where y0 is the ”initial” value of y when t = 0
and k is the exponential growth rate.

Step(1.) y = 3 when t = 0 ⇒ y = 3ekt .

Step(2.) y = 15 when t = 4 ⇒ 15 = 3ek(4) .

Step(3.) Solve for the value of k from the exponential equation 3e4k = 15.

ˆ Divide by the coefficient of the exponential term e4k = 5

ˆ Use the definition of logs: ax = b ⇒ x = loga b

ˆ 4k is the logarithm and e is the base; e4k = 5 ⇒ 4k = loge 5.

ˆ Therefore k = 1
4
ln 5.

Step(3.) Substituting the values of k and y0 into the model y = y0 ekt , gives
1
y = 3e 4 ln 5·t .

Step(4.) Substitute t = 2 into the model to estimate the unit price in 2018.
1
y = 3e 4 ln 5·(2) = R6, 71.
APPM1004 — Revision Lectures 6

Revision Lecture # 1 Exponential Growth and Decay

Notes:

1
1. Take care when calculating the value of y from y = 3e 4 ln 5·(2) .
The value of t = 2 is not multiplied by ’5’. It is multiplied by ln 5.
Follow the the steps below to ensure accuracy when calculating.

ˆ Calculate the exponent first: SHIFT ln(5) ÷ 4 × 2 EXE.

ˆ Store the result into memory A: SHIFT STO A.

ˆ Calculate the expression: 3 × eˆ(RCL A) EXE.

2. The model y = y0 eln 0,5·t , is a decay model because 0 < 0, 5 < 1 ⇒ ln 0, 5 < 0.
If 0 < a < 1 then log a < 0 ie. the log of a fraction is negative.
You do not need to ”see” a negative sign because ln 0, 5 is already negative.

5
3. The model y = y0 eln 4 ·t , is a growth model because 5
4
> 1 ⇒ ln 54 > 0.
If a > 1 then log a > 0 ie. the log of a number greater than ’1’, is positive.

4. There are two ways to solve an exponential equation like e5k = 30.

Method I:

(i) Take ”ln” of both sides of the equation: ln e5k = ln(30).

(ii) Apply the rule: log am = m log a ⇒ 5k ln e = ln(30).

(iii) Recall that ln e = 1 and hence 5k = ln(30).

(iv) Solve for k = 15 ln(30).

Method II:

(i) Recall the definition of a logarithm: ax = b ⇒ x = loga b.

(ii) Apply this definition : e5k = 30 ⇒ 5k = loge (30)

(iii) Solve for k = 15 ln(30).

APPM1004 — Revision Lectures 7

Revision Lecture # 1
Exercises

1. ˆ A company’s annual profit decreased exponentially from R36 million in 2010 to

R14, 4 million in 2013.

ˆ If the equation,
y = y0 ekt ,

is used to model the exponential decay of the company’s annual profit y (in
millions of rands) t years after 2010, then use the model to calculate (rounded to
two decimal places) the company’s annual profit in 2014.

Step1.) Organise the information into a table.

Year t y( Total profit)

2010
2013
2014

Step2.) Substitute the value for y0 into y = y0 ekt .

Step3.) Substitute the given values for t and y for the year 2013 into the equation
above and solve for k. Assess the numerical value of k to see that it is negative.

Step4.) Substitute the value for k into y = y0 ekt .

Step5.) Substitute the value for t in 2014 into the equation above and solve for y.
APPM1004 — Revision Lectures 8

Revision Lecture # 1
Exercises

2. ˆ A company’s share price increased exponentially from R50 in July 2013 to R72, 50
in January 2014.

ˆ If the equation,
y = y0 ekt ,

is used to model the exponential growth of the company’s share price y (in rands)
t months after July 2013, then use the model to determine when the company’s
share price will be equal to R100.