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Lec 2 Integration

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27 views22 pages

Lec 2 Integration

Uploaded by

Md Arman Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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integration

And its Business Application


Lecture 2
2. (a) A firm’s marginal cost function is
MC = 2
Find an expression for the total cost function if the fixed
costs are 500. Hence find the total cost of producing 40
goods.
(b) The marginal revenue function of a monopolistic producer
is
MR = 100 − 6Q
Find the total revenue function and deduce the
corresponding demand function.
(c) Find an expression for the savings function if the marginal
propensity to save is given by
MPS = 0.4 − 0.1Y−1/2
and savings are zero when income is 100.
Solution

(a) We need to find the total cost from the marginal cost function –
• MC = 2
𝑑(𝑇𝐶)
• Now 𝑀𝐶 =
𝑑𝑄
• So, 𝑇𝐶 = 𝑀𝐶𝑑𝑄 = 2𝑑𝑄 = 2𝑄 + 𝑐

• The fixed costs are given to be 500. These are independent of the number
of goods produced and represent the costs incurred when the firm does not
produce any goods whatsoever. Putting Q = 0 into the TC function gives
• 𝑇𝐶 = 2 0 + 𝑐
• The constant of integration is therefore equal to the fixed costs of
production,
• So, c = 500.
Hence
• 𝑇𝐶 = 2𝑄 + 500
• Therefore, the total cost of producing 40 goods –
• 𝑄 = 40
• Putting Q = 40 into the TC function gives
• 𝑇𝐶 = 2 40 + 500
• 𝑇𝐶 = 580
(b) We need to find the total revenue from the marginal
revenue function –
• MR = 100 − 6Q
𝑑(𝑇𝑅)
• Now 𝑀𝑅 =
𝑑𝑄
• So, 𝑇𝑅 = 𝑀𝑅𝑑𝑄 = 100 − 6𝑄 𝑑𝑄 = 100𝑄 − 3𝑄2 + 𝑐
• Unlike in part (a) of this example, we have not been given any additional information to
help us to pin down the value of c. We do know, however, that when the firm produces
no goods, the revenue is zero, so that TR = 0 when Q = 0. Putting this condition into
• 𝑇𝑅 = 100𝑄 − 3𝑄2 + 𝑐 gives
• 0 = 100 0 − 3 0 2 + 𝑐 = 𝑐
• The constant of integration is therefore equal to zero. Hence
𝑇𝑅 = 100𝑄 − 3𝑄2
• Finally, we can deduce the demand equation from this. To
find an expression for total revenue from any given
demand equation, we normally multiply by Q,
• because TR = PQ.
• This time we work backwards, so we divide by Q to get
𝑇𝑅 100𝑄−3𝑄2
•𝑃 = = = 100 − 3𝑄
𝑄 𝑄
• So, the demand function is
• 𝑃 = 100 − 3𝑄
(c) We need to find saving given that the marginal
propensity to save
• 𝑀𝑃𝑆 = 0.4 − 0.1𝑌 −1/2
𝑑(𝑆)
• Now 𝑀𝑃𝑆 =
𝑑𝑌
1
−2
• So, 𝑆 = 𝑀𝑃𝑆𝑑𝑌 = 0.4 − 0.1𝑌 𝑑𝑌 = 0.4𝑌 − 0.2 𝑌 + 𝑐
• The constant of integration can be calculated from the additional information
that
S = 0 when Y = 100. Putting Y = 100 into the expression for S gives
• 𝑆 = 0.4𝑌 − 0.2 𝑌 + 𝑐
• 0 = 0.4(100) − 0.2 100 + 𝑐
• 𝑐 = −38
• Hence,
• 𝑆 = 0.4𝑌 − 0.2 𝑌 − 38
3.
• Suppose a publishing company has found that the marginal cost at a
level of production of x thousand magazines is given by

25
𝑀𝐶 =
√𝑥
• The fixed cost is $36,000. Find the cost function
Solution: Finding Cost Functions
• By the indefinite integral rules –
1 1
25 −1/2 1
• 𝑑𝑥 = 25𝑥 𝑑𝑥 = 25( 1 )𝑥 + 𝑐 = 50𝑥 + 𝑐
2 2
√𝑥
2
• where c represents the constant of integration to avoid confusion with the cost
function. Notice that the production x is always non-negative, and so we proceed
with the integration with the implicit assumption that x≥0 is automatically
satisfied.
• To find the value of c, use the fact that C(0) is 36,000.
1
𝐶 𝑥 = 50𝑥 2
+𝑐
36000 = 50(0) + 𝑐
𝑐 = 36000
So, the cost function is
1
𝐶 𝑥 = 50𝑥 2 + 36000
Finding Revenue and Demand Functions

• Suppose the marginal revenue from a product is given by

800𝑒 −0.2𝑞 + 7.5


(a) Find the revenue function for this product.
(b) Find the demand function for this product.
Solution:
• The marginal revenue is the derivative of the total revenue function, so
𝑇𝑅 = (800𝑒 −0.2𝑞 + 7.5 )𝑑𝑞

𝑒 −0.2𝑞
= 800 + 7.5𝑞 + 𝑐
−0.2

= −4000𝑒 −0.2𝑞 + 7.5𝑞 + 𝑐


• If no items are sold, then there is no revenue. Hence, q=0 and R=0, and so
0 = −4000𝑒 −0.2 0 + 7.5 0 + c
0 = −4000 + c
c = 4000
• Therefore, the revenue function is
𝑇𝑅 = −4000𝑒 −0.2𝑞 + 7.5q + 4000
• Recall that TR=PQ, where p is the demand function that represents the price p as a
function of q. So
−4000𝑒 −0.2𝑞 + 7.5q + 4000 = pq

−4000𝑒 −0.2𝑞 + 7.5q + 4000


=𝑝
𝑞
Therefore, the demand function is
−4000𝑒 −0.2𝑞 + 7.5q + 4000
𝑝 𝑞 =
𝑞
3. Change in population
• The rate of change of population of Phoenix, Arizona is modeled by
the exponential function 𝑝′ 𝑡 = 11.7𝑒 0.026𝑡 , where t is the number
of years since 1960 and 𝑝′ 𝑡 is in thousands of people per year. In
1980, Phoenix had a population of 790,000.
(a) Find the population model 𝑝′ 𝑡 .
(b) Estimate the population of Phoenix in 2012.
(a) Population Model

• We anti-differentiate the rate-of-change model:


• 𝑝′ 𝑡 = 11.7𝑒 0.026𝑡 𝑑𝑡
11.7 0.026𝑡
= 𝑒 +𝑐
0.026

= 450𝑒 0.026𝑡 + 𝑐
The population in 1980 is treated as the initial condition: (20, 790)
We make the substitution and solve for C.
790 = 450𝑒 0.026(20) + 𝑐
790 = 756.9 + 𝑐
𝐶 = 33.1
Hence, the population model is –
𝑝(𝑡) = 450𝑒 0.026𝑡 + 33.1
(b) Solution

• The year 2012 corresponds to t = 52, so we make the substitution:

𝑝(𝑡) = 450𝑒 0.026𝑡 + 33.1

𝑝 52 = 450𝑒 0.026 52 + 33.1


= 1772
• According to this model, the population of Phoenix in 2012 should be
about 1,772,000.
Chain Rule of Differentiation:
So far, we have seen how easy it is to integrate a function written as a linear
combination of power functions. The same approach can be used to integrate a
wide variety of more complicated functions. To find

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