University of Kelaniya, Sri Lanka

Dr. Anura Karunarathne

Senior Lecturer (Grade I)

Department of Accountancy
[email protected]

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 Bachelor of Business Management
Honors in Accountancy/Auditing and
Forensic Accounting/Accounting
Information Systems Degree Programme-
2023

Business Mathematics
BACC-11633/BAFA 11233/BAIS 11033

Session-09:
Calculus;
Differentiation- Part-01

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 Learning Outcomes

At the end of the session students should be able to;

❖Define and explain the concept of Calculus;
Differentiation and Integration,
❖Identify the usefulness and applicability of calculus
in Business and Economics decisions,
❖Perform Differentiation and find derivatives using
different approaches; Limits Approach and
Differentiation Formulas,
❖Find turning points, Maxima and Minima points,
❖Use differentiation to solve Business & Economics
problems.
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 Define Calculus in Business
Applications

Calculus is a branch of mathematics that helps us to

understand the changes between values that are
related to a function.
Calculus is used in many different areas,
➢ Physics,
➢ Astronomy,
➢ Biology,
➢ Engineering,
➢ Economics,
➢ Medicine and
➢ Sociology.

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 Calculus
Calculus is a branch of mathematics, and it helps us in
finding the rate at which one such quantity changes with
respect to the other.

Calculus focused on limits, functions,

derivatives, integrals and infinite series.

It has two major branches, differential calculus and integral

calculus, which are related to the fundamental theorem of calculus.

Calculus has widespread applications in science, economics,

business, management and engineering.
 Differentiation
❖1st Order Differentiation
❖2nd Order Differentiation
❖Partial Differentiation
Calculus
Integration

❖Indefinite Integration
❖Definite Integration
 Differentiation

If Y = f(x),
Differentiation is a method to compute the rate at
which a dependent output y changes with respect
to the change in the independent input x.
This rate of change is called the derivative
of y with respect to x.

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 What is Differentiation?

Differentiation is a term used in calculus to refer to the change

in, which properties experience concerning a unit change in

another related property.

In other terms, differentiation forms an algebraic expression

that helps in the calculation of the gradient of a curve at a given

point. It is important to highlight that curves have their slopes

varying at a given point unlike straight lines, which have the

same gradient all through.

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 ❖ Derivative: At each point, the
derivative of is the slope of a line that
is tangent to the curve. The line is
Differentiation always tangent to the blue curve; its
slope is the derivative.
❖ Note derivative is positive where a
green line appears, negative where a
red line appears, and zero where a
black line appears.

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Minimum and Maximum Points

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 Application of Derivatives in
Real Life

❖To calculate the profit and loss in business using

graphs.
❖To check the temperature variation.
❖To determine the speed or distance covered
such as miles per hour, kilometres per hour etc.
❖To derive many equations in Physics.
❖To find the range of magnitudes of the
earthquake.

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 What are the applications
of differentiation in
Business and
Economics?

The concept of a derivative is extensively

used in economics and managerial
decision-making, especially in solving the
problems of optimization such as those of
profit maximization, cost minimization,
output and revenue maximization.

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 How is calculus used in
business?
❖Calculus helps us in finding the rate at which one
such quantity changes with respect to the other.
Marginal analysis in Economics and Commerce is
the most direct application of differential calculus.

❖Calculus is used to predict revenue, to manage

expenses, to characterize seasonal buying
patterns, and to understand how almost any
change can impact a business. If you want to
understand patterns of change, in business or in
the natural world, learning calculus is worth the
investment.

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 Differentiation
A derivative is defined as the instantaneous rate of
change in function based on one of its variables.
Derivatives are used to measure how a function is changing
❖If y = f(x) is a function in x,
❖then the derivative of f(x) is given as dy/dx or f ’(x) .
❖This is known as the derivative of y with respect to x.

▪ Derivatives have many applications in business, economics

and the social sciences.

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Applications of Differentiation

❖Differentiating the equation of a curve, gives the

gradient function. The gradient function can be
used to determine the gradient of the tangent and
normal to the curve. The behaviour of the curve
can be analysed by looking at the sign of the
gradient function.

❖On critical points the curve has no gradient. The

first derivative test and second derivative can be
used to distinguish among maximum or
minimum or inflection point. This information can
be used to sketch the curve and illustrate all the
important features.
 What is Integration?

❖Integration is a term used in calculus to refer to

the formula and the procedure of calculating the
area under the curve.
❖One of the main applications of integration is
calculating the areas of curved surfaces,
calculating the volume of objects, and calculating
the central point among other functions.
❖It is worth noting that the graph must be under a
curve, which results to the formation of an
integral part, which is difficult to find the area,
unlike other shapes like circles, squares, and
rectangles, which are easier to calculate their
areas.
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 Applications of Integration
❖Integrals can be used to express the volume of solids,
lengths of curves, areas of surfaces, forces, work,
energy, pressure, probabilities and a variety of other
quantities that are in one sense or another equivalent to
areas under graphs.(Producers' Surplus and
Consumers' Surplus).

❖Many quantities of interest in physics, mechanics,

ecology, finance economics and other disciplines are
described in terms of densities over regions of space, the
plane, or even the real line. To determine the total value
of such a quantity we must add up (integrate) the
contributions from the various places where the quantity
is distributed.
 In real-life scenarios, integration
and differentiation have been found
to be applied differently to each
concept used in providing different
results.
Real-Life
Application Nevertheless, It is remarkable to
for highlight that both differentiations is
essential calculus concepts that
Differentiat make life easy.
ion and One of the main applications of
Integration integration is calculating the areas
of curved surfaces, calculating the
volume of objects, and calculating
the central point among other
functions.

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Differentiation

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 Differentiation
A derivative is defined as the instantaneous rate of
change in function based on one of its variables.
Derivatives are used to measure how a function is changing
❖If y = f(x) is a function in x,
❖then the derivative of f(x) is given as dy/dx or f ’(x) .
❖This is known as the derivative of y with respect to x.

Derivatives have many applications in business, economics and

the social sciences.

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 Graphs-Tangent and Secant Line

Secant line

(c + x, f (c + x))
(c, f(c))
f (c + x) − f (c)

x

(c, f(c)) is the point of tangency and f(c+ x ) – f(c)

is a second point on the graph of f.
Graphs-Tangent and Secant Line

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 Average Rate of Change
The change of f (x) over the interval [a,b] is

f = f (b) − f (a)
The average rate of change of f (x) over the
interval [a, b] is

change in f f f (b) − f (a ) Difference

= = Quotient
change in x x b−a
Definition of the Derivative of a
Function
f(x)

f ( xi + x)
y

f ( xi )

x x

y f ( xi + x) − f ( xi )
=
x x
Definition
of the
Derivative
of a
Function

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 Methods of Finding
Derivative of a Function

Short Cut
Limit
Formula
Approach
Approach

First General
Principles Differentiation
Approach Formulas

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Limit Approach-First
Principles Approach

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 Definition of the Derivative of a
Function
The limit used to define the slope of a tangent
The line is also used to define one of the two
fundamental operations of calculus --- differentiation

Definition of the Derivative of a Function

f ( x + x) − f ( x)
f ' ( x ) = lim
x →0 x
f’(x) is read “f prime of x”
Other notations besides f’(x) include:
dy d
, y ' , [ f ( x)], Dx [ y ]
dx dx
 f ( x + x) − f ( x) f(x) = x2 + 1
lim
x →0 x

= lim
( x + x) + 1 − x + 1
2
( 2
) Therefore, the slope
at any point (x, f(x))
is given by m = 2x
x →0 x
x + 2 xx + (x ) + 1 − x − 1
2 2 2
= lim
x →0 x
What is the slope
x(2 x + x) at the point (-1,2)?
= lim = 2 x
x →0 x m = -2

The equation of the tangent line is y – 2 = -2(x + 1)

 The Slope of the Graph of a Line
Example 1 Find the slope of the graph of
at the point (2, 5). f ( x) = 2 x + 1
This example isn’t that challenging. A line is straight and
always has the same slope, so you should already know that
the slope is 2. But let’s try out the limit definition of a
derivative to verify that the slope is 2. (This would be the
long way of doing things…)
2( x + x) + 1 − (2 x + 1)
f ( x + x) − f ( x) = lim
x →0 x
f '( x) = lim
x →0 x
2 x + 2x + 1 − 2 x − 1
= lim
Note: The slope of a line x →0 x
has the same slope at all
points. 2x = lim 2 = 2
= lim x → 0
x →0 x
 The Slope of the Graph of a Non-Linear
Function
Example 2 Given f ( x) = x + 3 , find f ’(x) and the equation of the
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tangent lines at:
This function is quadratic, and the slope is
different depending where you are on the curve,
a) x = 1 so at x = 1 and at x = –2 , we’ll find different
slopes.
b) x = –2

Now
a) x = 1, we’ll find f ’(x) first. 2 xx + x 2 factor
= lim
f ( x + x) − f ( x) x →0 x
f '( x) = lim For part a,
x →0 x x(2 x + x)
= lim we know x
( x + x) + 3 − ( x 2 + 3)
2
x →0 x
= lim = 1, so the
x →0 x = lim (2 x + x) = 2x slope is
x 2 + 2 xx + x 2 + 3 − x 2 − 3 x → 0
2(1)=2
= lim
x →0 x
Take the Continued…
 ( x + x)3 = ( x + x)( x + x) 2

Derivative = ( x + x)( x 2 + 2 xx + x 2 )

= x3 + 2 x 2 x + xx 2 + x 2 x + 2 xx 2 + x 3
= x3 + 3x 2 x + 3xx 2 + x3
Example 5 Find the derivative of f(x) = 2x3 – 3x.

f ( x + x) − f ( x)
f '( x) = lim
x →0 x
2( x + x)3 − 3( x + x) − (2 x3 − 3x)
= lim
x →0 x
2 x3 + 6 x 2 x + 6 xx 2 + 2x3 − 3x − 3x − 2 x 3 + 3x
= lim
x →0 x
6 x 2 x + 6 xx 2 + 2x3 − 3x
= lim
x →0 x 0 0
Factor 6 x 2 + 6 xx + 2x 2 − 3
out a = lim = lim ( 6 x 2
+ 6 x  x + 2  x 2
− 3 ) = 6 x 2
−3
x →0 1 x→ 0
x and
reduce Now, take the limit
First Principle/Limit Approach
 First
Principle /
Limit
Approach
 Short Cut Formula
Approach;
Rules of Differentiation

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Rules of Differentiation
The Constant Rule

The Power Rule

The Constant Multiple Rule
The Sum and Difference Rules
The Product Rule
The Product Rule….Cont.
The Product Rule….Cont.
The Product Rule….Cont.
The Quotient Rule
The Quotient Rule…Cont.
The Chain Rule
The Chain Rule…Cont.
The Chain Rule…Cont.
The General Power Rule
The General Power Rule
Higher Order Derivatives
Higher Order Derivatives
Higher Order Derivatives
Higher Order Derivatives
Homework…Cont.
Homework…Cont.
Homework…Cont.
 Calculus Applications in
Business
In this lesson, we are going to expand upon our knowledge of
derivatives, Extreme, and Optimization by looking at Applications of
Differentiation involving Business and Economics, or Applications for
Business Calculus.

Some important business terms are:

❖ Cost Function

❖ Total Revenue

❖ Average Cost

❖ Profit Function

❖ Marginal Cost

❖ Demand Function 58
Some important business Functions

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 Function Application
A shirt producer has a fixed monthly cost of LKR 5000. If each
shirt has a cost of LKR 3 and sells for LKR 12 find:

a. The cost function

Cost: C(x) = 3x + 5000 where x is the number
of shirts produced.

b. The revenue function

Revenue: R(x) = 12x where x is the number of
shirts sold.
c. The profit from 900 shirts
Profit: P(x) = Revenue – Cost
= 12x – (3x + 5000) = 9x – 5000
P(900) = 9(900) – 5000 = LKR 3100
Basic Cost Functions
Demand, Revenue and Profit Functions
Demand Function

Revenue Function
 Basic Functions…..Cont.
Profit Function
Basic Functions…..Cont.
 Business Applications

For a new product, a manufacturer spends Rs.

100,000 on the infrastructure and the variable cost is
estimated as Rs. 150 per unit of the product. The
price per unit was fixed at Rs.200.

You are required to find,

i. Total cost function,
ii. Revenue Function,
iii. Profit Functions,
iv. The break-even point
Business Applications….Cont.
Business Applications….Cont.

A company produced a product with Rs.18000

as fixed costs. The variable cost is estimated to
be 30% of the total revenue when it is sold at a
rate of Rs. 20 per unit.
Find,
the total revenue,
The total cost, functions.
 Business
Applications….Cont.

A company produced a product with

Rs.18000 as fixed costs. The variable
cost is estimated to be 30% of the total
revenue when it is sold at a rate of Rs.
20 per unit.
Find the total revenue, total cost and
functions.
 Key Observations

❖A critical point is a point where the derivative is 0.

❖If the second derivative is positive, the point is a
minimum.
❖If the second derivative is negative, the point is a
maximum.
❖If the second derivative is 0, the test is inconclusive.
❖local minimum: A point on a graph (or its associated
function) such that the points on each side has a greater
value even though another point exists with a smaller
value.
❖local maximum: A maximum within a restricted domain,
especially a point on a function whose value is greater
than the values of all other points near it.
❖critical point: a maximum, minimum, or point of
inflection on a curve; a point at which the derivative of a
function is zero or undefined
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Q & A Session

The End

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