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Linear Function

The document discusses linear functions and their use in economic modeling. It provides examples of demand and supply functions expressed as linear equations with price and quantity as variables. It also discusses how to graph linear functions and find their slopes and intercepts. An example problem calculates the total cost function for a company to purchase and operate a van based on kilometers driven. The function is expressed as a linear equation and the total cost is calculated for 3,000 km. Formulas for finding the gradient of a linear function from points on its graph are also provided.

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SARAH MAULIDA
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55 views18 pages

Linear Function

The document discusses linear functions and their use in economic modeling. It provides examples of demand and supply functions expressed as linear equations with price and quantity as variables. It also discusses how to graph linear functions and find their slopes and intercepts. An example problem calculates the total cost function for a company to purchase and operate a van based on kilometers driven. The function is expressed as a linear equation and the total cost is calculated for 3,000 km. Formulas for finding the gradient of a linear function from points on its graph are also provided.

Uploaded by

SARAH MAULIDA
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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FACULTY OF ECONOMICS

UNIVERSITAS PADJADJARAN

Mathematics for Economics


Linear Function
• GENERAL FORM:

y=a+bx, xIR
the power of independent variable(s)
is = 1
• a=intercept (y axis), the value of y when x=0
• b=slope/gradient
– measures the change in the dependent variable
because of one unit change in the independent
variable.
– b is constant
• Graph: straight line
Example

• y = 10 – 2x
• a = 10, b = – 2
• How to graph?
– Set y = 0, we have the the value of x if
y=0x=5
– Or, use a table, say, start from -5 up
to 5
Example
x y
-5 20
-4 18
-3 16
-2 14
-1 12
0 10
1 8
2 6
3 4
4 2
5 0
Example
y

25

20

15

10

0
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6
Constant Function
Y

Y=5

0 X
6
Ingredients of a mathematical
model
• A mathematical Economic Model
will consist of:
– Variables, Constants
– Parameters, Equations and Identities
• Example: Supply-demand model
Qd =  - P demand equation
Qs =  + P supply equation
Qd = Qs equilibrium
condition
Example: demand function

• For each price level of a product,


there is a corresponding quantity of
that product that consumers will
demand during some time period
• Usually, the higher the price, the
smaller the quantity demanded: as
the price falls, the quantity
demanded increases (ceteris
paribus)
Example

• The demand for automobile tires


can be expressed as a linear
function where
• Qd=26400 – 200 Pd
• TO DRAW: Rewrite this function
into its inverse (so we can have P
as “dependent” variable)
• Pd=132 – 0.005Qd
Inverse function
• If a function y = f(x) is
one-to-one, with domain
A and range B, we can
construct its inverse f-1,
with domain B and range A B
A, such that if (xi, f(xi)) is
an ordered pair of the
function f then there
exists (yi,f-1(yi)) such that
yi = f(xi) and f-1(yi) = xi
• f(x)=2x  f-1(y)=1/2 f(x)
• y=1/x  x=1/y B A
• f(t)=et f’(t)=logey=ln y
Example: demand curve

Px

X
Example: supply function

• For each price level of a product,


there is a corresponding quantity of
that product that producers will sell
during some time period
• Usually, the higher the price, the
higher the quantity supplied: as the
price falls, the quantity supplied
decreases (ceteris paribus)
Example

• The supply of automobile tires can


be expressed as a linear function
where
• Qs=-12666.66 + 333.33 Ps
• Rewrite this function into its inverse
(so we can have P as “dependent”
variable)
• Ps= 38 + 0.003Qs
Example: supply curve

Px

X
Linear Function (univariate)
A small enterprise is considering to
purchase a van. The management
estimates that the purchase of that van
would be Rp 100,000,000. They also have
estimated an average operating cost of Rp
5,000 per km.
– Determine the mathematical function which
represents the total cost C of owning and
operating the car in terms of the number of
kms it is driven
– What are the projected total costs if the car
is driven 3,000 kms during this month?
Answer
• Biaya=f(jarak)
– Biaya = 5000.jarak + 100,000,000
• Projected total cost when the car is
driven 3,000 kms:
Biaya = 5000(3000) + 100,000,000
= Rp 115,000,000
Answer
Jarak Biaya Biaya
Pembelian Operasional
0 100000000 0
500 100000000 2,500,000
1000 100000000 5,000,000
1500 100000000 7,500,000
2000 100000000 10,000,000
2500 100000000 12,500,000
3000 100000000 15,000,000
Graph
Formulas of Gradient

1. y  y1
tg  b 
x  x1
2.
y  y1 y2  y1
tg  b  
x  x1 x2  x1

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