ECO 103: Introductory Mathematics for Economists
Week 3
Exponential & Logarithmic Functions
Dr. Stanley Nwani
2
Learning outcome
At the end of the topic, students should be able to:
State three examples of Power & Exponential
functions.
State five (5) properties of exponential &
logarithmic functions.
Convert exponential to logarithmic functions, and
vice visa.
Evaluate natural exponential & logarithmic
functions.
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Diagnostic tests…
Is there a difference between a power and an
exponential function?
What are the features of exponential
functions?
What is the mathematical relationship
between exponential and logarithmic
functions?
In what areas are natural exponential and
logarithmic functions applied?
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Power vs Exponential function
y= power function
y= exponential function
Note:
In a power function, the base “x” is a variable.
In an exponential function, the base “a” is a
constant. And the variable “x” is the exponent.
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Properties of exponential functions
1. y = a>0 and a ≠ 1
2. The domain (set of all possible values of x) of
the function is the set of all real numbers; the
range (values of Y) of the function is the set of all
positive real numbers.
3. For a>1, the function is increasing and convex;
4. For 0<a<1, the function is decreasing and convex.
5. At x = 0, Y = 1, independent of the base.
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LOGARITHMIC FUNCTIONS
Interchanging the variables of an exponential
function f defined by y = gives rise to a new
function g defined by = .
The new function g is a logarithmic function,
an inverse of the exponential function, f.
= can be written as y = log
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Properties of logarithmic
1.
functions
y = log : a>0, and a ≠ 1
2. The domain of the function is the set of all positive
real numbers; the range is the set of all real numbers.
3. For base a>1, g(x) is increasing and concave.
4. For 0<a<1, g(x) is decreasing and convex.
5. At x =1, y = 0 independent of the base.
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Switching f and g functions
Convert the following exponential functions to
logarithmic functions:
=
ii. =
ii. Expand the following logarithmic functions
a. d.
b.
c.
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Natural exponential and logarithmic
functions
Recall “e” irrational number system….
= 2.71828
n→ ∞
y= N.E.F
y = =lnx N.L.F
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Applications of Exponential & Logarithmic
Functions.
Compounding (future value, S).
Discounting (present value, P).
Real interest rate.
Deflator.
Population Growth.
Depreciation.
Growth rate computation.
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Rules of natural exponential and
logarithmic functions
e raised to the natural log of a constant (a>0),
a variable (x>0), or a function of a variable
[ f(x)>0] must equal that constant, variable, or
function of the variable.
Conversely, the natural log of e raised to the
power of a constant, variable, or function of a
variable must also equal that constant,
variable, or function of the variable.
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Class participation
simplify Simplify by finding x
1. = 750
= ??????
2. 5lnx-7=8
= ?????? 3. 6lnx-7=12.2
= ?????
= ??????
= ??????
ln= ?????
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Exercises
Evaluate: Practice work
i. = 360 Use the logarithmic
principles to solve for x
in terms of y:
ii. = 259
iii. 5lnx+8=14
i. = lny
ii. y=
iv. = 27 iii. y=
iv. y=
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Additional Reading on the topic
Dowling, E. T. (2001). Introduction to
mathematical economics, 3rd Edition,
McGraw-Hill. “Chapters Seven & Eight“ from pages
146
Alpha C. Chiang (1984). Fundamental
Methods of Mathematical Economics (Third
Edition), McGraw-Hill. Part One Pages 1-32.
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