Calculus for Economists

Addis Ababa, Ethiopia

2024
The Derivatives
2.1 The Concept of Derivatives and geometric Interpretation of
Derivatives: slope of a curve
2.2 Continuity and Differentiability of a Function
2.3 Rules of Differentiation
2.4 Derivatives of Logarithmic and Exponential Functions
2.5 Higher Order Derivatives
2.6 The sign of the Derivative
2.7 Maximization and Minimization
 Derivative of a Function

• The process of finding the derivative of a function is called differentiation and

the branch of calculus that deals with this process is called differential
calculus.

• Differentiation is an important mathematical tool in physics, mechanics,

economics and many other disciplines that involve change and motion.
2.1 The Concept of Derivatives and geometric Interpretation of Derivatives
Rates of change and slope of Tangent Line
I. Rates of Change
•Let a function be defined as y = f(x)
•If the independent variable x changes from x to x
0 1, then the dependent variable y will

change from y0 = f(x0) to y1 = f(x1). In this case,

•The change in x is said to be an increment in x and denoted as x
(read as “delta x”). That is, an increment in x from x0 to x1 can be represented as

x = x1-xo or x1 = xo + x.
•The corresponding change in y is said to be an increment in y and
denoted by y (read as “delta y”). That is, an increment in y from y0 to y1 can be
•Given y = f(x)
1. The average rate of change of y with respect to x is the change in y resulted from some
change in x. the average rate of change of y between x=x0 and x=x1 is given by
•Average rate of change =
•It is also termed as the difference quotient of the function and represents change in y per
unit change in x.

2. The instantaneous rate of change of y with respect to x is a change in y as a result of an

instant change in x. It represents a change in y at a given point of x.
•The instantaneous rate of change of y at a point x = x is given by
0

•It is also termed as marginal rate of change of y at x= x 0

•Example

Given the function y = f(x) = 3x2. Find

a)Average rate of change of y for x changes from 1 to 4

b)Instantaneous rate of change of y at x = 1

•Solutions
•a) x0 = 1 and x1 = 4, and thus x = x1-x0 = 4-1 = 3 Moreover, y = y1-y0 = f(x1) – f(x0)
• = f(4) – f(1)

• = 3(42) – 3(12) = 48 –3 = 45
Given y = 2x2 – 1
• Find the average rate of change of y.
Solution:
• f(x0) = 2x02 -1 and f(x0 + ∆x) = 2(x0 + ∆x)2 - 1
• The next step is to form the difference quotient
• Let x0 = 3 and ∆x = 5

• Then the average rate of change of y will be 4(3) + 2(5) = 12 + 10 = 22.

• This means that, on the average, as x changes from 3 to 8, the change in Y is

22 units per unit change in x.

• In economics, we are frequently interested in the rate of change of y when ∆x

is very small
• In the given example, if the x is very small, it tends to zero, then the
difference quotient

• That is as x approaches zero, will approach to

• Symbolically, as 0

• Or it can be expressed by the equation:

= () =

• This is the derivative of the function y = f(x) = 2x 2 – 1, provided that the limit
of exists as approaches zero
 II. Slope of a Tangent line
• Suppose the figure given below be the graph of y = f(x)

•A secant line is a straight line which passes through two points on the graph of
y = f(x). For instance, line L2 which passes through P and Q (in the graph on the next slide) is
a secant line. The slope of the secant line which passes through the point (x0, f(x0)) and (x0+ x
, f(x0+Δx) is given by:

•A tangent line is a straight line which touches (but not crosses) the graph of
y=f(x) at a given point. For instances, line L1 in the following graph is a tangent line.
•As it can be seen from the above graph, as x becomes closer and closer to 0 (as
x 0), the point Q approaches to point P. In other words, as x 0 the secant line L2 will
approaches to line L1 and its slope will approaches to the slope of L1.

•This leads to the following formal definition of a tangent line.

Definition

•Given the graph of Y =f(x), the tangent line at (x , f(x )) is a line that passes through this point
0 0

whose slope is given by:

 Remarks

1. The slope of the tangent line at (x0, f(x0)) is always equal to the slope of the graph or the
function y = f(x) at (x0, f(x0)).
 Derivatives: Definition
The derivative of a function 𝑦 =ƒ (𝑥) at the point 𝑥0 is the slope of the tangent line at that
point:

x0
f (x0 xx)  f (x0 )
lim  f '(x )
•If ƒ′(𝑥 0 ) exists, then we say that ƒ is differentiable at point 𝑥0.

•We say that the function ƒ is differentiable over (𝑎, 𝑏) if it is differentiable at each point
𝑥0 in (𝑎, 𝑏).
2.2. Continuity and Differentiability of a Function

If a function f (x) is differentiable where x  c , then the graph of y  f (x) has

a non-vertical tangent line at the point P(c, f (c)) and at all points on the graph
that are “near” P. We would expect such a function to be continuous at x  c
since a graph with a tangent line at the point P certainly cannot have a “hole”
or “gap” at P.

To summarize:
•Notice that we are not claiming that a continuous function must be differentiable. Indeed it
can be shown that a continuous function f ( x) will not be differentiable at x  c if f ( x)
becomes infinite at x  c or if the graph of f ( x) has a “sharp” point at P(c, f (c)) ; that is, a
point where the curve makes an abrupt change in direction. If f(x) is continuous at x  c but
f '(c) is infinite, the graph of f may have a “vertical tangent” at the point P(c, f(c)) (Figure a)
or a “cusp” at P (Figure b). The absolute value function f (x)  | x| has a “sharp point” at the
origin (0, 0) (see Figure c). Another graph with a “sharp point” is shown in Figure d.
• Steps on how to compute the derivative of f(x), f’(x)
I. From the difference quotient (Note that ∆x = h)
II. Simplify the difference quotient algebraically to eliminate the factor h
from the denominator.
III. Let ∆x or h approaches zero in the simplified difference quotient.

if this limit exists

Class work:
1. Find f1(x) for the function: f (x) = x2 - 5x + 9
2. If f(x) =
Answer: 1. f (x) = x2 - 5x + 9
f (x +h) = (x+h)2 – 5(x+h) + 9
f’(x) = =
=
f’(x) = = = = = 2x-5
Exercise:

• Use the difference quotient steps find the derivative of the following functions.

a) f(x) = 3x + 5

b) f(x) = x2 + 1 A n sw e r
a) f1(x) = 3 b) f1(x) = 2x
c) f(x) = 1/x
c) f1(x) =  21 d) f1(x)=8x-5
d) f(x) = 4x2 – 5x + 1 x
 Rules of Differentiation: Derivative Notations

• Up to now we found the derivative of a function by using the steps discussed earlier

• But it is a tedious process and time –consuming

• There are some general rules for differentiating particular types of function.

• Applying the rules will help to simplify the process

• These rules can be derived by the usual procedure

• They are handy to simplify the task of finding the derivative of a function

• Below are some of the derivative rules we are commonly practicing in calculus
1. Constant Function Rule
The derivative of a constant function y = f(x) = k is zero.
dy dk 1
0 or 0 or f ( x) 0
dx dx
Proof:
Ex 1:- Fforinany derxivwe
d thxeand ve offxf (x)x =k3.and
atihave Solu x: xf1( xf)(=x) 00
y tiof n

2 . T ey power Rule

h
.Hence for any x 0 and,
x
For any number n, the derivative of a power function f(x) = xn is
’ y
lim
consequently, f (x)d= 0 .n  1
x n 0
i.e. ( x )
x nx
dx
lim y lim 7 7
 consequently, f (x) = x  0 0 .
Constant Functi
1. oxn Rule
The de ri vat i ve o f
lima oynstlim
c ant 7
fun7ction y = f(
Example 1. If f(x)=7; x  0 x  0 0
x x
dy dk 1
 0 or 0 or f ( x) 0
on Rule dx dx
onstanExample
t fE
unxct1io
: nFyin=df(tx
h)e=dkeriisvzaetrio
v.e of f (x) = 3. Solu
2: 1
0 or2. f T (h
xe) 
po0wer Rule

ative of fFo)r =an

(x 3y. Snoum
lu tib
oenr: n,f1t(hxe
)=de0rivative of a powe
d
i.e. ( x n )  nx n  1 n
r function f(x) = x is nxn-1
he derivative of a powedx
n 1 Ex 2. Find the derivative of the following
 Ex 1: Findy
d the derivative of f (x)dk
= 3. Solution: f1(x) = 0 1
 0 or 0 or f ( x) 0
2. The pdx
ower Rule dx
n n-1
Fo r an y n u m b er n , t h e d e ri v at
Ex 1: Find the derivative of f n(x) = 3. Solut i v e o f a p ow e r fu n ct i o n f (x) = x i s n x
• The derivative of the function y = f(x) = x , where n is any real
d n
2.. Th i.ee
. p(o xw ) e nxrn 1
R u le
number dx is equal to nxn-1
FoErx 2a. nFinyd thne duerm ivatb iveeor f thn e f,olltohwieng fdunectiroinsvative of a powe
d 1n d 2 n  12  1
a) fi(.x)e=.x . Solutio(n:xf (x)) = (nx
2
x ) 2 x 2 x
dx dx

Ex 2. b)Ff(ix)n=d d
x . tSh
olue
tiond: e
3
f (rxi) v
= at(ixv
1 3 e o
) 3x 3 1ft3h
x 2 e following f
dx
2 1 d
Proof
Proof: - Let f x   x is a function and x h, then f ' x  lim
n x h  x
n n

h 0
h
But

n n 1 n(n  1) n  2 2 n
x  nx h x h  ...  h
2!
n 1 n 2 2
n nx h n ( n  1) x h
(x    ...  h n  x n )
 f ' ( x)  lim 1! 2!
h 0
h
 dx
Ex 2. Find the derivative of the following functions
d 2
a) f(x) = x . Solution: f (x) = ( x ) 2 x 2  1  2 x
2 1
dx
d 3
b) f(x) = x . Solution: f (x) = ( x ) 3x3 1 3x 2
3 1
dx
1 1 1
1 d( x) d 1 1 1 1 1
c) f ( x)  x . Solution: f ( x)   (x )  x 2 2
 x  1 
2
dx dx 2 2 2 x
2x 2

25 1 d 25 25  1 24
d) f(x) = x . Solution: f ( x)  ( x )  25 x  25 x
dx
Exercises
The derivative of a sum (difference) of two functions is the sum (difference) of the individual
derivatives.

If both f1(x) and g1(x) exist then

d d d
 f ( x ) g ( x )  f ( x )  g ( x )  f 1 ( x ) g 1 ( x )
dx dx dx
Example 3: Find the derivative dy/dx for each of the following functions.
a) f(x) = x2 + 2x
1 dy d 2 d 2 d
Solution: f ( x)   ( x  2 x)  ( x )  (2 x)
dx dx dx dx
Proof: - Let F(x) = f(x) g(x)
lim F ( x  x)  F ( x)
 F ' ( x)  x  0 
x
lim [ f ( x  x) g ( x  x)]  [ f ( x) g ( x)]
 x  0 
x

lim f ( x  x)  f ( x) lim g ( x  x)  g ( x)

= x  0 x 0 =
x x
= f’(x)  g’(x)
  f ( x ) g ( x )  f ( x)  g ( x )  f ( x ) g ( x )
dx dx dx
Example 3: Find the derivative dy/dx for each of the following functions.
a) f(x) = x2 + 2x
1 dy d 2 d 2 d
Solution: f ( x)   ( x  2 x)  ( x )  (2 x)
dx dx dx dx
d ( x2 ) d d 2
But  2 x and (2 x)  2 Therefore ( x  2 x)  2 x  2  2( x  1)
dx dx dx

b) f (x) = x3 + x2 + 1
1 d 3 2 d 3 d 2 d
Solution: f ( x)  ( x  x  1)  ( x )  ( x )  (1)
dx dx dx dx
d 3 2 d 2 d (1)
 d (x ) d d 2
But  2 x and (2 x)  2 Therefore ( x  2 x)  2 x  2  2( x  1)
dx dx dx

b) f (x) = x3 + x2 + 1
1 d 3 2 d 3 d 2 d
Solution: f ( x)  ( x  x  1)  ( x )  ( x )  (1)
dx dx dx dx
d 3 2 d 2 d (1)
But ( x ) 3x and ( x )  2 x by power rule. 0 by cons tan t rule.
dx dx dx
d 3
( x  x 2  1) 3 x 2  2 x
dx

c) f(x) = x5 + x3 + x + 10
Solution:
d 5
f ( x)  ( x  x 3  x  10)
1

dx
 dx

c) f(x) = x5 + x3 + x + 10
Solution:
1 d 5 3
f ( x)  ( x  x  x  10)
dx
d 5 d 3 d d
 ( x )  ( x )  ( x)  (10)
dx dx dx dx
5 x 4  3 x 2  1  0
5 x 4  3 x 2  1
2 1 d 2 d 2 d
d) f(x) = x – 5x. Solution: f ( x)  ( x  5 x)  ( x )  (5 x)  2 x  5
dx dx dx
5). The Product Rule

The derivative of the product of two (differentiable) functions is equal to the first function

times the derivative of the second function plus the second function times the derivative of the

first function.
Ex 5 Find the derivative of each of the following functions:
a). y =(x + 1) (x2 + 5)
Solution: Let f (x) = x + 1 and g (x) = x2 + 5
Then f1(x) = 1 and g1(x) = 2x

• Substituting the above values we get

 2 4
b). y = 2x (3x – 2)
2 4
Solution: Let f (x) = 2x and g(x) = 3x – 2
dy d 2 4 2 d 4 4 d 2
 2 x (3x  2)  2 x (3x  2)  (3x  2) (2 x )
dx dx dx dx
2 3 4
 2 x (12 x )  (3x  2)( 4 x)
5 5 5
 24 x  12 x  8 x 36 x  8 x
 2
c) y = (x – 5) (1-2x)
(x
2
Solution: Let f(x) = x – 5 and g (x) = 1 – 2x
dy

dx dx
d
 
( x 2  5)(1  2 x)

2 d d 2
( x  5) (1  2 x)  (1  2 x) ( x  5)
dx dx
2
( x  5)(  2)  (1  2 x)( 2 x)
2 2 2
  2 x  10  2 x  4 x   6 x  2 x  10
Exercises
 Note that
• The product rule can be extended to more than two functions

• For instance for the case of three functions: y = f(x) . g(x) . h(x)
Ex 6: Find the derivative of the function: y = (3x2 + 2) (3x) (6x + 7)

Solution: Let f (x) = 3x2 + 2, g(x) = 3x and h(x) = 6x + 7

6). The Quotient Rule
The derivative of a fraction (quotient) is equal to a fraction whose denominator is square of the
denominator of the given fraction, and the numerator is the difference between the product of the
denominator by the derivative of the numerator and the product of the numerator by the derivative of the
denominator;
If f(x) and g(x) are two functions, g(x)  0
Then the derivative of the quotient of two functions (h(x) is:

f ( x)
h(x) = ,then
g ( x)

d f x  f ' ( x )  f ( x ). g ' ( x )
( )
dx g ( x ) [ g ( x )] 2
 f ( x)
Proof:-Let h(x) =
g ( x)
 f ( x) h( x) g ( x)
 f ' ( x ) h' ( x ) g ( x )  h( x ) g ' ( x ) - - - product rule
h’(x)g(x) = f’(x) - h(x)g’(x)
h’(x) = (f’(x) - h(x)g’(x) )/g(x)
f ( x) This is
f ' ( x)  g ' ( x) b/s
g ( x) f ' ( x). g ( x)  f ( x).g ' ( x)
h’(x) =  h’(x) =
g ( x) [ g ( x)] 2
 x 1
Ex 5 y=
x 2
Solution: Let f (x) = x + 1 and g(x) = x – 2. Then
d d
( x  2) ( x  1)  ( x  1) ( x  2)
dy dx dx

dx ( x  2) 2
( x  2)(1)  ( x  1)(1) x  2  x  1  3
 2
 2
 2
( x  2) ( x  2) ( x  2)
 x2  1
Ex 6 y =
1  x2
Solution:
d 2 2 2 d
(1  x ) ( x  1)  ( x  1) (1  x 2 )
dy dx dx

dx (1  x 2 ) 2
(1  x 2 )( 2 x )  ( x 2  1)( 2 x )

(1  x 2 ) 2
2 x (1  x 2  ( x 2  1)) 2 x (1  x 2  x 2  1
 2 2

(1  x ) (1  x 2 ) 2
4x

(1  x 2 ) 2
 x 2  2 x  21
Ex 7 Y
x 3
Solution: d 2 2 d
( x  3) ( x  2 x  21)  ( x  2 x  21) ( x  3)
dy 2 d 2 d
dx dxd
2 x  21)  ( x  ( x2 x3) 21 ( x)  2 x(x 21 2
 )3 )(3x  2 x  21) ( x  3)
dy
dx dx dx ( x  3) dx
3
 3
( x  3dx
) ( x  3)( 2 x  2)  ( x 2 (2xx 321 ) )(1)
d
 21 2)  ( x
2
 2 x  21) ( x  23)
 ( x  2 x  21)( ( x1) 3)( 2 xdx
(2x)  3()x  2 x  21)(1)
3

3
 3
 3()x  3) 3
2 ( x  3 ) 2
2 x  6 x  2 x  6  x  2 x  21 x  6 x  15 2

2  2 2 2  2
x6 x2 x 221
2
x )2 x  6xx 2
)(121 ( x x36
6
x )  15
3 x  2 x  21 x( x 63x) 2 15

3 3
  23

3)3) ( x (x 33 )) ( x  3) 2
2 2
x  2 x  21 x  6 x  15
3
 2
( x  3)
 2

Ex 8: f ( x)  x ; f ' ( x) 
2 x.(1  x )  x 2
(1)

2
1 x (1  x )
Answer:
2
x ; f ' ( x) 
2
2 x.(1  x)  x (1) x  2 x

2

2 2
1 x (1  x) (1  x)

2 2
1  x)  x (1) x  2 x
2
 2
(1  x) (1  x)
7: The Chain Rule (Composite Function Rule)
•The Chain Rule

■ If y  f (u) is a differentiable function of u and u  g(x) is in turn a

differentiable function of x , then the composite function y  f (g(x)) is a

differentiable function of x whose derivative is given by the product:
 dy
Ex 1: Find the if y = u2 + 1 and u = 3x –2
dx

Solution: First find dy

du
dy  2u (by power rule)
du
du du
Then find i.e. 3
dx dx
dy dy du
Therefore,  .  2u (3) 6u
dx du dx
dy
Since you are thinking of y as function of x, it is more natural to express as a function of x
dx
Substituting the value of u, we get.
dy
6(3 x  2) 18 x  12
dx
 dy
Ex 2: Find if y = u – 5, where u = x3
dx
Solution:
 dy
Ex 4: Find if y = (2x – 5)10
dx
Solution:
 The chain rule is very useful to differentiate such kind of functions.
 Note that the dy/dx can be found by multiplying 2x – 5 ten times.
 But that will be a tedious process.
 The first step is to take the function inside the bracket as one function, say u and apply the
chain rule.
Let 2x – 5 = u, then y = u10
dy dy du
 .
dx du dx
dy du
10u 9 , 2
du dx
dy
10u 9 ( 2)  20u 9
dx
dy
Substituting the value of u, 2x – 5, we get  20( 2 x  5)9
dx
 Inverse Function Rule

• There are rules of finding the derivative of inverse function.

• This rule is applicable if the function has an inverse.
• The function f will have an inverse function, written as x = f-1(y):
 if there is a one - to – one mapping (for monotonic functions).
• If g is the inverse function of f, then f is the inverse function of g.
• The domain of f –1 is equal to the range of f, and the range of f –1 is equal to the domain of f.
• A function need not have an inverse function, but if it does, the inverse function is unique.
• The rule of differentiation is: the
• This means that the derivative of the inverse function is the reciprocal of the derivative of
the original function.
Ex 1 Given y = 3x + 5, find dx/dy
Solution:
• Since the function is a monotonic function (its slope is positive) an inverse
function exists.
• Hence the derivative of the inverse function is:
Ex 2 Given: y = x3 + x; find dx/dy
Solution:
• First check whether an inverse function exists
• This value is greater than zero for any value of x.
• That is, it is a monotonically increasing function and an inverse function
exists.
 Derivatives of exponential and logarismic functions
• Derivatives of Logarithmic Functions
 Derivatives of exponential and logarismic functions
• Derivatives of Logarithmic Functions
 Ex 1: Find the derivatives of the following logarithmic functions
ba)) ff((xx))==lnln2xx 3 b) f(x) = ln x3
1
’ f (dx ) 2 31x 2
3
S o lu t io n: f (
Solution: f ( x) x )
1 = 
ln( x 3
) 
  ......... by formula d 3 . 10 . 1(b3)x 2
3
f (dx
x) 2x
xx3
x S o l u t i o n : f 1
( x )  ln( x 3
)  3
 .........by formula 3.10.1(b)
dx x x

c) f ( x)  ln x 2  1

Solution:

= = = =

= .

Therefore, = =
Derivatives of Exponential Functions
 Differential Calculus – Derivative . . .
Exponential function Rule
• Now we learn to differentiate exponential functions of the form
• The derivative of the exponential function y = ex is ex
𝑥
𝑑 𝑒 𝑥
=𝑒
𝑑𝑥
• We can proof this by using the inverse function rule.
• Let y = ex
• The inverse of the function will be x = log ey = lny

Then, by inverse
function rule:-
 d
Ex 1: Ex   e 2 x   e 2 x 2 2e 2 x
dx
• Generally if h (x) is a differentiable function of x, then the derivative of eh(x) can
be found by using the following formula.
𝑑 h (𝑥)
𝑒 =h1 ( 𝑥 ) 𝑒 h ( 𝑥 )
𝑑𝑥
• That is the derivative of eh(x) is multiplying eh(x) by the derivative of the exponent
h(x)
• Note that in y = ex , h (x) = x and h1(x) = 1 hence
• Generalizing the above result to any base b, that is, in the form of bh(x), then the
derivative can be found by using the following formula.
𝑑 h( 𝑥) 1 h (𝑥)
𝑏 =h ( 𝑥) 𝑏 ln 𝑏
𝑑𝑥
If b = e then the formula will reduce to the above formula. (Since ln b = lne =
1).
If h(x) = x, then the derivative of bh(x) = bx is equal to bx ln b.
This can be proved as follows.
Let b = elnb
bx = exlnb
Differentiating both sides with respect to x,

𝑑 𝑥 𝑑 𝑥 ln 𝑏 d
dx
 a x  a x ln a, w/ a  0, 1

𝑏= 𝑒 d u
 a  au ln a 
du

𝑑𝑥 𝑑𝑥
dx dx
d sin x
Ex 
dx
 2   2
sin x
ln 2 cos x 
Derivatives of Exponential Functions
Derivatives of Exponential Functions
Exercise:
Differentiate the following functions by using exponential rule
a). f(x) = 5x-2

Solution: Let x – 2 = h (x), then f (x) = 5h(x)

f1(x) = h1(x) bh(x) lnb = (1) 5x-2 ln5 = 5x-2 ln5

x 2  3x
b). f(x) = 12

Solution: Let x2 – 3x = h(x)  h1(x) = 2x – 3.

1
f (x) = (2x – 3) 12 x 2  3x
ln12.
Exercises
 How do we differentiate a function when both the base and exponent
contain the variable???
 Example: , find the derivative of y with respect to x
 For a function like this we have to use Logarithmic Differentiation
 Procedures to use Logarithmic Differentiation are:
a. Take the natural logarithm of both sides of the equation
b. Use the properties of logarithms to simplify the equation
c. Differentiate (sometimes implicitly!) the simplified equation
 Examples: solve the followings

x
y x

ln y ln x x =x

ln y  x ln x dy
 y ln x  1
dx
d d
ln y    x ln x 
dx dx dy
 x ln x  1
x

dx
 Higher order derivatives
2.5 Higher Order Derivatives
In our previous discussion we have considered only the first derivative of a
function
Next we will see the concept of second derivative, and derivatives of even high
orders.
The derivative of a function is the first derivative.
The derivative of the first derivative is called the second derivative.
 The second derivative of the function f denoted by or indicates that
has been differentiated with respect to x twice.
If exists for all x values in the domain, the function is said to be twice
differentiable:
 WExample:
e call the second derivative of f.
5 4
 For y  f ( x )  x  3 x  x, the second derivative is given by

y 
  3 2
 f ( x )  20 x  36 x .
Continuing in this manner, we have
f ( x )  60 x 2  72 x, the third derivative of f
f ( x )  120 x  72, the fourth derivative of f
f ( x )  120, the fifth derivative of f .
Example1: Find the first and second derivative of the function f (x) = 3x2-5x+15
Exercise
 The sign of the derivative
• You are now well acquainted of what the derivatives of higher orders mean

• From which the second derivative has a special importance.

• Decide if the given function is

an increasing or
decreasing by observing the sign of the derivative of the given function
 The sign of the derivative

Conditions:-

a). First order derivative

• If f(x) is a differentiable function at any point and/ or interval, then

I. If then the value of the function tends to increase(or f(x) is an increasing function at a
given point and/or interval or the rate of change of f(x) with respect to x is positive)

II. If , then the value of the function tends to decrease (or f(x) is decreasing function at a
given point and/or interval); (or the rate of change of f(x) with respect to x is negative)
 The sign of the derivative

b). Second order derivative

I. If , then the slope of the curve tends to increase (positive)

II. If , then the slope of the curve tends to decrease (negative)

 C). The possible combination of 1st & 2nd order derivatives & their
a)interpretations
1. If f’(x)>0 and f” (x) >0
 The value of the function is increasing at increasing rate/the slope
of the curve is positive and increasing as the value of x increases/
2. If f’(x)>0 but f”(x) <0
 The value of the function is increasing at decreasing rate/ the slope
of the curve is negative but decreasing as the value of x increases/
3. If f’(x) <0 and f” (x)<0
 The value of the function is decreasing at decreasing rate/the slope
of the curve is negative and decreasing as x increases/
 of the curve is negative and decreasing as x increases/
4. If f’(x) <0 but f”(x)>0
 The value of the function is decreasing at an increasing rate/the slope
of the curve is negative but increasing as x increases/
5. What will be the conclusion, if f”(x) =0?
a. Concave and convex curve.

We can distinguish the concavity and convexity of the given

function/curve/ simply by looking at the sign of the second order

derivative.
 Hence:-
a. A function is said to be concave up ward (convex down ward) curve, if it increases at
an increasing rate or f” (x)>0.
b. A function is said to be concave down ward/convex up ward) curve, if it increases at a
decreasing rate or f” (x) <0
c. A function can be neither concave nor convex curve at a given point and it is called
point of inflection it is true when f”(x) = 0
Example.
The We can
inflection illustrate
point in diagram
(or point form about
of inflection) concavity,f convexity
of a function is defined&topoint of
be the
point at which the concavity changes.
inflection.
 Example. We can illustrate in diagram form about concavity, convexity & point of
inflection.
y

 Curve CGD is concave downward (convex up F -

B-
ward), that shows, the function is increasing at a ,
D

decreasing rate because f” (x) <0. G

E 1

 Curve CGF and EGD are neither concave nor A1

-C
convex at point G. 0 x

We can see different up ward sloping functions/ curv

 We can see different up ward sloping functions/ curves.  At point G, f”(x) = 0, G is
 Curve EGF is concave up ward (convex downward), that point of inflection or
shows, the functions is increasing at and increasing rate inflection tangent for CGF
because f”(x) > 0. and EGD.
 • A more picture illustrating when a function is concave up or concave down

• Notice the tangent lines and their slopes.

• A point of inflection is also labeled on the picture.

Note:
• To find the inflection points, we look at the second derivative.
• Find all the points such that f” is zero or undefined at those points.
• Then use the Key Number Method to test the sign changes of f” at those
points.
 Concavity and convexity of a function
•Let f(x) be a function of a single variable defined on an interval.

•f(x) is Convex if every line segment joining two points on its graph is never
below the graph

•The line tangent to convex (concave upward) functions is below the graph of
the functions (tangent from below).

•A curve is said to be concave upwards (or convex downwards) on (a, b) if

all the points of the curve lies above any tangent to it on that interval.
Concavity and convexity

•f(x) is Concave if every line segment joining two points on

its graph is never above the graph.

•The tangent line of concave downward functions

is tangent from above.
• A curve is said to be concave downwards (or convex upwards) on (a,b) if all
the points of the curve lies below any tangent to it on that interval.
 lOMoARcPSD|6162234

Concavity and convexity

Concave up

Concave up or Concave down or Concave

Convex Inflection point
Here the concavity changes. Concave down

This is called an inflection point (or point of inflection).

 Point of inflection
• In the previous section, stationary points show maximum or minimum value of
any function

• However, there are also stationary points that are neither a maximum nor a
minimum value of the function.
• These stationary points are called points of inflection

•A point on the curve is said to be a point of inflection if the

curve changes from convexity to concavity or from
convexity to concavity in passing through the point.
 lOMoARcPSD|6162234

Point of inflection
• key insight is that a point of inflection is a point at which the slope of the function (not the
function itself) reaches a maximum or minimum value.
• At a stationary point the curve is neither rising nor falling at this point.
• For any function 𝑦 = 𝑓(x), a point of inflection is a point on the curve at which the slope is
at a maximum value or a minimum value.
• Conditions for inflection
First Order Condition for a point of inflection
 The second order derivative = 𝑑𝑑x2 𝑦2 =
0 Order Condition for a point of inflection
 Second
 The third order derivative = 𝑑3𝑦
> 0, the slope is the minimum of the
𝑑x 3
The third order derivative =
 function 𝑑3𝑦
< 0, the slope is the maximum of the
𝑑x 3
𝑑𝑦
function
• Note that 𝑑 may or may not equal zero at a point of inflection.
x
 lOMoARcPSD|6162234

Inflection Point: Exercise

• 𝑦 = x 3 − 12x 2 +
• 𝑦 = 3 1 x 3 − 3x 2 + 9x 𝑦 = −x 3 + 6x 2 − 12x
20
+5 + 50

3 2
4
• 𝑑x = 2x − 6 =
𝑑2𝑦 𝑑2
𝑦
= 6x − 24 = 𝑑2
= −6x + 12 =
• 0𝑑𝑑x𝑦 = 2 > 0
2 • 𝑑x 2 • 𝑦
𝑑x 2
0 =6 >0 0 = −6 < 0
3
𝑑3𝑦 𝑑3𝑦
3
• 𝑑x 3
• 𝑑x 3
• Slope is min • Slope is min • Slope is max
𝑑2 𝑑 2
• OR check sign of 𝑑 𝑦2 close to 2 and if
2
• OR check sign of 𝑑𝑦x 2 close to 3 and if • OR check sign of 𝑑𝑦x 2 close to 4 and if 𝑑x
sign changes, then there is inflection point sign changes, then there is inflection point
sign changes, then there is inflection point
 lOMoARcPSD|6162234

More exercise on inflection

•Show that 𝑓 (x) = x 4 does not have an inflection point.
Since f''(x)≥0 for all x , f never changes its concavity.
Hence, f has no inflection point.
 Criteria for Concavity, Convexity and Inflexion:
1. The curve is concave upwards (convex downwards) at P if
f’’(c)>0.
If the second derivative of a function is positive on a given interval, then the graph
of the function is concave up on that interval.

2. The curve is concave downwards(convex upwards) at P if

f’’(c)<0.
If the second derivative of a function is negative on a given interval, then the graph
of the function is concave down on that interval.

3. The curve has a point of inflection at P if f’’(c)=0.

 Example:
I. Identify the below functions whether they are increasing or decreasing at a given
1. points
a. f(x) = x 2  6 x  17 ,at x=2 and x=4

 f’(x)= 2x-6
 When x=2  f’ (2) =2(2)-6=-2<0, the function is decreasing.
 When = 4  f’ (4) -6 = 2>0, the function is increasing.
b. f(x) = x2+4x+5, at x =-3 and x = -1, and x =-2
 f’(x) = 2x+4
 When x = -3  f’(x) =2(-3) +4 = -2<0, the function is decreasing.
 When x =-1  f’(x) =2(-1) +4 = 2>0, the function is increasing.
 When x = -2  f’(x) = 2(-2) + 4=0, the slope of the curve is horizontal
and stationary.
 Example:
II. Identify the following function whether they are concave, convex curve or has point of
1.
inflection.

a) f(x)=2x2-4x
f’(x) = 4x-4
f” (x) = 4>0 , then the curve is convex downward.
b). f (x) = x3-3 x2+4

f”(x) = 3x2-6x
f”’(x) = 6x – 6, point of inflection is where f”(x) = 0
hence it will be at x=1.
Maximization and minimization

AIMS AND OBJECTIVES

• To discuss one of the most important applications of calculus

• Finding the absolute max or minimum value of a function

• One of the most important uses of the derivative

• Economics is a science of choice

• Common to deal with the maximization & minimization of something

Maximization and minimization

• Necessary to introduce students with a systematic procedure of finding the relative

(absolute) maxima and minima of differentiable functions.

• Different techniques of finding the extremum of a function are discussed.

• Students will apply the knowledge they acquire in other fields of economics like
microeconomics, labor economics, macroeconomics, etc.

• Therefore, they apply the concept of derivative in order to solve such kind of problems
(optimization problems) involving one variable only and we will extend it to more than one
variable in unit 6.
Maximization and minimization

• After completion of this chapter students will be able to;

Þidentify the difference between absolute and relative extremum.

Þfind the extremum of differentiable functions by using different tests.

Þapply the techniques they learn in solving optimization problems in economics.

Maximization and minimization

4.1. INTRODUCTION

• In the previous unit we have learned differential calculus.

• Now we will apply the concept of derivatives to problems of optimization of

functions with a single variable.

• Concepts of absolute and Relative extrema, the first and second order test

• Finally how to find the minimum or maximum values of economic problems will
be discussed.
Maximization and minimization
4.2. Absolute Maxima and Minima

• Consider one of the most important applications of the derivative- to

find the

absolute maximum or minimum value of a function and

relative maximum or minimum value of a function

 Absolute Maximum and Absolute Minimum of a Function
• The absolute maximum and minimum of a function can be defined as follows.

• The domain of the function is restricted to some relevant interval.

 f(c) is an absolute maximum of the function f if 𝒇 (𝒄)≥ 𝒇 (𝒙)for all x in the domain of f

 f(c) is an absolute minimum of f if for all x in the domain of f

Theorem: (Extreme Value Theorem)
A function f that is continuous on a closed interval [a, b] has both an absolute
maximum value and an absolute minimum value on that interval.
• The absolute maximum of a function on an interval is the largest value of the
function on the interval
• The absolute minimum is the smallest value on the interval.
 Optimization with a Function of One Variable . . .
f(x) f(x)
f(x)

x x

a
x
x1 X2
A) Absolute maximum at x = 0 B) Absolute minimum at x = 0,
C) Absolute maximum (b) and minimum(a) on a
but no absolute maximum
closed interval or

oFig c shows absolute maximum and minimum on a closed interval.

oA closed interval is an interval of the form
oThat is, an interval that contains both of its end points
oAn absolute extremum of a function f on a closed interval [a, b] attains an absolute maximum
value and an absolute minimum value of f on that interval.
 Optimization with a Function of One Variable . . .

D) Additional graphical Illustration: Determine the absolute extrema of the functions

The absolute maximum of The absolute minimum of The absolute The absolute
the function occurs at a. the function occurs at b. maximum of the minimum of the
function occurs function occurs
at c. at a.

The absolute The absolute

The absolute minimum of The absolute maximum of minimum of the
the function occurs at a. the function occurs at b. maximum of
function occurs the function
at c. occurs at b.
• Theorem: Absolute extrema (if they exist) must always occur at critical values of
the derivative or at end points

• The following steps will help to find the absolute extrema of a continuous
function f on a closed interval

Steps
1. Check that the function is continuous over the interval [a, b]
2. Find the critical values of the function f on the closed interval [a, b] (i.e )
3. Compute f (x) at these critical values and compute f (x) at the end points (critical
points found in step 2) i.e. at x = a and x = b.
4. Select the largest and smallest value of f (x) in step 3.
5. The largest value is an absolute maximum
6. The smallest value is the absolute minimum
Ex 1: Find the absolute maximum and absolute minimum of the function:
f (x) = x2 + 4x + 5 on the interval
Solution:
 Does f have absolute maximum and minimum values? Yes. Let us see it.
Step 1: The function is continuous on [-3, 1]
Step 2: f1(x) = 2x + 4 = 0
2x + 4 = 0
2x = -4 x = -2 is the critical value.
Step 3: f (-2) = (-2)2 + 4(-2) + 5 = 4 – 8 + 5 = 1
f (-3) = (-3)2 + 4(-3) + 5 = 9 – 12 + 5 = 2
f (1) = 12 + 4(1) + 5 = 1 + 4 + 5 = 10
Step 4: The largest value in step 3 is f (1) = 10 is an absolute maximum.
The smallest value f (-2) = 1 is an absolute minimum.
Ex 2: Find the absolute maximum and absolute minimum of the function
f (x) = x3 + 3x2 – 9x – 7;
Solution:
Steps 1. The function is continuous
Steps 2. f’(x) = 3x2 + 6x – 9 = 0. Hence, x = -3 or x = 1 are the critical values.
Steps 3. f (-3) = (-3)3 + 3(-3)2 – 9(-3) – 7 = 20
f (1) = (1)3 + 3(1)2 – 9(1) – 7 = -12
At end points
f (-4) = (-4)3 + 3(-4)2 – 9(-4) – 7 = 13
f (2) = (2)3 + 3(2)2 – 9(2) – 7 = -5
• Therefore: f (-3) = 20 is an absolute maximum
f (1) = -12 is an absolute minimum
Class Work:
Find the absolute extrema of g on [-3,-1] if g(x) = x 3 + 5x - 4
Solution:
 Does f have absolute maximum and minimum values? Yes
 Solve for the critical numbers of g on [-3,-1].
 g’(x) = 3x2 + 5 = 0. Then for what value/s of x will g’(x) be zero? None
 Thus, g has no critical number on [-3,-1].
 Compute the function values of g at the endpoints,
x  3 g  3  3  5  3  4
3

 46 g has an absolute minimum value of -46 at x = -3.

g  1  1  5  1  4
3
x  1
 10 g has an absolute maximum value of -10 at x = -
1
 The above procedure will not be applied if the interval is not a closed interval.

 Sketch the graph of the function to identify the absolute maximum and minimum

 The interval with which you are working will contain only one first order critical
value of the function.
 That is functions with no absolute extrema

 To find the local extrema and or absolute extrema of interval that is not closed:

a. we need to sketch the graph or

b. use the 2nd derivative test
4.2.1. SECOND DERIVATIVE TEST FOR ABSOLUTE EXTREMA
Theorem: Let f be continuous on interval I with only one first order critical value c in the interval I.

Þ If f ’(c) = 0 and f ’’ (c) > 0, then f (c) is the absolute minimum of f on I.

Þ If f ’(c) = 0 and f ’’ (c) < 0, then f (c) is the absolute maximum of f on I.

Ex 2: Find the absolute maximum value of the function

Solution:
• Take the first derivative of the function and find the critical value.

• Therefore, f(2) = 24 – 2(2) – 8/2 = 16 is

the absolute maximum value of the

function: on the interval

x>0
Ex 3: Find the absolute minimum value of the function

Solution:
• But only x = 3 is the only value on the relevant
• As usual find the critical values of
interval.
the function

• Therefore, f (3) = 3(3) + 27/3 = 9 + 9 = 18 is the

absolute minimum value of the function f (x) on

the interval x > 0

 Class work

1). Find the absolute minimum and maximum value of the function:
f(x) = 4x2 – 16x + 4
Solution:
f(x) = 4x2 – 16x + 4
f’(x) = 8x – 16 = 0, x = 2 is critical value
f’’(x) = 8, hence:
• f’’(x) is always positive, that is f(x) is always concave up and
• Thus, by the 2nd derivative test f(x) has a relative minimum at x = 2
• Since this is the only critical value, it follows that:
 f(x) has an absolute minimum of f(x) = f(2) = 4.22 – 16.2 + 4 = -12 at x = 2
 and consequently, has no absolute maximum.
 Home Work
a). Find the absolute minimum and b). Find the absolute minimum value of
maximum value of the function: the function f(x) = ex – 5x
f(x) = x3 – 9x2 + 24x -10 Solution:
Solution: f’(x) = ex – 5 = 0
f’(x) = 3x2 – 18x + 24 = 0
ex = 5
3(x2 – 6x + 8) = 0
ln ex = ln 5 so x = ln 5 is a critical
3(x – 4) (x -2) = 0 point
so x = 2 or x = 4 are both critical points
f’’(x) = ex
f’’(x) = 6x – 18
f’’(ln5) = eln5 = 5 > 0
f’’(2) = -6 < 0
so f has a local minimum at x = ln5
so f has a local maximum at x = 2
f’’(4) = 6 > 0
so f has a local minimum at x = 4
c). Find the absolute minimum value of the function f(x) = 10x6 – 24x5 + 15x4
Solution:

f’(x) = 60x5 – 120x4 + 60x3 = 0  60x3 (x2 – 2x + 1) = 0

60x3(x – 1)2 = 0 so x = 0 or 1 both are critical points
f’’(x) = 300x4 – 480x3 + 180x2
f’’(0) = 0 can’t determine, the 2nd derivative test is failed because f’’ = 0
f’’(1) = 0 can’t determine

Therefore, there is
a local minimum at
x=0
Decreasing Increasing Increasing
RELATIVE MAXIMUM AND MINIMUM
A relative maximum of a function is a peak, a point on the graph of the
function that is higher than any neighboring point on the graph.

A relative minimum is the bottom of a valley, a point on the graph that is lower
than any neighboring point.

The relative maxima and minima of a function are collectively called relative
extrema.
 Y

C Y = f(x)

D
B

Fig a: Fig b:

Fig: shows the relative maxima and minima of a function

 Fig a of the above function {Y = f(x)}

 has a relative maximum at point A & C and a relative minimum at points B & D
 Each of these points represents an extremum in the immediate neighborhood of the point
only
4.3.1. The first order Test for Relative Extrema
 Given y = f (x), then the first derivative, f’(x) plays a major role in our search of
its extreme values.
 This is due to the fact that if a relative extremum of the function occurs at x =
xo, then either
I. The first derivative value of the function at the critical value is equal
to zero i.e. f1(xo) = 0
II. The first derivative at the critical value, f1(xo), does not exist
 But we rule out the possibility of the second condition since we assume that f
(x) is continuous and possess a continuous derivative.
 Therefore, we will not deal with sharp points.
• The value of the function at the critical value, x0, f (x0) will be

a) a relative maximum if f’(x) changes its sign from positive to negative from the
immediate left of the point x0 to its immediate right.

b) a relative minimum if f’(x) changes its sign from negative to positive from the
immediate left of x0 to its immediate right.

c) neither a relative maximum nor a relative minimum if f’(x) has the same sign on
both the immediate left and right of point xo
Important Note:
• Need to find out the critical values first before we can apply the 2nd derivative
test
(a) (c)
• In fig (a) above, the values x1 and x2 are critical values of f (x).

• The value of the function at x1, f (x1), is a relative minimum because the sign of the
first derivative f’(x) changes its sign from negative to positive.

• The value of the function at x2, f (x2), is a relative maximum because the sign of the
first derivative f’(x) changes its sign from positive to negative.

• Fig (b) shows that the value of the first derivative at x1, f’(x1) is zero, the derivative

does not change its sign from one side of x = x1, to the other side.

• Point A is called an inflection point.

• In figure (c) the slope of the function is maximum at point R, but it is not zero.
Critical Point:

• The critical point of x is the value of x0 when

a. f’(x0) = 0 (Points A, B and C) or

b. f’(x0) = undefined (Points D and E)

Stationary Point
• The derivative of the function is 0 only (a point where f’(x0) = 0 ) .. Points A &
B
• Points are called “stationary” because at these points the function is neither
increasing nor decreasing
• The tangent to the curve is a horizontal line
A
• Could have local extremum (local max and
local min) or neither
B
• The value of the function f (x0) at the point is
called a stationary value of y [a stationary
value of y is f(x0) ]
More on Stationary Point
• Identify points where the curve is:

a. Concave up … b. Concave down ….

 b/n a and c b/n 0 and b
 b/n b and x  b/n b and x

Stationary Point

• A point at which the derivative of a function vanishes,

• A stationary point may be a minimum, maximum, or inflection point.
Saddle Point
• At a saddle point, the function has:
neither a minimum
nor a maximum

Point of Inflection:
• f’’(x) = 0
• An inflection point is a point on a curve at which the
sign of the curvature (i.e., the concavity) changes.
• Independent of first derivative – it is what make it
differ with saddle point
Ex 1: Find the relative extrema of the function: f (x) = x2 – 4x + 5
Solution:
• First find the first derivative of the function;
f’(x) = 2x – 4, then equate f’(x) to zero
f’(x) = 2x – 4 = 0
2x = 4, x = 2 is the only critical value.
• Now check the sign of f’(x) by taking numbers from the immediate left and right of x
=2
• Let's take 1.9 from the left and 2.1 from the right.
• Therefore, the sign of f’(x)
f’(x) = 2x – 4. changes from negative to
At x = 1.9, positive.
f’(x) = 2(1.9) – 4 = 3.8 – 4 = -0.2 < 0 • Hence f(2) = 1 is a relative
At x = 2.1 minimum.
f’(x) = 2(2.1) – 4 = 4.2 – 4 = 0.2 > 0
Ex 2: f(x) = x3 – 12x2 + 36x + 8
Solution:
 The first derivative of f(x) is: f’(x) = 3x2 – 24x + 36 equating this to zero,
Þ 3x2 – 24x + 36 = 0  x1= 2 and x2 = 6 are the critical values.
• The signs of f’(x) by taking #s from the immediate left & right of x = 2 & x = 6
x = 1.9 and x = 2.1
At x = 1.9, f’(x) = 3(1.9)2 – 24(1.9) + 36 = 1.23
At x = 2.1, f’(x) = 3(2.1)2 – 24(2.1) + 36 = -1.17
• The sign of f’(x) changes from +ve to -ve, hence f(2) = 40 is a relative
maximum
At x = 5.9, f1(x) = 3(5.9)2 – 24(5.9) + 36 = -1.17
At x = 6.1, f1(x) = 3(6.1)2 – 24(6.1) + 36 =1.23
• Since f’(x) changes its sign from -ve to +ve , f(6) = 8 is a relative minimum.
Ex 3:
• Given f(x) = x3: Find the inflection point(s)
Answer:

• (Might as well find any local maximum and local minimums as well.)
• Start with getting the first derivative: f '(x) = 3x 2

• Then the second derivative is: f "(x) = 6x

• Now set the f "(x) = 0 and solve for x to find possible inflection points

6x = 0

x=0
• We can see that if there is an inflection point it must be at x = 0.
• But how do we know for sure if x = 0 is an inflection point?
• We have to make sure that the concavity actually changes.
• To do this pick a number on either side of x = 0 and check what the concavity is
at those locations.
• Let's use x = -1 and x = 1 to check.
• At x = -1, the second derivative gives: f "(-1) = -6 and the function is concave
down at x = -1.
• If we check x = 1 we get: f "(1) = 6, which means the function is concave up at
x = 1.
• Thus, we can see that the function has different concavities on either side of x
=0 and the inflection point is at x=0.
• Note the inflection point is not necessarily where the function crosses the x-
axis but is where the concavity actually changes.
• Let's now go back and find the local maximums and local minimums of this function.
• Start by finding the critical points.
f '(x) = 3x2
3x2 = 0
x=0
• We only have one critical point, x = 0. Is it a local max or a local min? Let's try using the second
derivative test.
f "(x) = 6x
f "(0) = 6(0)
f "(0) = 0.
• Well, that's unfortunate because that means the function is neither concave up nor concave down. We still
don't know if it is a local max or a local min. I guess we'll have to try another technique. Let's try the first
derivative test.
• Try using x=-1 and x=1 for numbers on either side of our critical point x=0. Plug them into the first
derivative.
f '(-1) = 3(-1)2
Since the derivative is positive in either side of
the critical point, the function is increasing on f '(-1) = 3.
both side of the critical point and there is no f '(1) = 3(1)2
local maximum or local minimum.
Class Work 1: Find all relative extrema of the function f(x) = -x3 – 6x2 – 9x – 2)
Answer: • Now check to see if the first derivative
• For a critical point to be local extrema, the function must go changes sign around these points. Since
from increasing, i.e., positive f′, to decreasing, i.e. negative f′, or you're dealing with two critical points,
vice versa, around that point. you're going to have to look at 3
intervals.
• So, start by determining the first derivative of f
• Select a value from each of these intervals
• f′=−3x2−12x−9 and note the sign of f′
• To determine the function's critical points, make f′=0 and solve • (−∞,−3)
for x
• f′(−4)=−3⋅(−4+1)⋅(−4+3)
• f′=0
• f′(−4)=−3⋅(−3)⋅(−1)=−9→negative
• f′=−3x2−12x−9=0
• (−3,−1)
• This is equivalent to
• f′(0)=−3⋅(−2+1)⋅(−2+3)
• −3(x2+4x+3) = 0, or x2+4x+3=0
• f′(0)=−3⋅(−1)⋅(+1)=3→positive
• x1,2=−4±√42−4⋅1⋅32={x1=−3x2=−1
• (−1,∞)
• Since no domain restrictions are given for your function, both
solutions will be critical points. • f′(0)=−3⋅(0+1)⋅(0+3)
• f′(0)=−3⋅1⋅3=−9→negative
• The f’(x) changes sign twice. • To get the actual points at which
• It goes from being negative to the function has the local
being positive around x=−3, which minimum and maximum,
means that this critical point is evaluate f at the critical points.
a local minimum. • f(−3)=−
• And it goes from being positive to (−3)3−6(−3)2−9(−3)−2
being negative around point x= −1, • f(3)=27−54−27−2=−2 and
which means that this critical point is
a local maximum. • f(−1)=−
(−1)3−6(−1)2−9(−1)−2
• This is equivalent to having a
f(−1)=1−6+9−2=2
function that goes
from decreasing to increasing (thin • Therefore, the function f has
k of a valley) around point x=−3, and (−3,−2)→ local minimum
from increasing to decreasing (thin (−1,2)→ local maximum
k of a hill) around point x=−1. • graph{-x3 – 6x2 – 9x – 2 [-10, 10, -5, 5]}
Class Work 2: Consider the function f(x) = 2x3 - 3x2 + 6. Find the
relative extrema?
Solution:
Step 1: Determine the derivative of f(x)
• f'(x) = 6x2 - 6x
Step 2: Equate the derivative to 0, i.e., f'(x) = 0 to find the
critical points.
• f'(x) = 0
• ⇒ 6x2 - 6x = 0
• ⇒ 6x(x - 1) = 0
• ⇒ x = 0, or x = 1
• Therefore, x = 0 and x = 1 are the critical points
• Now, to determine the points of relative extrema, we will consider points on the left and right sides
of these critical points.
Step 3: Find a point on the left side and right side of the critical points and check the value of the
derivative at these points.
• Consider x = -1 on the left side and x = 1/2 on the right side of the critical point x = 0 and check
the value of f'(x) at these points.
• f'(-1) = 6(-1)2 - 6(-1) = 6 + 6 = 12 > 0
• f'(1/2) = 6(1/2)2 - 6(1/2) = 6/4 - 6/2 = 3/2 - 3 = -3/2 < 0
• Since the value of f'(x) changes from positive to negative, therefore x = 0 is a point of relative
maxima.
• Similarly, consider x = 1/2 on the left side and x = 2 on the right side of the critical point x = 1 and
check the value of f'(x) at these points.
• f'(1/2) = 6(1/2)2 - 6(1/2) = 6/4 - 6/2 = 3/2 - 3 = -3/2 < 0
• f'(2) = 6(2)2 - 6(2) = 24 - 12 = 12 > 0
• Since the value of f'(x) changes from negative to positive, therefore x = 1 is a point of relative
minima.
• To determine the relative maximum and minimum values, we can find the values of f(0) and f(1),
respectively.
Class Work 3: : f(x) = (x3 – 1)4
Solution:
The critical values of the function
f’(x) = 4(x3 – 1)3 (3x2) = 0
(x3 – 1)3 = 0 or 3x2 = 0
x3 = 1 or x = 0
x = 1 or x = 0 are the critical values.
Take numbers to the immediate right and left of x = 1, ex. 0.8 and 1.1
f’(0.8) = 4( (0.8)3 – 1)3 (3 (0.8)2 ) = -0.8925<0
f’(1.1) = 4( (1.1)3 – 1)3 (3 (1.1)2 ) = 0.52656>0
• Therefore, since the sign of f’(x) changes from negative to positive, f(1) = 0 is a
relative minimum.
• The next thing to do is to check whether the other critical value x = 0
corresponds to the maximum or minimum or saddle point of the function.

• Take numbers from the immediate right and left of x = 0, say –0.1 and 0.1

f’(-0.1) = 4( (-0.1)3 – 1)3 (3 (-0.1)2 )= -0.12

f’(0.1) = 4( (0.1)3 – 1)3 (3 (0.1)2 )= -0.119

• Since f’(x) does not change its sign, f(0) = 1 is neither a relative maximum
nor a relative minimum.

• It is a saddle point.
4.3.2. Second Derivative Test for Relative Extremum
• The 2nd derivative can be used to find the relative maxima or relative minima of a
function.
• This test is more convenient than the 1st derivative test, because it does not require
us to check the derivative sign to both the left and the right of x0.

• If the 1st derivative of a function f at x = x0 is f’(x0) = 0, then the value of the

function at x0 {i.e f(x0)} will be

 A relative maximum if the second derivative value at x0 is f’’(x0) < 0

 A relative minimum if the 2nd derivative value at x0 is f’’(x0) > 0

• But if f’’(x0) = 0, the stationary value f(x0) can be either a relative maximum, or a
relative minimum, or even an inflection value.
Ex 4: Find the relative extremum of the function f(x) = 4x2 – x by using the
second derivative test.
Solution:
• First find the first derivative of the function and then the critical value
f’(x) = 8x – 1, x = 1/8 is the critical value
• Then find the second derivative
f’’(x) = 8 and check the sign of the second derivative at the critical value
f’’(1/8) = 8 > 0
• Therefore, f(x) = 4x2 – x and f(1/8) = 4 (1/8)2 –1/8 = -1/16 is the relative
minimum
Ex 5: y = g(x) = x3 – 3x2 + 2
Solution:
• First derivative of the function
g’(x) = 3x2 – 6x, equating this to zero, we get
3x2 – 6x = 0 x(3x – 6) = 0 x = 0 or x = 2 are critical values.
• Stationary values are g(0) = 2 and g(2) = -2
• To check whether these are the relative maximum or minimum values, find the
2nd derivative
g''(x) = 6x – 6
g'' (0) = 6(0) – 6 = -6 < 0, hence g(0) = 2 is a relative maximum
g'' (2) = 6(2) – 6 = 6 > 0, hence g(2) = -2 is a relative minimum
• Follow the next steps for finding a min/max value by using 2 nd derivative test.

1. Find the first derivative, f’(x) for the given function y = f(x)

2. Find the critical values of the function (values of x that make f’(x) = 0)

3. Find the second derivative, f’’(x) or of the function y = f(x)

4. Put x = x0 in step 3 (i.e. evaluate f’’(x) at x0).

• From step 4:

If f’’(x0) > 0, f(x0) is a relative minima.

If f‘’(x0) < 0, f(x0) is a relative maxima.

Ex 6: Find the relative extrema of the function f(x) = x4 + 2x3 – 3x2 – 4x + 4
Solution:
• Follow the above steps
Step 1: f '(x) = 4x3 + 6x2 – 6x – 4
Step 2: f '(x) = 4x3 + 6x2 – 6x – 4 = 2(2x3 + 3x2 – 3x –2) = 2(2x3 + 3x2 – 3x –2 = 0
• By solving this equation, we get
x0 = 1,
x0 = -1/2 and These are the critical values.
x0 = -2
Step 3: f ''(x) = 12x2 + 12x – 6 . . . b/s f '(x) = 4x3 + 6x2 – 6x – 4
Step 4: At x0 = 1, f ''(1) = 12 + 12 –6 = 24 - 6 = 18 > 0
At x0 = -1/2, f ''(-1/2) = 12(1/4) + 12(-1/2) – 6 = -9 < 0
At x0 = -2, f ''(-2) = 12(-2)2 + 12(-2) – 6 = 18 > 0
• Therefore:
f (x) has a relative minimum at:

x = 1, where f(1) = (1)4 + 2(1)3 – 3(1)2 – 4(1) + 4 = 0 and

x = -2, where f(-2) = (-2)4 + 2(-2)3 – 3(-2)2 – 4(-2) + 4 = f (-2) = 0
 f (x) has a relative maximum at x = -1/2
f (-1/2) = (-1/2)4 + 2(-1/2)3 – 3(-1/2)2 – 4(-1/2) + 4 = 81/16
4.5. SOME EXAMPLES ON ECONOMIC APPLICATIONS
• Let us try to see the application of calculus in solving economic problems.
Ex 1:
• Find the relative extremum of the average cost function by using the first
derivative test: AC = f(Q) = Q2 – 5Q + 8 where Q is the level of output
Solution:
• The first derivative of the function is:
f’(Q) = 2Q – 5
• Equating this to zero  2Q – 5 = 0 Q = 5/2 = 2.5
• Taking numbers from the immediate left and right of Q = 2.5:
 say Q = 2.4 & Q = 2.6,
f’(2.4) = 2(2.4) – 5 = 4.8 – 5 = -0.2 < 0
f’(2.6) = 2(2.6) – 5 = 5.2 – 5 = 0.2 > 0
• Since f’(Q) changes its sign from negative to positive:
AC = Q = f(2.5) is a relative minimum.

Note that:
• Since the graph of the average cost function is U – shaped curve, the
relative minimum already found is also the absolute minimum.
Ex 2: Let the R(Q) and C(Q) be the revenue and cost functions respectively and

R(Q) = 1200Q – 2Q2

C(Q) = Q3 – 61.25Q2 + 1528.5Q + 2000

a. find the profit maximizing level of output

b. what is the maximum profit

•  = 1200Q – 2Q2 – (Q3 – 61.25Q2 + 1528.5Q + 2000)
•  = -Q3 + 59.25Q2 – 328.5Q – 2000
• Next find the critical values from the profit function
• (Q) = -3Q2 + 118.5Q – 328.5 = 0
Q = 3 or Q = 36.5 are the critical values
• Then check the sign of the second derivative at Q = 3 and Q = 36.5

• At x = 3,

• At x = 36.5,
• Therefore, Q = 36.5 is the profit maximizing level of output.
b) The maximum profit can be found by directly substituting Q = 36.5 in to the
profit function

 = -(36.5)3 + 59.25(36.5)2 – 328.5(36.5) – 2000 = 16,318.44

Note:

• The above problem can also be solved by MR – MC approach (ii).

• This requires equating MR and MC and solving for Q (the profit maximizing level
of output).

• Check the introduction to economics (Econ. 101) on the rules of profit

maximization.
Exercise:
• Suppose the TC of producing a certain commodity is given by:
a. Find the level of output at the smallest value of the average cost.
b. Find the level of output, which equates the average cost and marginal cost.
Solution:
a). Q when AC is min______?

• Equating the first derivative of the average cost function to zero,

, for
• Then find the 2nd derivative of the AC function

• is positive when is minimal on when , when 4 units

are produced

b). First find the AC and MC function of the TC function and equate them.

or

• The same as that point in part (a) for which AC is minimal.

The end