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BUSCALC

LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS BUSANA2 LECTURE NOTES
AND
ECONOMICS
OF
FUNCTIONS
Market Equilibrium Isagani B. Jos
Break-Even Analysis

Department of Mathematics
De La Salle University - Manila

1ST Term SY 2017-2018


Outline

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS
AND
ECONOMICS 1 APPLICATIONS TO BUSINESS AND ECONOMICS OF
OF
FUNCTIONS FUNCTIONS
Market Equilibrium
Break-Even Analysis
Market Equilibrium
Break-Even Analysis
Outline

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS
AND
ECONOMICS 1 APPLICATIONS TO BUSINESS AND ECONOMICS OF
OF
FUNCTIONS FUNCTIONS
Market Equilibrium
Break-Even Analysis
Market Equilibrium
Break-Even Analysis
Demand Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos Definition
APPLICATIONS A demand function gives a relationship between the
TO
BUSINESS quantity of the commodity demanded and the price per unit
AND
ECONOMICS of this commodity.
OF
FUNCTIONS
Market Equilibrium Let :
Break-Even Analysis

x := quantity demanded;
p := price per unit;

Therefore, the demand function is p = f (x).


Demand Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS Properties of a Demand Function:
AND
ECONOMICS
OF
1 Usually, a decreasing function;
FUNCTIONS
Market Equilibrium
2 The y -intercept of the demand curve, p0 , represents
Break-Even Analysis
the highest price a consumer is willing to pay for the
commodity.
Demand Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS Properties of a Demand Function:
AND
ECONOMICS
OF
1 Usually, a decreasing function;
FUNCTIONS
Market Equilibrium
2 The y -intercept of the demand curve, p0 , represents
Break-Even Analysis
the highest price a consumer is willing to pay for the
commodity.
Demand Function

BUSCALC
LECTURE
NOTES 2
Example
Isagani B. Jos
For each P4 decrease in the unit price, 100 more of a
APPLICATIONS
TO certain commodity are sold. When the unit price is P30, the
BUSINESS
AND company sells 600 units. Assume that the demand function
ECONOMICS
OF
is linear.
FUNCTIONS
Market Equilibrium
1 Set up the demand function;
Break-Even Analysis
2 What is the highest price to be paid for this commodity?
3 How many units would be demanded if the commodity
were free?
4 How many units will be bought if the unit price is P40?
5 How much will be paid for each unit if 250 units are
demanded?
Demand Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
The demand for a particular commodity is given by
APPLICATIONS
TO
BUSINESS
AND x 2 + 2x + 3p 23 = 0.
ECONOMICS
OF
FUNCTIONS
Market Equilibrium
Break-Even Analysis 1 Draw a sketch the demand curve.
2 Find the highest price that would be paid for the
commodity.
3 Find the demand if the commodity were free.
4 How many units will be demanded if the unit price were
P5?
Supply Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos Definition
APPLICATIONS A supply function gives a relationship between the quantity
TO
BUSINESS of the commodity supplied and the unit price per unit of the
AND
ECONOMICS commodity.
OF
FUNCTIONS
Market Equilibrium Let :
Break-Even Analysis

x := quantity supplied;
p := price per unit;

Therefore, the supply function is p = f (x).


Supply Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS Properties of a Supply Function:
AND
ECONOMICS
OF
1 Usually, an increasing function;
FUNCTIONS
Market Equilibrium
2 The y -intercept of the supply curve, p0 , represents the
Break-Even Analysis
lowest price a consumer is willing to pay for the
commodity.
Supply Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS Properties of a Supply Function:
AND
ECONOMICS
OF
1 Usually, an increasing function;
FUNCTIONS
Market Equilibrium
2 The y -intercept of the supply curve, p0 , represents the
Break-Even Analysis
lowest price a consumer is willing to pay for the
commodity.
Supply Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
APPLICATIONS
TO For each P100 increase in the unit price, 200 more
BUSINESS
AND
calculators will be supplied. When the price per calculator is
ECONOMICS
OF
P400, 500 calculators are supplied. Assume that the supply
FUNCTIONS
Market Equilibrium
function is linear.
Break-Even Analysis
1 Set up the supply function.;
2 Find the lowest price at which the calculator will be
supplied.;
3 How many units will be supplied if the unit price is
P200?
Supply Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
APPLICATIONS
TO
The supply for a particular commodity is given by the
BUSINESS equation
AND
ECONOMICS 4x 2 9p2 + 16x + 52 = 0.
OF
FUNCTIONS
Market Equilibrium
Break-Even Analysis
1 Draw a sketch of the supply curve.
2 Find the lowest price at which the commodity would be
supplied.
3 How many units will be supplied if the unit price were
P6?
Market Equilibrium

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Definition
BUSINESS
AND The point of intersection of the demand and the supply
ECONOMICS
OF curves is called the market equilibrium point.
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Example
Find the market equilibrium point of the demand curve:
p = 10 2x and the supply curve: p = 32 x + 1.
Market Equilibrium

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Definition
BUSINESS
AND The point of intersection of the demand and the supply
ECONOMICS
OF curves is called the market equilibrium point.
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Example
Find the market equilibrium point of the demand curve:
p = 10 2x and the supply curve: p = 32 x + 1.
Market Equilibrium

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS Example
TO
BUSINESS For each pair of demand and supply curves below. Do the
AND
ECONOMICS following: (i.) Determine which represents the demand
OF
FUNCTIONS curve and which represents the supply curve; (ii.)
Market Equilibrium
Break-Even Analysis Determine the market equilibrium point.
1 3x 2 + p 10 = 0 and x 2 + 2x p + 4 = 0;
2 2x p + 2 = 0 and x 2 + p2 + 2x 24 = 0
3 p2 + 3p x 54 = 0 and 426 x p = 0
Outline

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS
AND
ECONOMICS 1 APPLICATIONS TO BUSINESS AND ECONOMICS OF
OF
FUNCTIONS FUNCTIONS
Market Equilibrium
Break-Even Analysis
Market Equilibrium
Break-Even Analysis
Break-Even Analysis

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Restrictions:
BUSINESS
AND
ECONOMICS
1 Only one product is involved;
OF
FUNCTIONS
2 Manufacturer incurs only two types of costs - fixed and
Market Equilibrium
Break-Even Analysis
variable;
3 Selling price is constant;
4 Output produced equals sales.
Break-Even Analysis

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Restrictions:
BUSINESS
AND
ECONOMICS
1 Only one product is involved;
OF
FUNCTIONS
2 Manufacturer incurs only two types of costs - fixed and
Market Equilibrium
Break-Even Analysis
variable;
3 Selling price is constant;
4 Output produced equals sales.
Break-Even Analysis

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Restrictions:
BUSINESS
AND
ECONOMICS
1 Only one product is involved;
OF
FUNCTIONS
2 Manufacturer incurs only two types of costs - fixed and
Market Equilibrium
Break-Even Analysis
variable;
3 Selling price is constant;
4 Output produced equals sales.
Break-Even Analysis

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Restrictions:
BUSINESS
AND
ECONOMICS
1 Only one product is involved;
OF
FUNCTIONS
2 Manufacturer incurs only two types of costs - fixed and
Market Equilibrium
Break-Even Analysis
variable;
3 Selling price is constant;
4 Output produced equals sales.
Break-Even Analysis

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS
Total Cost involves:
AND
ECONOMICS
1 Fixed Cost (Overhead Expenses) are fixed in value and
OF
FUNCTIONS may include rent, depreciation, interest on loans
Market Equilibrium
Break-Even Analysis
2 Variable Cost is dependent on the number of units
manufactured and may include raw materials,
advertising expenses, labor.
Total Cost Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO C(x) = V (x) + F ,
BUSINESS
AND
ECONOMICS where
OF
FUNCTIONS C(x) is the total cost function;
Market Equilibrium
Break-Even Analysis
V (x) is the variable cost function which is equal to

V (x) = (variable cost per unit) x;

F is the fixed cost


Total Revenue Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
BUSINESS Total revenue is the product of the selling price per unit and
AND
ECONOMICS
the number of units sold. Thus,
OF
FUNCTIONS
Market Equilibrium
Break-Even Analysis
R(x) = px,
where p is unit selling price and x is the number of units
sold.
Total Cost and Total Revenue

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
Remark
BUSINESS
AND R(x) > C(x) a profit is realized;
ECONOMICS
OF R(x) < C(x) a loss is realized
FUNCTIONS
Market Equilibrium
Break-Even Analysis

Remark
When R(x) = C(x), then neither a profit nor a loss is
realized. The producer is said to break-even.
Total Cost and Total Revenue

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO
Remark
BUSINESS
AND R(x) > C(x) a profit is realized;
ECONOMICS
OF R(x) < C(x) a loss is realized
FUNCTIONS
Market Equilibrium
Break-Even Analysis

Remark
When R(x) = C(x), then neither a profit nor a loss is
realized. The producer is said to break-even.
Break-Even Point

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
APPLICATIONS
TO A company manufactures an item for which the material
BUSINESS
AND
cost is P12 per item, the labor cost is P8 per item, and
ECONOMICS
OF
additional variable cost is P20 per item. Fixed costs are
FUNCTIONS
Market Equilibrium
P80,000. Each item sells for P80.
Break-Even Analysis
1 How many items must be sold for the company to
break-even?
2 How many will be the sales at break-even?
3 How many items must be sold to recover fixed costs
alone?
Total Profit Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Total profit is the difference of the total revenue over total
BUSINESS
AND cost. Thus,
ECONOMICS
OF P(x) = R(x) C(x).
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Remark
At break-even, P(x) = 0.
Total Profit Function

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Total profit is the difference of the total revenue over total
BUSINESS
AND cost. Thus,
ECONOMICS
OF P(x) = R(x) C(x).
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Remark
At break-even, P(x) = 0.
Break-Even Point

BUSCALC
LECTURE Example
NOTES 2
Isagani B. Jos The manufacturer of a certain type of item will require
overhead expenses of P15,000. From his experience of
APPLICATIONS
TO similar items,he feels that he can make annual sales of
BUSINESS
AND 25,000 items at a unit price of P2, and 30,000 units at a unit
ECONOMICS
OF price of P1.50. His variable costs equals 0.016x 2 + x
FUNCTIONS
Market Equilibrium
thousand pesos, where x is in thousand units.
Break-Even Analysis
1 Set up the demand function, assuming that it is linear;
2 Set up the total cost, revenue and profit functions;
3 At what level(s) of sales will the manufacturer
break-even?
4 How much profit is obtained when 20,000 units are
manufactured and sold? At 30,000 units?
5 How many units must be sold to obtain a profit of
Break-Even Point

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS Example
TO
BUSINESS A manufacturer of inexpensive local furniture sells all that he
AND
ECONOMICS produces. If the total cost function is given by
OF
FUNCTIONS C(x) = 40x + 2000 and his total revenue function is
Market Equilibrium
Break-Even Analysis R(x) = 50x, then
1 determine the level of production at the break-even;
2 determine the level of production at the break-even
point if the total cost is increased by 5%.
Break-Even Point

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Example
BUSINESS
AND A manufacturer of local products sell his products at P8.75
ECONOMICS
OF per piece selling all he produces. His fixed cost is P3500
FUNCTIONS
Market Equilibrium and his variable cost is P3.75 per piece.
Break-Even Analysis
1 At what level of production will he have a profit of
P3500? a loss of P1750?
2 At what level of production will he break even?
Additional Example

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS Example
TO
BUSINESS A manufacturer of inexpensive local furniture sells all that he
AND
ECONOMICS produces. If the total cost function is given by
OF
FUNCTIONS C(x) = 40x + 2000 and his total revenue function is
Market Equilibrium
Break-Even Analysis R(x) = 50x, then
1 determine the level of production at the break-even;
2 determine the level of production at the break-even
point if the total cost is increased by 5%.
Additional Example

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos

APPLICATIONS
TO Example
BUSINESS
AND A manufacturer of local products sell his products at P8.75
ECONOMICS
OF per piece selling all he produces. His fixed cost is P3500
FUNCTIONS
Market Equilibrium and his variable cost is P3.75 per piece.
Break-Even Analysis
1 At what level of production will he have a profit of
P3500? a loss of P1750?
2 At what level of production will he break even?
Additional Example

BUSCALC
LECTURE Example
NOTES 2
Isagani B. Jos Studies indicate that under perfect competition, the demand
for a particular commodity is given by the equation
APPLICATIONS
TO (x + 10)y = 500 and that the manufacturers willingness to
BUSINESS
AND supply this commodity is given by 3y = 4x. Determine the
ECONOMICS
OF market equilibrium quantity.
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Example
Given 30x + 3y + y 2 = 1796 and y 2 + 4y 30x 4 = 0,
where x represents quantity in hundreds of units and y
represents the unit price in tens of pesos.
1 Identify which of the equations given is the demand
curve and which is the supply curve.
2 Determine the market equilibrium price and the market
equilibrium quantity.
Additional Example

BUSCALC
LECTURE Example
NOTES 2
Isagani B. Jos Studies indicate that under perfect competition, the demand
for a particular commodity is given by the equation
APPLICATIONS
TO (x + 10)y = 500 and that the manufacturers willingness to
BUSINESS
AND supply this commodity is given by 3y = 4x. Determine the
ECONOMICS
OF market equilibrium quantity.
FUNCTIONS
Market Equilibrium
Break-Even Analysis
Example
Given 30x + 3y + y 2 = 1796 and y 2 + 4y 30x 4 = 0,
where x represents quantity in hundreds of units and y
represents the unit price in tens of pesos.
1 Identify which of the equations given is the demand
curve and which is the supply curve.
2 Determine the market equilibrium price and the market
equilibrium quantity.
Additional Example

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
APPLICATIONS
TO A manufacturers total cost function C(x) = 25x + 27500.
BUSINESS
AND The total revenue function is linear and that the total
ECONOMICS
OF revenue for 100 units is P7000, while the total revenue for
FUNCTIONS
Market Equilibrium
150 units is P10500. Find the break even point.
Break-Even Analysis

Example
The demand equation is x = 6000 30p and the total cost
function is C(x) = 3x + 5880, where p is in thousands of
pesos. Find the break even point.
Additional Example

BUSCALC
LECTURE
NOTES 2
Isagani B. Jos
Example
APPLICATIONS
TO A manufacturers total cost function C(x) = 25x + 27500.
BUSINESS
AND The total revenue function is linear and that the total
ECONOMICS
OF revenue for 100 units is P7000, while the total revenue for
FUNCTIONS
Market Equilibrium
150 units is P10500. Find the break even point.
Break-Even Analysis

Example
The demand equation is x = 6000 30p and the total cost
function is C(x) = 3x + 5880, where p is in thousands of
pesos. Find the break even point.