1-1 Functions

Two ways to describe or define functions Note the functions defined on p. 13: Cost function: C = (fixed costs) + (variable costs) C = a + bx E. g. C = 3000 + 200x This is an example of a function defined by an equation, with independent variable x dependent variable C When graphing such a function the independent variable labels the horizontal axis the dependent variable labels the vertical axis Alternatively, the Cost function could have been given as C(x) = 3000 + 200x This is a function defined using functional notation. Here, the C is the name of a function, not the name of a variable, as in the prior example.

1-1

p.1

The independent variable is still x, but there is no dependent variable, so you can label the vertical axis with C(x). Using this notations, we can write: C(1000) = 3000 + 200(1000) = 203000 That is, the cost of producing 1000 units is $203,000.00 The 1000 is called an input, with corresponding output 203000.

1-1

p.2

Some common business functions (see p. 13) Cost: C = a + bx the cost of producing x items The parameters (numbers that are specific to a particular business situation), are a and b. Example: C = 100 + .50x fixed cost = $100 cost per item produced = $.50 Price-demand: p = m - nx x is the number of items that can be sold for a price of $p per item Here, m and n are the parameters that will vary according to the business situation. Example: p = 1 - .0001x:

1-1

p.3

Price
1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1

1000

2000

3000

4000

5000

6000

7000

8000

9000

Demand
10000

11000

Notice that as the price goes up, the demand will drop.

1-1

p.4

Revenue: Revenue will be (#items sold) x (price per item) R = xp where per item x = #items sold p = price

Looks like as price increases, revenue increases, right? But as price increases, demand (x) decreases, remember? Two conflicting forces. How do they resolve? For our example: R(x) = xp = x(1 - .0001x) Heres the Revenue graph for our example:
Revenue
2500

2000

1500

1000

500

1000

2000

3000

4000

5000

6000

7000

8000

9000

Demand
10000

11000

Note: lowered prices greater demand increased sales

1-1 p.5

BUT the lower prices eventually overtake increased sales, ultimately decreasing revenues.

1-1

p.6

Profit: Profit is, of course, Revenue Cost: P = R C For our example: C(x) = 100 + .50x R(x) = x(1 - .0001x) P(x) = x(1 - .0001x) (100 + .50x) = -.0001x2 +.50x - 100 Here, Profit is written in terms of Demand (x).

1-1

p.7

Guidelines for graphing functions Label and scale your graphs!

(1) both axes must be labeled according to the names of the variables given by the problem: independent variable (often x) on the horizontal axis dependent variable (often y) on the vertical axis if the graph is the graph of a named function, there is no dependent variable; instead, the name of the function is used; e.g. "f(x)", as shown above (2) scaling should be done so as to convey the sense of scale of the graph without overly cluttering it:

1-1

p.8

if the scale goes from 1 to 100, don't draw in 100 ticks and scale each one usually 2-10 scale ticks, with 2-3 of them labeled will convey the scale, as shown above

1-1

p.9