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Quantitative Techniques I
Topic 1
Mathematical Techniques
Basic Arithmetic
Real Numbers
Real numbers describe real-world quantities such as amounts,
distances, age, temperature.
A real number can be an integer (eg. -5, 0, 3), a fraction (eg.
1/3, -2/5), or a decimal (eg. -0.5, 3.99)
A real number can take +ve or –ve value or be zero.
They can also be either rational or irrational.
Source: http://www.math.com/school/subject2/lessons/S2U1L1DP.html
Rational Numbers
A number that can be expressed as the ratio of 2 integers.
Examples of rational numbers:
Fraction eg. ½, 3/8 ….
Integer eg. 3 = 3/1
Irrational Numbers
A number that cannot be expressed as the ratio of 2 integers.
Example: square roots of non-perfect “squares”
17 4.1231...
e 2.718281...
Subtraction, − 2–2=0
Multiplication, x 2x2=4
Division, ÷ 2 ÷ 2 =1
4
When different operations occur in the same
mathematical expression:-
Multiply and divide before addition and subtracting.
Eg. 10 – 8 * 2
5
Basic Arithmetic (Cont…)
Examples:
3 9 7 (27) 7
Without Brackets : 10
2 2
3 (9 7) 3(2)
With Brackets : 3
2 2
Without Brackets : 9 8 3 2 17 5 12
6
1
2(1 2)
6
(1 2) 9
2
Basic Arithmetic (Cont…)
Negative Numbers
Subtracting a negative number is the same as adding
5 – (-10) = 5 + 10 = 15
a n x ... a 2 x a1 x a0
n 2
variable is x
Power is 2
Source: http://mathworld.wolfram.com/Polynomial.html
Polynomials (Cont…)
Sum of two polynomials: adding together the coefficients
sharing the same powers of variables:
Example:
(4x5 + 3x3 + 4x) + ( 8x – 5x3 - 5 )
= 4x5 + 3x3 – 5x3 + 4x + 8x – 5
= 4x5 – 2x3 + 12x – 5
Polynomials (Cont…)
Product of two polynomials: multiplying term by term and
combining the results:
(a 2 x 2 a1 x a0 )(b1 x b0 )
a 2 x 2 (b1 x b0 ) a1 x(b1 x b0 ) a0 (b1 x b0 )
a 2 b1 x 3 (a 2 b0 a1b1 ) x 2 (a1b0 a0 b1 ) x a0 b0
Example:
(x – 1) (2x + 3) = 2x2 + 3x – 2x – 3
= 2x2 + x – 3
Polynomials (Cont…)
The special names given to polynomials of low orders
Polynomial
Polynomial name Example
order
0 constant 10
1 Linear 8x + 10
2 Quadratic 5x2 + 8x + 10
5 x 3 10 x 2 3 x 6
5 x 2 ( x 2) 3( x 2)
(5 x 2 3)( x 2)
Factoring Polynomials
Source: http://homepage.mac.com/shelleywalsh/MathArt/Factoring.html
Question
Multiply : 2t 3 5t 3t 1
2
Rational Expressions
A rational expression is an algebraic expression of the form:
P( z )
R( z )
Q( z )
where P(z) and Q(z) are simpler expressions (usually
polynomials), and the denominator Q(z) is not zero.
Example: 2 xy y 2
2x 1
2
Source: http://www.sparknotes.com/math/algebra2/rationalexpressions/section1.html
Numerator a
Fractions
Denominato r b
Quotient of “a” and “b”, or fraction “a” over “b”
The rule governing the use of algebraic fractions are identical to
those used for ordinary fractions.
ac a a c
ad bc
bc b b d
a c ac a c ad bc
b b b b d bd
a c ac a c a d
b d bd b d b c
Fractions (Cont…)
1. Simplification of algebraic fractions
• Fractions may be simplified by moving a common factor
from numerator and denominator.
• Examples:
14ax 2 x(7a) 2 x
2
("7a" is a common factor )
21a 3a(7a) 3a
x 2 1 3x 6 ab
1
x 2x 4x 4
2 a b
2 2
a b
( x 1)( x 1) 3( x 2) ab a b
x( x 2) 4( x 1) (a b)( a b) 1
( x 1)( x 1) 3( x 2) ab
x( x 2) 4( x 1) ab
3( x 1) WRONG !!! IF
4x ab a b
(a b)( a b) 1
( A B )( A B )
Fractions (Cont…)
A2 AB AB B 2
4. Simplification and complex fractions A2 B 2
a 2 b2
b a 2
b 2
ab
ab b 3
3 (a b)( a b) 3 WRONG !!! IF
(a b)( a b) 3
b ab
b ab
3(a b)
b
Fractions (Cont…)
5. The three signs of a fraction
• The sign of the numerator
• The sign of denominator
• The sign of the fraction proper
8 8
(4) 4 (4) 4
2 2
8 8
(4) 4 (4) 4
2 2
8
(4) 4
2
Ratios
A ratio is a different way of expressing a fraction.
A fraction is the ratio of a numerator to a denominator.
Numerator
Fraction
Denominato r
Numerator
Percentage(%)
100
r
r%
100
Example: what is 12% of RM80
12
RM 80 RM 9.60
100
Percentages (cont…)
Application of percentages
In business and management:-
Sales manager
Personnel staff
Accountant
Economists
r
final value original value (1 )
100
r
where (1 100 ) is called the scale factor for an r %
increase.
Percentages (cont…)
Markups: Applications
A bank gives 4% interest at the end of each year on any sum left
in a deposit account for a whole year. If Mr. Smith opens such a
deposit account with RM20,000.
a) Calculate the interest gained by Mr. Smith.
b) What is the balance in the account at the end of 1 year?
4
Interest gained = RM 20,000 RM 800
100
4
End of year balance = RM 20,000 (1 ) RM 20,800
100
With bank accounts the original deposit is called the principle
while the percentage markup is called the interest rate.
Percentages (cont…)
Marking Down
Used to calculate discounts.
If the percentages decrease is r % then
r
final value original value (1 )
100
r
where (1 ) is called the scale factor for an r %
100
decrease.
Percentages (cont…)
Marking Down: Applications
The normal retail price of a product sold in a shop is RM5, but
will be reduced by 10% for cash purchase.
a) Calculate how much the 10% discount given on the retail
price?
b) What price does the consumer pay for cash?
10
Discount = RM 5 RM 0.50
100
10
Cash price paid = RM 5 (1 ) RM 4.50
100
Percentages (cont…)
Marking Down: Applications
M a n
M a n
(a ) a
m n mn
(ab) a b
m m m
a 1
0
a m 1
m
m a
n
a a m n
Power and Root (cont…) CAUTION!
Rule applying to powers: a m a n a m n
Rule 1:Product rule
mn
a a a
m n
Example:
3
2
2 2
3 2
Power and Root (cont…)
Rule applying to powers:
Rule 7:Negative exponent rule
m 1
a m
a
A power of some number with a negative (integer) exponent is
defined as negative exponent is 1 divided by the base raised to
the positive exponent:
Example:
a0 1 a–1 = a0–1
a-m = a0-m = m = = a0/a1
a (a·a·····a) m times
= 1/a
Power and Root (cont…)
Rule applying to powers:
Example:
51 = 5
Power and Root (cont…)
Properties of nth roots
n
a a
n
ab a b
n n n
n
b b
m n
a mn
a
n
a a if n is odd
n n
a a if n is even
n
Power and Root (cont…)
Properties of nth roots
Example: 3 n
ab n a n b
32 8.4
3
8 4
3 3
2 4 3
Power and Root (cont…)
Properties of nth roots
Rule 2 : Quotient rule
n
a a
n
n
b b
Example: 2
81 81
2 2
100 100
9 2
92 9
10 2
102 10
Power and Root (cont…)
Properties of nth roots
th
Rule 3 : m root of an n rootth (a ) a
m n mn
1 1 1
a (a ) a
mn
m n mn m n
a
m n
a mn a
Example:
2 2
81 4 81
3 3
Power and Root (cont…)
3
5 3
125 5
3 3
5
3
125 5
3
n
a a if n is odd
n
if x 5 also, if x 5
x 25
2
x 25
2
x?
Power and Root (cont…)
We have seen that :
5 2
25 5 5
2
25 5
so 5 5, 5 5
So the logarithm is 3
log2(8) = 3
•"the logarithm of 8 with base 2 is 3"
•or "log base 2 of 8 is 3"
•or "the base-2 log of 8 is 3"
Logarithms tell you what the exponent is!
So this:
is also this:
51 5 log 5 5 1
4 1
3 0
log 1 0
3
4
x 8
56
Logarithms
General rules for the use of logarithms
i. The general expression of a logarithms
If Y = ax loga Y = loga ax
loga Y = x loga a
In general: If ax = Y,
loga Y = x then logaY = x.
CAUTION!
M log a M log a M
log a log a M log a N
N log a N log a N
log a M N log a M log a N
Logarithms (cont…) Y a x
........log a Y x
c.The logarithm of a power: Y a log a Y
log Y p p log Y
a
and raise both sides to the p power:
a
p
log 10 100 2 log 10 100
2
Y a
p log a Y
a
2 log 10 ( 10 )2 p log a Y
Yp
2( 2 ) log 10 10
2( 2 ) log both sides
4
log a Y p log a a p loga Y p log a Y
CAUTION! log a 3 x 2 log a 3 2 log a x
log a 3 x 2 2 log a 3 x
3x
log a 3 x 2
x 2 log a 3 log a 3 x 2 log a 2 log a 3 x log a 3 2
3
Logarithms (cont…)
d. The change of base in a logarithm:
log c b log a b log c a
log10 20 log5 20 log10 5
Changing the base of logarithm:
Example:
if a > b, then, provided c > 0 If 7 > 3, c = 2
(a + c) > (b + c) (7 + 2) > (3 + 2)
(a – c) > (b – c) (7 – 2) > (3 – 2)
ac > bc 7X2>3X2
a b 7 3
c c 2 2
Inequalities (cont…)
ii. Any increase in an equality may be moved from one
side to the other provided that its sign is changed.
Example:
if a – c > b 53 1
a>b+c
5 1 3
iii. If the sides of an inequality are interchanged then the
sign must also be changed.
Example:
if a>b
5 1 switched sides and
turned the ``>'' into a
then b < a 1 5 ``<''
Inequalities (cont…)
iv. If both sides of an inequality are multiplied or divided
by the same negative quantity then the sign of the
inequality must be reversed.
Example:
if a > b , and p < 0
then pa < pb
5 2, p 1
and a b 5 2, p 1
5
2
p p 5(1) 2(1) 1 1
5 2 5 2
Inequalities (cont…)
Example:
If a b
If
ab
4 2 25
c d then
then 5 3
1 1
5 3 1 1
c d 2 5
4 2 a b
a b
Question
1 1
1.) Factor x 2
x 2
1
x
x x2
2.) Simplify
2 x 1 2
x
3 4 3 0.6 5
3.) Evaluate: log 5 8 log 2 4 ln ( e log10 5 )
5
y = mx + c
Linear and Simultaneous Equations (cont…)
Linear equations:
In graphing a function such as f(x),
m = -4 m = +3
m = -1/4
x
m = - 4 means strong negative relationship between x
and y and when x increases by 1, y decreases by 4.
m = 3 means weak positive relationship between x and y
and when x increases75 by 1, y increases by 3.
Linear and Simultaneous Equations (cont…)
Linear equations:
A negatively slope moves down.
x
Linear and Simultaneous Equations (cont…)
Linear equations:
y y intercept
x intercept
x
The y intercept is the point where the graph
crosses the y axis; it occurs when x = 0.
The x intercept is the point where the line
intersects the x axis; its occurs when y = 0.
Linear and Simultaneous Equations (cont…)
To plot the graph:- plot two or preferably, three points.
Example: Y
Sketch the line y = 100 – 2x
100 (0, 100)
when x = 0, y = 100
y = 0, x = 50
y
The slope of the line (m) (50, 0)
x
100 0 x
2 50
0 50
Linear and Simultaneous Equations (cont…)
Example:
Find the equation of the line that passes through points (2, 3) and (-1, 4)
y 3 4 1
Method 1: m
x 2 (1) 3
y
For intercept on the y axis (0, c)
.11
(-1, 4) y c4 1 y mx c
- m
x 0 (1) 3 1 11
y x
3
1
.(2, 3) c4
3
3 3
3 y x 11
x 1 1 12 11
c 4
3 y x 11 0
-1 2
3 3 3
Example:
Find the equation of the line that passes through points (2, 3) and (-1, 4)
Method 2:
y y1 y2 y1 y 3 43
Formula:
x x1 x2 x1 x 2 1 2
Step 1: y 3 1
(2, 3) is (x1, y1)
(-1, 4) is (x2, y2) x 2 3
or vice versa
3 y 9 x 2
Step 2: substitutes x1, y1, x2, 3 y x 11
y2 into the formula.
3 y x 11 0
Linear and Simultaneous Equations (cont…)
Solution quadratic equations
i. By taking the square root
Example: (x - 2)2 = 9
x 2 9 x 2 3
x – 2 = +3 or x – 2 = – 3
x = 5 or x=–1
ii. By factoring
Example: 3x2 – 2x – 5 = 0 3x -5 -5x
(3x – 5)(x + 1) =0 × x 1 +3x
3x = 5 or x = – 1 3x2 – 5 -2x
x = 5/3 or x = – 1
Linear and Simultaneous Equations (cont…)
iii. By formula
If, ax2 + bx +c = 0
Then
b b 2 4ac
x
2a
5 7 5 7i
x Note : i 1
8 8
5 7 5 7
x i x i
8 8 8 8
Linear and Simultaneous Equations (cont…)
Graphing a quadratic function
The graph of quadratic function is an U-shaped or a parabola.
Either opens upward, U or opens downwards,∩.
y = ax2 + bx + c
Hints for sketching the graph:
Specify the values of a, b and c
i. If a < 0, the parabola opens down “∩”; if a > 0, the parabola
opens up “U”.
ii. Determine the y intercept, by substituting x = 0. thus, y = c.
iii. Determine the x intercept by solving the quadratics
function. When y = 0, ax2 + bx + c = 0
iv. Determine the vertex, b 4 ac b 2
x ,y
2a 4a
Determine the vertex (max. or min. point)
There are 2 ways: 1) differentiation. 2) formula.
y will be at max or min value when dy/dx = 0
y = ax2 + bx + c
dy b
2ax b 0 x
dx 2a
Substitute x = -b/2a into y = ax2 + bx + c
b b b2 b2
2
y a b c y a 2 c
2a 2a 4a 2a
b2 b2 b 2 2b 2 4a
y c y c
4a 2a 4a 4a 4a b 4ac b 2
x ,y
b 2 2b 2 4ac 4ac b 2 2a 4a
y y
4a 4a 4a 4a
Linear and Simultaneous Equations (cont…)
y = x2 + 6x – 7
Graphing a quadratic function y
Example: y = x2 + 6x – 7
x| | x| x
a = 1, b = 6, c = -7 0
-7 -3 1
i. a =1 > 0, parabola open up or “U”-
shape.
ii. When, x = 0, y = c = -7. (0,-7) -7 –
x
b b 2 4ac
iii.y = 0, x
2a
6 6 2 4(1)( 7) x -16 –
x 7 or 1 Minimum Point (-3,-16)
2(1)
i. Consistent
2x 3y 6 6x 9y 18
3y 6 - 2x 9y 18 - 6x
2 2
y 2- x y 2- x
3 3
Linear and Simultaneous Equations (cont…)
Simultaneous equations
Pairs of the linear equations may be:
Simultaneous equations
A system of simultaneous linear equation can be
solved by:-
i. Substitution method
ii. Elimination method
Linear and Simultaneous Equations (cont…)
Substitution method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]
I. Solve one of the equations for one variable in terms of the
other.
From [2]: b = 7m – 19
II. Substitute the value of that term in the other equation, in
[1], and solve for m.
8b – 3m = 7
8(7m – 19) = 7
56m – 152 – 3m = 7
53m = 159
m=3
Linear and Simultaneous Equations (cont…)
Substitution method
Example: 8b – 3m = 7 [1]
-b + 7m = 19 [2]
Tangent
at x = a y = f (x)
x
a
When a function given, y = f(x), is non-linear, we need the
idea of a tangent instead of slope/ gradient of the curve.
Tangent = a straight line which passes through a point on a
curve and which just touches the curve at this point.
In To calculate f ’ (a) exactly using graph is difficult
and inaccurate.
Apply differentiation
The Derivative and the Rules of Differentiation
(cont…) y
Tangent
at x = a y = f (x)
x
a’ a a’’
f ’(x) = 0
Example f(x) = 8
f ’(x) = 0
dTFC
If TFC c, then 0 where TFC is total fixed costs
dQ
Fixed cost don' t change when a change in output.
ii. The Linear Function Rule
f(x) = mx + k
When x is to the power of 1, the derivative of x is
1. Therefore, derivative of mx is the constant
slope m.
f ’(x) = m
Example
f(x) = 3x +2
f ’(x) = 3
iii. The Power Function Rule
f(x) = kxn where n is any nonzero real number
The derivative of a constant times a function is the constant
times the derivative of the function. That is,
f ’(x) = k.n.xn-1
Example: given f ( x ) 5x 2
, which is the case where k 5
and n 2 , we obtain
f ' ( x ) 25x 21 10 x
iv. The Rules for Sum and Differences
f(x) = g(x) ± h(x)
Example
dC d 3 d d d
f(x) = 12x5-4x4 Q 4Q
2
10Q 75
dQ dQ dQ dQ dQ
f ’(x) = (5)12x5-1- (4)4x4-1 dC
3Q 2 8Q 10
= 60x4-16x3 dQ
v. The Product Rule
f(x) = g(x). h(x)
Example y 5 x 3
2 4
dx
Substitute u 5 x 2
3
let y u and u 5 x 3
4 2
Then
dy
4u and
3 du
10 x
dy
dx
40 x 5 x 3
2 3
du dx
Question: 2x x 3 2 x 6 x
2
f ’ (a) > 0
0 a x 0 a x
Slope > 0 Slope < 0
Increasing function at x = a Decreasing function at x = a
The Derivative and the Rules of Differentiation
(cont…)
Application of derivatives
ii. Concavity and convexity
f ’’(a) > 0: f (x) is convex at x = a
y y
0 a x 0 a x
0 a x 0 a x
0 a x 0 a x
f ’ (a) = 0 f ’ (a) = 0
f ’’ (a) > 0 f ’’ (a) < 0
The Derivative and the Rules of Differentiation
(cont…)
Application of derivatives
iv. Inflection Point
f ’’ (a) = 0 or is undefined
Concavity change at x = a
Graph crosses it tangent line at x = a
y y
Inflection point at x = a
f ’ (a) = 0 f ’ (a) = 0
f ’’ (a) = 0 f ’’ (a) = 0
0 a x 0 a x
The Derivative and the Rules of Differentiation
(cont…)
Application of derivatives
y y
Inflection point at x = a
0 a x 0 a x
f ’ (a) < 0 f ’ (a) > 0
f ’’ (a) = 0 f ’’ (a) = 0
120
The Derivative & Rules of Differentiation (con’t)
Application of derivatives
Therefore to use the successive-derivative test (if f ’’ (a) = 0) :
If the first nonzero value of a higher-order derivative
(evaluated at critical point), is odd-numbered derivative
then the function is an inflection point.
Rule of integration:
To increase the power of x by 1, b+1
To divide the function by b+1, and
To add an arbitrary constant.
a b 1
ax dx b 1 x C
b
ax dx n 1 c
n
Example:
x)dx
2
(6 x
6 21 x11
x C
2 1 11
6 3 1 2
x x C
3 2
1 2
2x x C
3
2
Integration (cont…)
Example:
dy
If = 5x2 and y = 10 when x = 0, find y in terms of x.
dx
5 3
y 5 x dx x C
2
3
When x = 0, y = 10
5 3 C = 10
(0) C 10
3
5 3
Thus, y x 10
3
Question:
( 1 ) 2 x( x 1 )dx
2
5x 6 x
2
(2)Integrate 3
with respect to x
x
Marginal Function in Economics
Marginal analysis is the study of the rate of change of
economic quantities.
For example, an economist is not merely concerned with
the value of an economy’s gross domestic product (GDP)
at a given time but is equally concerned with the rate at
which it is growing or declining.
A manufacturer is not only interested in the total cost
corresponding to a certain level of production of a
commodity but also is interested in the rate of change of
the total cost with respect to the level of production.
Cost, Revenue and Profit Function
Cost Functions
Fixed (or set-up) costs
Costs associated with the purchase, rent or lease of
equipment and fixed overheads.
All those costs that need to be borne before the begin of
production. Thus, independent of the number of items to be
produced.
Variable costs
Costs associated with the supply of the raw materials and
overheads necessary to manufacture each product.
Special costs
Optional costs relating to storage, maintenance or
deterioration. The effects of this type of cost would only be
significant for large production.
Cost, Revenue and Profit Function (cont…)
Cost Functions
Total Cost = Total Fixed Cost + Total Variable Cost
TC = TFC + TVC or TC = FC + VC(Q)
Revenue Functions
The money received for selling the output of some
process. TR = P × Q
Profit Functions
The difference between the revenue and cost functions.
= TR – TC
Marginal Function in Economics (Cost Functions)
Total cost (TC) – the cost of producing a particular amount of
product.
Average cost (AC) – obtained by dividing the total production
cost by the number of units produced (x).
TC
Marginal cost (MC) AC
x/Q
– the cost of producing one extra unit.
– marginal cost of a given output is the rate at which total cost
is changing at that output.
– differentiate the total cost function dTC
to get marginal cost function. MC
– this relationship hold for revenue function. dQ
Marginal Function in Economics (Revenue Functions)
TR P Q
Total revenue (TR) – the value of a firm’s sales. It is calculated
as the price of the good (P) multiplied by the quantity sold (x).
Average revenue (AR) – obtained by dividing TR
the total revenue by the the quantity sold (x). AR
Marginal revenue (MR)
x/Q
– the change in total revenue that results from a one unit
increase in the quantity sold.
– It is calculated as the change in total revenue divided by the
change in quantity sold.
dTR
– differentiate the total revenue function to
get marginal revenue function.
MR
dQ
Marginal Function in Economics (cont…)
Optimizing Economic Function
The business decision maker and economist are interest in
finding the maximum value of certain relationship for:-
Profit
Sales revenue
Welfare
Integrate Differentiate
MARGINAL
Past Year Question
Answer: i) Q=24 ii) TR’’ = - 4 <0 iii) Maximum value for TR= 1152