Math 1526 Formulas:

Review Supplement

Business Differential Calculus

Cost = Variable Cost + Fixed Cost Variable cost is the cost per item produced. For example if you are buying pencil sharpeners at $5 a piece then your variable cost would be 5x where x represents the number of pencil sharpeners you produce. Fixed cost is the cost that a business encounters no matter how much it produces. For example: rent, phone bills, order fees, shipping and handling, etc. Revenue = price * quantity or R=p*q Revenue is the amount of money taken in regardless of cost. Remember that either price or quantity could be a function instead of a number. For example: p=3q+23. Profit = Revenue - Cost or P=R-C Profit is the amount of money you make after all of your expenses have been met. Negative profit means that you are operating in the red (losing money).

More Business Terms:

Demand: What demand tells you is what price people will pay in order to buy exactly q items.. Remember that demand gives you the price as a function of quantity. ex. D(q) = -0.401q+145 OR Quantity as a function of price. ex: D(p) = -33p + 600. In either case Demand will always have a negative slope. Supply: Supply tells you the price at which the supplier is willing to supply exactly q items. Again, this is different from what you may have thought. Supply also gives you the price as a function of quantity. ex. S(q) = 0.418q + 8.33 Supply will always have a positive slope. Break-Even Point: This is the point at which Revenue = Cost (or Profit = 0). At this point a business is neither making nor losing money. Equilibrium Point: This is the point at which Supply = Demand. At this point there is neither a surplus nor a shortage of items so that the market is in equilibrium. Marginal Cost: This tells you the approximate change in cost when one more item is produced. It is the derivative of the cost function. Marginal Revenue: This tells you the approximate change in revenue when one more item is produced. It is the derivative of the revenue function. Marginal Profit: This tells you the approximate change in profit when one more item is produced. It is the derivative of the profit function.

Modeling:
A mathematical model is a specification of a verbal definition of a function and its variables (including units), a symbol definition (algebraic formula) for the function (including the domain), and the assumptions being made, that is used to represent a real-world problem or situation mathematically. The verbal definition tells you in words what the model means. You must include units. The symbol definition is the equation or the function that best approximates the data. In this course we will usually find the symbol definition using Excel. The assumptions tell you where your model may diverge from reality a bit. This is where you acknowledge that your model is an approximation and state what makes is so. The 2 assumptions that are almost always made are certainty and divisibility. Certainty means that the relationship is exact. It means that no matter what the equation that you came up with will always work. The only factors influencing the result that you are trying to predict are the factors that you included in your model. -> For example, if you are trying to compare attendance at a football game to the win-loss record of the team, certainty means that the win-loss record is the only factor influencing attendance. Other factor, such as weather, local economy, other events in the area, etc. are assumed to have no effect. Divisibility means that you can have any fractional amount of either variable. -> In the previous example, divisibility means that we can have any fraction of a win-loss record and any fraction of people in attendance.

Choosing model type:

x y 1st diff: 2nd diff: 1 5 6 -2 2 11 4 2 4 15 4 21 6 -3 5 24 3 10 30 15 40

linear: x values evenly spaced; 1st diff same or close; general form is y = f(x) = ax + b quadratic: x values evenly spaced, 2nd diff same or close; always concave up or concave down, not both; 2 general form is y = f (x) = ax + bx + c exponential: x values evenly spaced, equal or very close ratio y2/y1 same; always concave up or concave down (not both); always increasing or decreasing (not both); has a natural upper or lower limit (not both); general form is y = f (x) = aebx cubic: change concavity exactly once (i.e. one point of inflection); general form is y = f(x) = ax 3 + bx 2 + cx + d ; has no upper or lower limit quartic: change concavity exactly twice (i.e. two points of inflection); general form is y = f(x) = ax 4 + bx 3 + cx 2 + dx + e logistic: changes concavity exactly once (i.e. one point of inflection); always increasing or decreasing (not L both); has a natural upper and lower limit; general form is y = f(x) = 1+ Ae-Bx

where L is the upper limit, A and B are constants, and 0 is the lower limit.