CHAP 1

I. How to compute overall percentage changes

 multiply all the scale factors together on each corresponding individual period
EX:
If share prices rise by 32% during the first half of the year and rise by a further 10%
during the second half, the overall percentage change during the year (1 + 32/100 ) ×
(1 + 10/100 ) = 1.32 × 1.1 = 1.452
If the price of a good rises by 5% in a year but then is reduced by 30% in a sale, the
overall percentage change in the price is
(1 + 5/100) x (1 -30/100) = 0.735. => the price is reduced by 26.5%
II. Invests P0 $ into a bank with the annual interest rate of r%. How much will receive?

 After 1 year (simple interest)

P1 = P0 (1 + r%)
 after n years: receives (compound interest)
Pn = P0 (1 + r%)n .
 if the interest is compounded m times per year then, after n years,
Pn = Po (1 + r%/m )m*n
 If the interest is compounded in a smaller and smaller time periods (m very large)
then the future value rises, however, after n years, they appear to be approaching a
fixed number compounded continuously
Pn = Poer%*n
III. Applications
 Savings: invest regularly an equal amount of money into a bank account. (sinking
fund)
⇒ If each payment / beginning of the periods, then the accumulated amount
( 1+ r )n−1
Vn = a(1 + r) usually
r
⇒ If each payment / end of the periods where a is payment
( 1+ r )n−1
Vn = a
r
 Loans: pay back by a series of repayments (an annuity) made at equal time intervals.
(the opposite of a sinking fund)
⇒ each repayment / end of the periods, then the actual value of a debt, after n
repayments made, is
1−( 1+r )−n
V0 = a usually
r

⇒ each repayment / beginning of the periods

1−( 1+ r )−n
V0 = a( 1+r )
r

 NPV worthwhile if NPV positive.

NPV = the present value of revenue - the present value of the costs.
 IRR = the annual rate which, when applied to the initial outlay, yields the same return
as the project after the same number of years. worthwhile if IRR > market rate.
Pn
IRR = n
√ Po
-1

often if a decision is made between 2 projects, the one with higher NPV or IRR is the
better choice.
CHAP 2
1. Domain: D = { x |f (x) is well defined}
2. Range: R = {f (x) |x ∈ D}
3. (f (x))2 = x. function
4. Properties of function
Monotone: A function f is called increasing (resp. decreasing) on I ⊂ D
if, for all x1, x2 ∈ I, x1 < x2 implies f (x1) < f (x2) (resp)
Symmetry: A function is called symmetric about the y−axis if
f (−x) = f (x).
Periodic functions: A function is called periodic with period of T > 0 if
f (x + T) = f (x) for all x.
For example, trigonometric functions such as sine, cosine, tangent,
cotangent are periodic
5. Special function
Constant functions f (x) = c
Polynomial functions

Where n is non-negative integer and a0, a1, . . . , an are constants

Case-defined functions
6. Limits
lim f ( x ) exists
x→ a

 x→lim
+¿
a f (x)¿
¿ and lim ¿ exist and are equal.
−¿
x→ a f (x)¿

In that case lim f (x) = lim ¿ lim ¿

+¿ −¿
x→ a x→ a f (x)=¿ ¿ x→ a f (x)¿

 f is said to be continuous at a if
lim f ( x ) = f(a)
x→ a

 f is continuous on an interval [a, b) if it is continuous at every point in the

interval and x→lim +¿

a f (x)¿
¿ = f (a).

 f is continuous on an interval (a, b] if it is continuous at every point in the

interval and x→ blim

−¿
f (x)=¿¿
¿ f (b).

 f is continuous on an interval [a, b] if it is continuous at every point in the

interval and x→lim +¿

a f (x)¿
¿ = f (a) and lim −¿
x→ b f (x)=¿¿
¿ = f (b).

CHAP 4 differentiation
1. Tangent problem. Find the slope of a tangent line at P(c, f (c)) on the curve C of
equation y = f (x).

f ( c+ h) – f (c )
MPQ = change in f / change in x =
h

The slope of the tangent line at P can be calculated as

MPQ = Qlim M pq = lim f (c +h) – f (c)

→P
h→ 0 h

2. Velocity problem. If an object is moving along a straight line according to an

equation s = f (t), where s is the displacement of the object from the origin at time
t, then the average velocity of the object moving in the time interval from time a to
time a + h is
displacement f ( a+h) – f (a)
Va = =
elapsed time h

If the movement in a shorter and shorter time interval, the average velocity
becomes the instantaneous velocity

f (a+ h) – f (a)
V(a) = lim
h→ 0 h

The speed of the movement is|velocity|.

3. DERIVATIVE!
f (a+ Δx) – f (a) Δf
f ' ( a )= lim ¿ lim
Δx →0 Δx Δx → 0 Δx
  If f’ > 0 on a certain interval then the curve of f rises from the left to the
right of the interval and thus the function is said to be increasing.
 If f’ < 0, the curve of f drops and the function is decreasing.
 The point at which x = 0 is called the turning point!
 function is not continuous at a point then it is not derivable at that point,
the graph at this point is broken into two pieces or has a hole.

 continuous functions that whose graph has a sharp corner are also not
derivable
 f’’(x). The point at which the function changes the concavity (lõm) is called
the point of
inflection.

4. Rate of change
 Example An efficiency study of the morning shift [from 8:00 a.m. til 12:00
noon] at a certain factory indicates that an average worker arriving on the
job at 8:00 a.m. will have produced Q(t) = −t 3 + 8t 2 + 15t units t hours
later. At what time is the worker performing most efficiently? and least
efficiently?

Step1: Rate of producing is Q’(t). Q’(t) =

Step2: Q’’(t) =  t =
Step3: Table of variation suppose [a,b], t= c
 t a c b
Q’’(t) Sketch to conclude min max
Q’(t)

5. Relative rate of change

 The relative rate of change of Q(x) = Q’(x) / Q(x)
 The percentage rate of change of Q(x) = 100 (Q’(x) / Q(x)).
6. Elasticity
q'
X 100
percentage rate of change∈demand q p X q'
E(p) = percentage rate of change ∈price = p ' = q
X 100
p

 Demand is elastic if |E| > 1 ⇒ the percentage decrease in demand > the
percentage increase in price that demand is relatively sensitive to changes
in price
 inelastic if |E| < 1 ⇒ demand is relatively insensitive to changes in price
 unit elastic if |E| = 1
 The relationship between revenue and price:
 revenue curve is rising where demand is inelastic
 falling where demand is elastic
 has a horizontal tangent line where the demand is of unit elasticity

7. Marginal functions
  If q0 units are currently being produced, the marginal cost of producing q0:
C(q 0+ Δq )– C( q 0)
C ' ( q 0 )= lim
Δq→ 0 Δq
 the average cost of a unit of product if q0 units are produced
C( q 0+ Δq ) – C(q 0)
AC(q0) =
Δq
 as ∆q = 1
C’(q0) ≈ C(q0 + 1) − C(q0)
 C(q0 + 1) − C(q0): the cost of increasing the level of production by one
unit, from q0 to q0 + 1
 C’(q0) ≈ the additional cost incurred when the level of production is
increased by one unit, from q0 to q0 + 1

 change in total cost ≈ marginal cost × change in output

C(q0 + ∆q) − C(q0) ≈ C 0 (q0) × ∆q

8. Two general principles of marginal analysis.

 [Maximum profit criterion] The profit P(q) = R(q) − C(q) is maximized when
R’(q) = C’(q) and R’’(q) < C’’(q)
R’(q) marginal revenue
C’(q) marginal cost
R’’(q) the rate of change of marginal revenue
C’’(q) the rate of change of marginal cost

 [Minimal average cost] Average cost is minimized

AC(q) = C’(q)

AC(q) average cost

 C’(q) marginal cost
Revisit
1. determine how many products you need to sell to break even
Break-even Point = Fixed Costs / (Sales Price Per Unit – Variable Costs Per Unit)