Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

CHAPTER 03: FUNCTIONS OF SEVERAL VARIABLES AND

PARTIAL DERIVATIVES

Learning Objectives

 Define the nature of functions of several variables.

 Provide knowledge of partial derivatives.
 Describe optimization of functions of several variables.
 How to apply these theories in Business and Economics.

Learning Outcomes

At the end of the chapter students will be able to

 Define and evaluate two variable functions.

 Find partial derivatives of a function.
 Find marginal functions of several variables & interpret the results.
 Optimize two-variable functions.

So far we discussed functions only with one variable. But there are situations where the
value of the function depends on more than one variable. In this chapter we are going to discuss
about functions of several variables and use of partial derivatives to analyse the nature of
functions with several variables.

3.1 FUNCTIONS OF SEVERAL VARIABLES

Consider the cost function C = x2 - 3x + 5000, the cost depends only on the variable x,
where x represents the number of items produced. When we are explaining the relationships
between variables, in many fields including business world, a dependent variable may depends
on more than one variable.
For example, suppose that a company produces two products, x units of one and y units
of the other. Then the cost function depends on both x and y and we might write,
C ( x, y )  4000  10x  5 y , where 4000 represents the fixed cost. Here the function C is the
joint-cost function of the company.
Similarly if the company produces three products the cost function might be of the form,
C (x, y, z) = 500 + x + e2y + 10.6z2, where x, y and z represent the number of units produced
by each of the three types.

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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

Examples:
(1) For f (x, y) = 5x +2 y2, find a) f (2, 3) b) f (2, 2) c) f (0, 0)

(2) It is estimated that if the manufacturer supplies x machines to the domestic market and y
x
machines to the foreign market, the machine will sell for 150  thousand rupees per
6
y
machine domestically and for 100  thousand rupees per machine abroad.
20
(a) What is the joint revenue function?
(b) What is the revenue if the manufacture supplies 84 machines to the domestic market
and 100 machines to the foreign market?
Exercises:
(1) For C (x , y) = 3500 + 4x2 +3y4. Find C (2, 1) and C (5, 2)
(2) A company makes two grades of paint, grade I and grade II. A litre of grade I costs Rs.155
to make while a litre of grade II costs Rs 208 to make, the weekly fixed cost is Rs. 180,000.
(a) Find the joint cost function C (x, y) for making x litters of grade I and y litters of grade II.
(b) What is the cost of making 200 litters of grade I and 140 litters of grade II?

(3) The ‘WJS’ company produce two types of toy products. The demand equations for the two
products are given below. The prices and quantities for product 1 and 2 are given by p1, p2,
q1 and q2 respectively.

q1  200  3 p1  p2

q2  150  p1  2 p2
(a) Express the joint revenue function for the two products in terms of p1 and p2.
(b) Find the joint revenue when the price for product 1 is Rs.20 per item and the price for
product 2 is Rs.30 per item.

3.2 PARTIAL DERIVATIVES

dy
For a function of one variable, y = f(x) the first derivative  f (x) . If it exists, it can
dx
be interpreted as an instantaneous rate of change of y with respect to x. The same idea can be
applied for a function of two or more variables. Let Z =f (x, y) is a function of two variables,
as in a single variable function the instantaneous rate of change of Z with respect to each
variable x and y (one at a time) can be found.

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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

When Z = f (x, y) is a function of two variables,

A derivative with respect to x, by treating y as a constant, is denoted by
Z f
or or fx
x x
A derivative with respect to y by treating x as a constant is denoted by
Z f
or or fy
y y
Derivatives of this type (if they exist) are called Partial derivatives.
A value of the partial derivative of Z = f(x, y) with respect to x at the point (a ,b) can be denoted

f Z
by any of the following forms, f x ( a ,b ) or
x
(a, b) or (a, b)
x

Similarly to denote the value of the partial derivative of z = f(x, y) with respect to y at point
f Z
(a, b) we use, f y ( a ,b ) or
y
(a,b) or (a,b)
y

f f
Example: If f(x, y) =3x2 +5x – 2xy +y 2 +4y , Find and
x y
Exercises:
f f
(1) If f (x, y) = 180x  50xy  y 3  60 y , find and .
x y

Z Z
(2) If Z = x3y3 –7x3y +3 xy2 + 5y, find (1,0) and (1,0)
x y

(3) If f (x, y) = 2 x 3  y 2  4 xy , find fx(1, 2) and fy(1, 2)

3.3 APPLICATIONS OF PARTIAL DERIVATIVES

Suppose a manufacture produces x units of product A and y units of product B, then the joint
C
cost function is given by C = f (x, y). Then is called the marginal cost with respect to x.
x
This is the rate of change of C with respect to x when y is held fixed.

Example: The weekly output of a certain plant is given by the function

Q( x, y )  1200x  500 y  x 2 y  x 3  y 2 units, Where x is the number of skilled workers and is
the number of unskilled workers employed at the plant. Currently the workforce consists of
30 skilled workers and 60 unskilled workers.
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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

𝜕𝑄
(i) Find the value of (30,60) and interpret it.
𝜕𝑦
𝜕𝑄
(ii) Find the value of (30,60) and interpret it.
𝜕𝑥

Exercises:
1 3
(1) A certain production function is given by f ( x, y)  28x 4 y 4 , when x units of labour and
y units of capital are used. Find the marginal productivity of labour when labour = 81 units
and capital = 256 units and interpret the results.

(2) A firm produces and sells x units of product A and y units of product B. Its revenue function
is given by R( x , y )  80x  100 y and its cost function is given by,

C( x , y )  x 2  1.5 y 2  xy  1500 . Find the marginal profits at (50, 25) and interpret the
result.
1 2
(3) The production of a certain country is given by Q( K , L )  90K 3 L 3 units, where K is the
capital expenditure in millions of rupees and L is the size of the labour force in thousands
of worker hours. Find the marginal product of capital QK and the marginal product of

labour QL when K  5,495 and L  4,587 interpret the result.

3.4 SECOND ORDER PARTIAL DERIVATIVES

For a function of two variables, Z = f(x, y), each of the first partial derivatives fx and fy
is also a function of two variables. This means that each of the functions fx and fy has two
partial derivatives provided that they exist. Let Z = f(x, y), then

  Z  2Z   Z  2Z
    f xx ,     f xy
x  x  x 2 y  x  yx
  Z  2Z   Z  2Z
    f yy ,     f yx
y  y  y 2 x  y  xy

Example: Let f be defined by f(x,y) = 5x + y2 - 3y+4x4y5. Find fxx, fxy, fyy and fyx

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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

3.5 OPTIMIZATION

The definitions of relative maxima and relative minima of the functions with two variables
are similar to that of functions of one variable.

Saddle point: The saddle point of a function of two variables is neither a minimum nor a
maximum and it is equivalent to a point of inflection for a function of one variable.
If f(x, y) has a critical point at (a, b) then at point (a, b) there can be a maximum,
minimum or saddle point. The reverse of this logic is also true, that is if there is a minimum,
maximum or saddle point at point (a, b) then the point (a, b) is a critical point of that function.

Figure 3.1

3.5.1 Critical Points of a Function with two Variables

Let f(x,y) = 4x - 14y + 2xy - x2 + 1.5y2
The requirements need to be satisfied for the critical points is fx = fy = 0 simultaneously.
fx = 4 +2y - 2x = 0 and fy = -14 +2x +3y = 0
Let 2y - 2x = -4 and 3y +2x = 14
Solution of the system of equations is, x = 4 and y = 2. The critical point is at (4, 2)

Exercises: Find the critical points of the following functions.

a) f(x, y) = 2x2 + y2 – 2xy + 5x – 3y + 1
b) f ( x, y )  x 3  y 3  6 xy
c) f ( x, y )  xy

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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

3.5.2 Second-Derivative Test (D-Test) for Function of Two variables

As in a function of one variable, here a second derivative test or D- test is used to identify
the critical points.
Suppose Z = f(x ,y) has continuous partial derivatives fxx , fyy , and fxy at all points (x, y) near
the critical point (x0, y0). Let D be the function defined by
D(x,y) = fxx (x,y) fyy(x,y) - [fxy(x,y)]2
Then,
a) If D(x0, y0) > 0 and fxx (x0, y0) < 0, f has a relative maximum at (x0, y0).
b) If D(x0, y0) > 0 and fxx (x0, y0) > 0, f has a relative minimum at (x0, y0).
c) If D(x0, y0) < 0 , f has neither a relative maximum nor a relative minimum at (x0, y0).
A saddle point is at (x0, y0).
d) If D(x0, y0) = 0 , no conclusion can be drawn.

Example:
Let f(x, y) = x3 + y3 – 3xy . Find the critical points and test the nature of the critical points with
using the second derivative test.

Exercises:
(1) Find the critical points of the function and determine whether the points are maximum,
minimum, neither minimum nor maximum or whether the test false.
(i) f(x, y) = 4 + (x + 3)2 + (y +5)2
(ii) f ( x , y )  xy
(iii) f(x, y) = x2 + 2y2 - 4x + 4y + 7

(2) Suppose p = f(L, K) = 1.08L2 – 0.03L3 + 1.68K2 – 0.08K3 is a production function for a
firm. Find the quantities of inputs, L and K, so as to maximize output p.

(3) The total weekly revenue (in rupees) that Acrosonic realizes in producing and selling its
1 3 1
two types of speaker systems is given by R( x , y )   x 2  y 2  xy  300x  240 y
4 8 4
where x denotes the number of type A units and y denotes the number of type B units
produced and sold each week. The total weekly cost is given by
C( x , y )  180x  140 y  5000. Determine how many type A units and type B units should
be produced and sold per week to maximize its profit.

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Chapter 03 Functions of Several Variables and Partial Derivatives Business Mathematics

(4) The joint revenue function of selling x number of type “A” computers and y number of
type “B” computers is given by 𝑅(𝑥, 𝑦) = −0.25𝑥 2 − 0.375𝑦 2 + 0.25𝑥𝑦 + 300𝑥 +
240𝑦 . The total cost function of the company is 𝐶(𝑥, 𝑦) = 180𝑥 + 140𝑦 + 5000 .

𝜕𝑅
i). Find the value of (250,350) and interpret it.
𝜕𝑥
ii). Find the profit function of the company.
iii). Find the number of computers that should to be produced from each type to
maximize the profit of the company

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