Chapter 5: Integration (11)

5.1. The Concept of Integration

In differential calculus, we have been concerned with finding the derivative of a function or how
to find the derivative of given a function. However, there are some problems in economics that
require us to come up with the original function given its rate of change. These problems are
common in the area of social welfare, distribution of income of a country etc. The technique of
finding out the original function based on its derivative is known as integration or antiderivative.
For introduction, let’s begin with illustrations.

Differentiation is the process of finding out the rates of changes. If y=f (x ) is a function of x, we can
dy
find the rate of change of Y with respect to x by differentiating the function and thereby obtaining
dx
¿ f ‘ ( x ).
Thus if the hypothetical total utility function is U =q2 , where q is the quantity consumed,
du
t h en =2 q is the rate of change of total utility as given by the differential coefficient of U with
dq
respect to q, and is the marginal utility function.
However, here an important question is, if the marginal utility function is 2q, what is the total utility
function? The problem is reversed here: because we are now given the marginal utility function and
we are to find the total utility function, or in other words we are given the change in quantities and
we have to calculate the total effects of the change. This reverse process involves summation of the
differences. Process of such calculations is called integration.
Given the function F(x) is referred to as an integral (or antiderivative) of the function f’(x), we need a
special notation to denote the required integration of f(x) with respect to x. thus,

∫ f ' ( x ) dx=f ( x ) + c, Where

 the sign∫ read as integration of … ¿

 f ' ( x ) is integrand
 dx diferentiation w . r . t ¿ x .

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 f ' ( x ) dx is diferential of the primitive function F ( x ) ( i . e , dF ( x )=f ' ( x ) dx )

 c is constant
NB. Integration or anti-derivative is the inverse of the operation of differentiation.
It is the process of determining the original function from its derivative.
There are two fundamental concepts of integral calculus
1. Indefinite integral
d ' '
If F ( x )=f ( x ) for all x , t h en t h e ∫ f (x)dx=F (x)+C is called indefinite integral of f’(x),
dx
since it has no definite numerical value. Because it is equal to F (x) + C, its value will in
general vary with the value of x (even if C is definitized). Thus, like a derivative, an
indefinite integral is itself a function of the variable x.
2. Definite integral
Let, f’(x) be a function and “a” and “b” be real numbers. The definite integral of f’(x)
over the interval from x=a ¿ x=b denoted by
b

∫ f ' ( x ) dx is the net change of an anti-derivative of f’(x) over the interval. Thus, if F(x) is
a

∫ f ' ( x ) dx= F (x)|a =F ( b )−F(a). Here, “a” is the

b
an anti-derivative of f’(x), then we have
a

lower limit of integration & “b” is the upper limit of integration.

Note that it is used to find definite integral and not anti-derivative of a function.
It has definite value, not a function of x.
Indefinite integral
n+1 n
( ) x d ( ) x
Let a function F x = +c , then F x =(n+1) ; because differential coefficient of
n+1 dx n+1
constant is zero.
n+1
x
Hence by the definition of an integral ∫ x dx=
n
+c
n+1
n +1
x
∴∫ xn dx=F ( x )= +c
n+1
Rule of indefinite integration
1. The constant rule: given constant K & C, ∫ K dx= Kx+C
Example:

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2. Constant multiple rule: for ∫ K f ( x ) dx=K ∫ f ( x)dx and

n+1
x
3. Simple power rule: for ∫ x dx=
n
+c , wheren ≠−1
n+1

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4. Sum or difference rule

5. Exponential rule
d x x
For the given exponential function f (x)=e x , e =e .Thus, ∫ e x dx=¿ e x + C . ¿
dx
d u
Moreover, we have seen that when U is a function of x, that is, u=f ( x ) , e , give t ^,
dx
d u ' u du
e =u ( x ) e ,t hus ,∫ e u ( x ) dx∨∫ e
u u ' u
dx =e +C .
dx dx
Example 1:
d
A. ∫ e x dx=¿ e x + C since dx e x =e x ¿
f (x) x
B. ∫ af (x) dx=¿ f ' (ax ) lna +C , thus ,∫ a x dx=¿ lna
a
+C ¿ ¿

k f (x ) kx
a a
C. ∫a k f (x)
dx=¿ '
k f ( x ) lna
+ C , thus ,∫ a dx=¿
kx
k lna
+C ¿ ¿

Example 2:

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6. Logarithmic function rule:

The general power rule of integration applies only whenn ≠−1 ; i.e.

Example :

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Solution:

5.2. Properties of integration

5.3. Techniques of Integration
Although we have seen some rules of integration, some functions are much more complex for such
functions it is difficult to know their integrals using the above rules. There are different techniques of
finding integrals of these functions. For this chapter, we will calculus 3 of them. I.e. Integration by
substitution, integration by parts and integration partial fraction.
1. Integration by substitution
One of the methods (techniques) which are used to find integrals if complex functions is substitution
method or change of variables. This method consists of transforming the integral and the variable of
integration to some standard form say ‘u’ & ‘du’ completely eliminating ‘X’ & ‘dx’.

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Example 3:

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Integration by part
The integral of U with respect to m is equal to Um less the integral of M with respect to u.
Although the previous rules of integration are important elements in the day-to-day mathematical
toolkits of economists when dealing with integration problems, there are problems, which require
us more. Some of these problems are solved using the concept of integration by parts.
We know that: from the product rule:

This is the formula which helps us solving integration problems by dividing them in to two parts.
In fact, that is why it is called integration by parts. Hence, in applying this method, you have to
divide the integrand in to two parts namely “U” and “dm”. Experience has thought us that the
success in using this method strongly depends up on our choice of the two parts. From
experience, we have learnt that there is more chance of arriving at the solution easily if you
choose the “U” part, a part that is easily differentiable and “dm” part, a part which should be
easily integrable. If you confront with a dilemma, give priority to the easily integrable part.
Anyway, let’s see examples for they make ideas simple and clearer. Other options
dm will be the most complicated portion of the integrable and U will be the remaining factors of
the integral or
U will be the portion of the integrand whose derivative is simpler function than itself, & dm will
be the remaining factors of the integrand.

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3. Find ∫ x ( x +1) dx .
1/ 2

1 /2
Let U =x , dm=(x +1) dx Then,
∫ Udm=UM −∫ Mdu
What is M?
3
M =∫ dm=∫ (x +1) dx= (x+ 1)
1 /2 3 /2
2
du
=1 ⇒ du=dx
dx

∫ Udm=∫ x (x+ 1)1 /2 dx=UM −∫ Mdu

( )
3
3( 3
∫ x ( x +1) dx=x
1/ 2
2
x +1 ) 2 −∫ ( x+1) dx, Since du=dx
2
3 /2

( ) ( )
3 5
3( 4 (
∫ x (x +1)1/ 2 dx=x 2
x +1 ) 2 −
15
x +1 ) 2 +C

Integration by partial fraction

This technique is used to find integrals of rational functions, which can be discomposed (reduced). The
point of partial fraction integration is that integration of a rational function can be reduced as follows by
determining the roots of the polynomial in the denominator.

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dx
∫ x−a =ℓn|x−a|+c
Example 1: use partial fraction method to integrate
xdx
∫ ( x−1 ) ( x−2 )
First we should decompose it as follows
x A B
= +
( x−1 )( x−2 ) x−1 x −2
à Now multiplying this equation by (x-1) (x-2) we get
x= A ( x−2 ) +B ( x−1 ) → Comparing the terms on the left and right
x= Ax−2 A +Bx−B
x=( A+B ) x−2 A−B
The coefficient of ‘x’ on the right is A+B & on the left 1 so

A+B=1
−2 A−B=0→
The constant on the left side is 0.

Solving the above equation simultaneously we get A = -1 & B=2

x −1 2
= +
( x−1 )( x−2 ) x−1 x −2
xdx −1 dx 2 dx
∫ ( x−1 ) ( x−2 ) =∫ ( x−1 ) +∫ x−2
x−2 2
−ℓn|x−1|+2 ℓn|x−2|+c=ℓn| | +c
x−1
Economic application

0.01x
1. Suppose the marginal revenue from the sale of a product is MR = 6 e . What is the
revenue from the sale of 100 units of the product?

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2. Given the marginal cost function Mc=32-0.004x and it costs $50 to produce the first unit
of output, find the total cost of producing 200 units of output.

5.4. The Definite Integral

Let f(x) be a function and “a” and “b” are real numbers. The definite integral of f(x) over the
interval from X =a ¿ X =b denoted by:

Example:
Evaluate the definite integrals of the following functions:

5.5. Properties of Definite Integrals

Here are the basic properties of definite integrals, which we often refer to in dealing with
analytical and empirical problems involving definite integrals and related issues. For functions of
f(x) & g(x), and constants of a, b, c, and k we have the following properties.

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Example: Evaluate the definite integral of the following problems

Area under a Curve

One of the most important applications of definite integral is the calculation of area under a
curve.

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Let f (x) be a function that is continuous and non-negative for all X between “a” and “b” where
a<b, determine the area of the shaded region lying beneath the curve Y =f (x ) and above the X-
axis from X =a ¿ X =b. The area of the shaded region is calculated using the fundamental
theorem of calculus stated above. It is given by:

The area of a region between two curves

For any two functions f(x) and g(x), if Y = f (x) lies above Y = g (x) from x=a to x=b, the area of the
region between f(x) and g(x) from x=a to x=b is given by:

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Some economic applications of definite integrals

Consumer’s surplus: is the excess of money that the consumer is willing and able to pay for a
commodity over what he is actually paid. Let us take example. If price is Birr 3, the consumer is
willing to buy 5 units with Birr 25 but she is actually required to pay 3x5=Birr 15. The surplus of
the consumer is then = 25 – 15 = Birr 10 when the relationship between price and quantity
demanded is assumed to be discrete.

Using integral calculus assuming the relationship between price and quantity demanded is
continuous,

Area of the shaded region using the law of triangle is given as = (8-3) (5-0)X0.5

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1 2
P x =20+ X is thedemand function
20
1 2
P x =2+ X isthe supply finction
5000

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Now, it is easy to deal with the problem. Insert the values in the formulae so that you will come up
with the answers.

Distribution of income
While no country has been able to achieve equal distribution of income, a desirable goal in the eyes
of many political scientists is to reduce the in-qualities that exist. The table and corresponding graph
indicate how incomes in the United States were distributed in 1973 (source: Paul Samuelson,
th
Economics (10 ED.), New York: McGraw-Hill, page 976). The left column of the table assumes
that people have been \ ranked according to income.

Note in the table that the lowest paid 40% of the population receives only 18% of the income,
whereas if income were absolutely equally distributed, they would get 40% of the income. In
fact, if income were equally distributed, the data would lie along the 45-degree line. In actuality,
the data always lie along a curve below the line, a curve called a Lorenz curve. The further this
curve moves from the 45 degree line, the more unequal the income distribution.

As a measure of inequality, we use the so-called Gini coefficient of inequality “g” defined by:

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The numerator is a definite integral whose value is between 0 and ½; the denominator has a
value of exactly ½. Thus, g is between 0 (absolute equality) and 1 (absolute inequality). If y =
f(x) is the equation of the Lorenz curve, the formula for g takes the simple form:

Continuous Money Streams

Written in this from, the equation tells us the present value P of F dollars that will be received t
years from now, assuming that interest is compounded continuously at the annual rate r.
Example
Bethel knows that she will need to replace her car in 3 year. How much would she have to put in
the bank today at 8% interest compounded continually in order to have the $12,000 she expects
to need 3 years from now?

Continuous Money Streams within a Period

There are many situations in business and industry where it is useful to think of money as
flowing continuously into an account. For example, the ABC Company plans to buy an
expensive machine which it estimates will increase the company’s net income by $10,000 per

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year. But this income won’t come at the end of each year; it will come in dribbles throughout the
year. As a model for what will happen, it is convenient to think of the machine as if it will
produce income continuously. Our next example raises an important question for the company to
answer.

Let us modify the problem in the above example in another way by assuming that the machine
will last indefinitely. More generally, let us ask for the present value PV of a perpetual (meaning
infinitely long) income stream which produces income at an annual rate R(t), assuming that
interest is at an annual rate r compounded continuously. The result in this case is:

Here, we face a new kind of integral, one with an infinite limit. Such integrals are called
improper integrals and must be given a clear definition. We do this by defining

This point leads us to the concept known as improper integrals, which we will handle right now!
Improper Integrals
An improper integral is an integral which is bounded by either (−∞ , ∞ ) ,(∞, c) or (c, ∞−) where c
is a constant. This limit of integration is infinite. To find out the value of this integral use the
formula:

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Note: In each three cases of above, if limit exists, then the improper integral is said to converge;
otherwise, the improper integral diverges.
Examples

Since limit does not exist, the integral diverges.

3. Now it is time for you to check whether you have grasped the concept or not. To this end, why
don’t you handle this problem? Use

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