ISC 2023-24

Mathematics
Project-2

Name: Nandika
Agarwal
Class: 12

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 UID No.:
7629031

Topic:
Draw a rough sketch of Cost(C),
Average Cost (AC) and Marginal
Cost(MC). Give their
mathematical interpretation
using the concept of increasing -
decreasing functions and
maxima – minima.

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Content
Serial No. Particulars Page no.

1. Introduction, Aim, 4
Rationale

2. Mathematical 5-9
Presentation
3. Reflection 10

4. Conclusion 11

5. Bibliography 12

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Introduction
I have chosen a topic from the chapter Application of Calculus in Commerce
and Economics. This topic is really an interesting and I love to explore more
about functions thus I have chosen this topic. In this project we interpret
the mathematical concepts of increasing decreasing functions and maxima
minima with the cost, marginal cost and average cost functions.

Aim
The aim of this project is to represent the cost, average cost and Marginal
cost functions with the help of graph and then relate them to the
mathematical concepts of increasing decreasing functions and maxima-
minima.

Rationale
In this project we see how we can apply simple calculus to find solutions to
economic problems. It basically shows us the working of maxima minima
and increasing decreasing functions in commerce and Economics.

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Mathematical
Presentation
Cost Function (C):
The cost function represents the total
cost incurred in producing a certain
quantity of goods or services. It is
denoted by C(q), where q is the quantity
of output. Usually, the cost grows as the
quantity increases because it is an
increasing function. Cost function
includes both fixed cost and variable cost.

Average Cost (AC): The average cost is the cost per unit of output and is
given by

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AC(q)= C(q)/q
By dividing the total cost (C) by the
quantity produced, the average
cost is computed. The average cost
curve has a U-shaped pattern,
going down first and then up. At a
particular production level, it hits a
minimum before beginning to
increase once more. This is due to
the fact that fixed expenditures are
first distributed over a greater
quantity, causing the average cost
to drop. But after a while, the average cost goes up due to declining returns
to scale and rising variable expenses.

Marginal Cost (MC): Marginal cost is

the additional cost incurred by
producing one more unit of output and
is given by
MC(q)= dC(q)/dq
The additional cost required while
creating one more unit of output is
represented by the term "marginal cost."
At its minimum, the average cost curve and the marginal cost curve
intersect. This is due to the fact that creating an extra unit lowers the
average cost when the marginal cost is lower. However, creating an extra
unit raises the average cost when the marginal cost is higher than the
average cost

Mathematical
interpretation of cost
(C), Average Cost (AC)
and marginal Cost(MC)
using the concept of
increasing decreasing
functions.

1.Cost (C):

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If C'(q) >0
the cost function is increasing, suggesting that producing one more unit
increases the total cost.
If C'(q)<0, the cost function is decreasing, indicating that producing one
more unit decreases the total cost.
Since it is usually an increasing function, the cost rises in proportion to the
quantity. This can be expressed mathematically as C(x) > 0. The cost
function is growing, according to the aforementioned inequality, since its
derivative with respect to quantity (x) is positive.

2.Average Cost (AC):

If AC'(q)>0, the average
cost is increasing,
suggesting that the cost per
unit is rising as production
increases. If

AC' (q)<0, the average cost

is decreasing, indicating
that the cost per unit is decreasing with increased production.
From a mathematical perspective, we have: AC(q) is equal to C(q) / we must
examine the derivative of the average cost function to see if the average
cost is rising or falling. The average cost is rising if the derivative is
positive, and falling if it is negative. We can mathematically express this as:
When AC'(q) > 0, the average cost increases. Decreasing average cost is
represented by AC'(q) < 0.

3.Marginal Cost (MC):

If MC' (q)>0, the marginal cost is increasing, indicating that the cost of
producing an additional unit is rising.
If MC'(q)<0, the marginal cost is decreasing, suggesting that the cost of
producing an additional unit is decreasing.
The second derivative of the cost function must be examined in order to
ascertain whether the marginal cost is rising or falling. The marginal cost is
rising if the second derivative is positive, and falling if it is negative. We can
mathematically express this as: MC'(q) < 0 indicates a declining marginal
cost, MC'(q) > 0 indicates an increasing marginal cost.

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 In conclusion, the following is the mathematical meaning for Cost (C),
Average Cost (AC), and Marginal Cost (MC) utilizing the idea of growing
and decreasing functions’'(q) > 0 indicates an increase in cost; AC'(q) > 0
indicates an increase in average cost; AC'(q) < 0 indicates a decrease in
average cost. Increasing marginal cost is shown by MC'(q) > 0. Decreasing
marginal cost is indicated by MC'(q) < 0.

Mathematical Interpretation of Cost (C), Average Cost (AC) and

Marginal Cost(MC) using the concept Maxima and Minima.

1.Cost function C(q): To find a

minimum or maximum for the cost
function, we look for critical points
where C'(q)=0 or C'(q) is undefined.

A minimum implies a point where

the cost is minimized, and a
maximum implies a point where the
cost is maximized. It shows the
overall expense incurred to create a
specific quantity (q) of goods or
services. To determine the cost
function’s minimal point in the
setting of maxima and minima, we can examine its behavior. The optimal
production level, where costs are minimized, is represented by this
minimum point. We may use calculus to discover the cost function's minimal
point and identify the critical spots by Setting quantity (q) equal to zero
results in the derivative of the cost function being:0 is C'(q)The cost
function's minimum value, or at, can be found by solving this equation. The
manufacturing level where costs are minimized is represented by this
minimum point.

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2. Average Cost (AC): To find a
minimum or maximum for the
average cost function, we look
for critical points where
AC'(q)=0 or AC'(q) is undefined.
A minimum average cost implies
an optimal level of production.
By examining the average cost
function's behavior in relation to maxima and minima, we may determine
where its minimum is. The production level at which the average cost is
lowest is represented by this minimum point. Again using calculus, we can
determine the crucial points by setting the derivative of the average to
determine the minimum point of the average cost function.
The cost function where quantity (q) is equal to zero 0 for AC'(q)The value
of at at which the average cost function reaches its minimum can be found
by solving this equation. This lower bound indicates the output level at
which the average cost is as low as possible.

3.Marginal Cost (MC): To find a minimum or maximum for the marginal

cost function, we look for critical points where
MC'(q) =0 or MC'(q) is undefined. A minimum marginal cost implies an
optimal level of production where the cost of producing an additional unit is
minimized.This lowest point denotes the ideal production level at which
marginal costs are kept to a minimum. Again using mathematics, we can
determine the crucial points by setting the second derivative of the
marginal cost function to get the minimum point.
The quantity (q) and the cost function are equal to zero’s MC'' = 0. The
value of at at which the marginal cost function reaches its minimum can be
found by solving this equation. The level of output where the marginal cost
is minimized is represented by this minimum point. In conclusion, we can
analyze the critical points of the cost function, average cost function, or
marginal cost function to determine the ideal level of production where the
cost is minimized utilizing the notion of maxima and minima. The ideal
production levels where costs are kept to a minimum are represented by the
minimum points.

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Reflection
The aim of this project was to provide for a mathematical interpretation
with the help of increasing decreasing functions and maxima- minima. The
cost and revenue functions are used in commerce to find out maximum
output or minimum cost with the help of maxima minima. Similarly, we can
also find the trend in output and so on with the help of increasing and
decreasing functions.

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Conclusion
Thus the cost and revenue functions can be used more practically with the
help of increasing decreasing functions and maxima minima. We can use
these concepts to solve real life problems. This project also gives us a
glimpse of how we can use calculus in economics and commerce and make
calculations easier.

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Bibliography
 https://www.scribd.com
 https://www.coursehero.com
 https://study.com

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