MAXIMA AND

MINIMA
DIFFERENTIATION
 Stationary Points
Stationary points are the solution of the equation
f´ (x) = 0.
Example1: Find the stationary points of the
function f (x) = x2 – 4x +5.
Solution: Here f´ (x) = 2x – 4 Put f´ (x) = 0 i.e.,
2x – 4 = 0, solve this equation we get x = 2.
So 2 is the stationary point.
 MAXIMA AND MINIMA
 Step1. Solve the equation f ´ (x) = 0 to find the
stationary points, suppose you got x = a.
 Step 2. Find f ´´ (x).
If f ´´(a) > 0 then the function has a minimum at x =
a. And minimum value will be f (a).
If f ´´(a) < 0 then the function has a maximum at
x = a. And minimum value will be f (a).
 If f ´´(a) = 0 then the point cannot be classified using
the available information.
 Example
 Find the maxima or minima of the function
f (x) = x2 – 4x +5.
Solution:
Step 1. The stationary point of this function is x = 2.

Step 2. Finding f ´´(x) = 2.

Now f ´´(2) > 0, thus at x =2 we got minima.
Hence minimum value of this function is,
f (2) = (2)2 – 4 (2) + 5 = 1
 Example (Application)
A firm’s short-run production function is given by
Q = 6L2 - 0.2 L3 where L denotes the number of
workers.
(a) Find the size of the workforce that maximizes
output.
(b) Find the size of the workforce that maximizes
the average product of labor. Calculate MPL and
APL at this value of L. What do you observe?
 Solution
(a) In the first part of this example we want to
find the value of L which maximizes
Q = 6L2-0.2L3
Step 1 Finding the stationary point
d Q = 12L - 0.6 L2
dL
Putting d Q = 0 i.e., 12L - 0.6 L2 = 0
dL
 Solution
12L - 0.6 L2 = 0
 L (12-0.6L) = 0
It follows that either L = 0 or 12 - 0.6 L = 0 that is, the
equation has solutions L = 0 and L = 12/0.6 = 20.
Step 2. Finding d2Q = 12 - 1.2 L
dL2
When L = 0, d2Q = 12 - 1.2 L = 12 > 0
dL 2
which confirms that at L = 0 we got minimum.
 Solution
The corresponding (minimum) output is given by
putting L = 0 in the given equation as,
Q = 6(0) - 0.2 (0) = 0 as expected.
Now at L = 20 we have,
d2Q =12 - 1.2 L
dL2
= 12 – 1.2 (20)
= - 12 < 0
which confirms that at L = 20 there is a maximum.
 Solution
The firm should therefore employ 20 workers to achieve a
maximum output i.e.,
Q = 6 (20) - 0.2 (20) = 800

(b) In the second part of this example we want to find the

value of L which maximizes the average product of labor.
The average product of labor is,
APL = Q/L = 6L2- 0.2 L3
APL= 6L2- 0.2 L3 = 6L- 0.2 L2
L
 Solution
Step 1. Find the stationary point i.e., putting
d APL = 0
dL

 6 - 0.4 L = 0
 L = 6/0.4 = 15.
Step 2. d2 APL= -0.4 < 0
dL
Which shows that it is a maximum. The labor
productivity is therefore greatest when the firm employs
15 workers.
 Solution
In fact, the corresponding average labor
productivity, APL, is
6(15) - 0.2 (15) = 45
In other words, the largest number of goods
produced per worker is 45. Finally, we are invited to
calculate the value of MPL at this point. To find an
expression for MPL we need to differentiate Q with
respect to L to get
MPL = 12L-0.6L2
When L = 15, MPL = 12(15) - 0.6 (15) = 45
 Example 2
The demand equation of a good is P + Q = 30
and the total cost function is
TC = ½ Q + 6Q + 7
(a) Find the level of output that maximizes total
revenue.
(b) Find the level of output that maximizes
profit. Calculate MR and MC at this value of
Q.
 Solution
(a) The total revenue is defined by TR = PQ We
seek the value of Q which maximizes TR, so
we express TR in terms of the variable Q
only. The demand equation
P + Q = 30 can be rearranged to get
P = 30 – Q Hence
TR = (30-Q) Q = 30 Q - Q2
 Solution
Step 1. At a stationary point
d (TR) = 0
dQ
 30 - 2Q = 0
which has solution Q = 30/2 = 15.
Step 2. To classify this point we differentiate a
second time to get d2 (TR) = -2
dQ2
 Solution
This is negative, so TR has a maximum at
Q = 15.
(b) In the second part we want to find the value
of Q which maximizes profit.
The profit function is defined by
 = TR – TC from part (a) TR = 30Q - Q2
We are given the total cost function,
 Solution
TC = 1/2 Q2 + 6Q + 7 Hence
=(30Q – Q2) –(1/2Q2 + 6Q + 7)
= 30Q – Q2 – 1/2Q2 – 6Q – 7
= – 3/2 Q2+24Q – 7
Step1. At a stationary point
d  = 0 so, -3Q + 24 = 0
dQ
which has solution Q = 24/3 = 8.
 Solution
To classify this point we differentiate a second
time to get
d2 = - 3
dQ2
At Q = 8

At Q =8, d2 = - 3 <0

dQ2
 Solution
 In fact, the corresponding maximum profit is
 = -3/2 (8)2 + 24 (8) – 7 = 89.
Finally, we calculate the marginal revenue and marginal
cost at this particular value of Q. To find expressions for
MR and MC we need only differentiate TR and TC,
respectively. If
TR=30Q-Q2 then d (TR) = MR= 30 - 2Q
dQ
So when Q = 8, MR = 30- 2(8) = 14
 Solution
If TC = 1/2Q2 + 6Q + 7 then
d (TC) = MC=Q+6
dQ
So when Q = 8, MC = 8 + 6 = 14.
 LINEAR PROGRAMMING
Graphical solution of linear programming
problems
Note: Consider an equation y = x If a point P (x, y) lies
above the line then the y coordinate is greater than the x
coordinate, so that y > x Similarly, if a point Q lies below
the line then the y coordinate is less than the x coordinate,
so that y < x if a point P lies above the line. Of course,
the coordinates of a point P which actually lies on the line
satisfy y = x Hence we see that the inequality y =x holds
for any point that lies on or above the line y=x.
 Example 1
Sketch the region 2x + y < 4.
Solution: We first sketch the line
2x + y = 4 When x = 0 we get y=4
When y = 0 we get 2x = 4 and so x = 4/2 = 2.The line
passes through (0, 4) and (2, 0) and is shown in
Figure.
Figure
 Example 1
For a test point let us take (0, 0),
2x + y < 4.
 2(0) + 0 < 4
0<4
The statement is true thus the feasible region is towards
origin i.e., below the line and is shown in figure.
 Example 2
Sketch the feasible region
x + 2y  12
–x+y3
x0
y0
 Solution
In this problem the easiest inequalities to handle
are the last two. These merely indicate that x and
y
are non-negative and so we need only consider
points in the top right-hand quadrant of the
plane,
as shown in Figure.
 Solution
In this problem For the inequality
x + 2y  12
we need to sketch the line x + 2y = 12
When x = 0 we get 2y = 12 and so y = 12/2 =6.
When y = 0 we get x = 12 The line passes
through
(0, 6) and (12, 0).
 SOLUTION
For a test point let us take (0, 0), we have
x + 2y  12
 0 + 2 (0)  12
Which is a true statement. Hence its feasible
region is towards origin.
 Solution
For the inequality – x + y  3 we need to sketch
the line x + y = 3 When x = 0 we get y = 3 When
y = 0 we get -x = 3 and so x = 3/(-1) = -3. The
line passes through the points (0, 3) and (-3, 0).
Test a point (0, 0) we have,
-0+03
Which is again a true statement
SOLUTION
Figure
 EXAMPLE 3
Solve the linear programming problem:

Maximize : 5x + 3y (Objective function)

Subject to the constraints
2x + 4 y  8
x0
y0
 SOLUTION
Step1: The non-negativity constraints x = 0 and y = 0
indicate that the region is bounded by the coordinate axes
in the positive quadrant. The line 2x+4y=8 passes through
(0, 2) and (4, 0). Also, at the test point (0, 0) the
Inequality 2x+4y=8reads0=8which is true. We are
therefore interested in the region below the line, since this
region contains the test point, (0, 0).
 SOLUTION
The feasible region is sketched in Figure.
 SOLUTION
Step 2: The feasible region is a triangle with three
corners, (0, 0), (0, 2) and (4, 0).

Step 3:

The maximum value of the objective function is 20,

which occurs when x = 4 and y = 0.
 APPLICATION OF LINEAR
PROGRAMMING (EXAMPLE)
An insurance company employs full- and part-time staff,
who work 40 and 20 hours per week respectively. Full
time staff are paid $800 per week and part-time staff $320.
In addition, it is company policy that the number of part
time staff should not exceed one-third of the number of
full-time staff. If the number of worker-hours per week
required to deal with the company’s work is 900, how
many workers of each type should be employed in order
to complete the workload at minimum cost?
 SOLUTION
If the company employs x full-time staff and y
part-time staff then the company would like to
choose x and y to minimize its weekly salary costs.
Also, since full- and part-time staff are paid $800
and $320 per week, respectively, the total wage bill
is then 800x + 320y
which is the objective function that needs to be
minimized.
 SOLUTION
Full- and part-time staff work 40 and 20 hours per week,
so the total number of worker hours available is 40x + 20y
It is required that this is at least 900 so we
obtain the constraint
40x + 20y ≥ 900
In general, if x denotes the number of full-time staff then
the number of part time staff, y, cannot exceed x/3: that
is, y ≤ x/3

In addition, we have the obvious non-negativity

constraints
x ≥ 0 and y ≥ 0
 EXAMPLE
The complete problem may now be stated:
Minimize: 800x + 320y
Subject to
40x + 20y ≥ 900
y ≤ x/3
x≥0
y≥0
 Assignment # 2
(1) The supply and demand equations of a good
are given by P = ½ QS+25 and P = Q + 50
respectively. The government decides to
impose a tax, t, per unit. Find the value of t
which maximizes the government’s total tax
revenue on the assumption that equilibrium
conditions prevail in the market.
 Assignment # 2
2. Solve the linear programming problem:
Maximize: 3x+5y
Subject to
x + 2y  10, 3x + y  10
x = 0, y = 0.