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256
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Решение
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Эйнштейна
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285
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К.А.,
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9
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4
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Кутумова Ж.Б. Использование мультифрактального анализа для классификации
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322
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Л.Е.
Уравнение
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325
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Б.Б.
Радиоқабылдағыш
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Радиоқабылдағыш қҧрылғының арналған мақсаты, қҧрылымы және әрекет ету
принципі................................................................................................................................................
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Исследование
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А. Қазақстан
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ХИМИЯ
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372
11
СЕКЦИЯ 1
ЕСТЕСТВЕННО-НАУЧНОЕ НАПРАВЛЕНИЕ
ПОДСЕКЦИЯ 1.1
МАТЕМАТИКА
УДК 517.6
PROJECT TITLE APPLICATIONS OF THE CONCEPT OF DERIVATIVE OF A
FUNCTION IN PRODUCTION ECONOMICS
Abdirasev Omirzak Koptileuuly
Student, Gumilyov Eurasian National University, Astana
Scientific teacher - Baimadieva Galiay Abilakimkyzy
Abstract
Originality. Organization of production within firms is the backbone of a market economy.
Increasing the efficiency of such organization constitutes an important objective of any
management effort. If the organization of production can be described in the mathematical
language, mathematics can be exploited to discover new ways of optimizing production. Thus, the
subject of this project is a highly actual in today‘s economy.
Project objectives. The objective of the project is to apply some of the properties of the
derivative of a function to find out results for production economics applicable in real life. The first
objective is to show how the derivative can be applied to determine the most technically efficient
level of production of a firm. The second objective is to apply some of the rules of differentiation to
finding the relationship between different cost functions of the firm.
Scientific novelty. Scientific novelty of the project lies in applying the well-known and
standard mathematical properties of derivatives of a function to explore novel results for production
economics.
Theoretical and applied value. The results found in the project have an important
theoretical value for the economic theory of a firm and a key applied value for finding most
technically efficient and least costly way of organizing the production within the firm.
Research methods. The method used in the project consists of building a simple general
mathematical model of the organization of production within a firm. Next, we analyze the functions
used in the model and exploit mathematical theory to find several interesting properties of these
functions. Then, we translate these properties back into economic language. Finally we present
examples of practical application of these properties for the efficient organization of the firm
production.
PRODUCTION FUNCTIONS
Consider a technology of production with one input only (e.g. hours of labor).
Mathematically, let us describe this technology with a function
)
( q
f
y
where q measures the quantity of input and y measures the quantity of output produced. For
example, if
,
75
)
10
(
,
5
)
1
(
f
f
it means that using this technology of production, 1 hour of labor can produce 5 units of output and
10 hours of labor can produce 75 units of output. In this example (and in general), the relationship f
does not have to be linear, because workers can specialize and produce more efficiently at a larger
scale.
Let us also assume that the function f has the following properties:
12
(1)
f is twice differentiable continuous;
(2)
f is increasing;
(3)
there exists some a such that for
,
0
a
q
f is convex and for q>a, f is concave.
From the economic point of view, property 1 means that both input and output is divisible
quantities and that at any level of production, small changes in the quantity of input imply small
changes in the quantity of output. Property 2 means that, naturally, increasing the quantity input
cannot decrease the output. Property 3 means that up to some level of input a, the technology of
production becomes more and more efficient (output increases more than proportionally when input
increases), and that beyond this level, the technology becomes less and less efficient as the scale of
production keeps increasing (output increases less than proportionally when input increases). This
latter assumption is plausible, because as the scale of production increases beyond some point, the
firm has to incur additional management costs.
For example, take first a small firm run by its owner. When he increases the number of
workers, they can start to specialize in producing different parts of the final product (think of an
assembly line) and this specialization implies that the production becomes more efficient. However,
if the owner keeps increasing the number of workers, at some stage, he will be unable to manage the
firm alone, and will have to hire one or several managers. This means that the cost of coordinating
the workers starts to increase, and therefore the technology of production becomes less efficient.
An example of such a function is given on Figure 1.
Figure 1. An example of a production function
1)
Using the concept of derivative of a function, we can rewrite the properties 2 and 3 in a very
simple and mathematically handy form as follows:
(2‘) f’(q)>0
for any q ;
(3‘) there exists some a≥0 such that: f”(q)>0 for 0≤q, f”(q)>0 for q>a.
The usefulness of this application of the concept of the second derivative in applied work can be
illustrated as follows. From Property 3, we can see that given that the second derivative of f changes
its sign before and after the level q = a, at this level the second derivative of f must be zero.
Suppose now that we have data, based on past production of the firm, on different levels of input
and the corresponding quantities of output produced. Using simple statistical techniques, we can
find a twice-differentiable continuous function (e.g. a third-order polynomial) that describes best
these data. For example, let this function be
f(q) = 5q
3
– q
2
+ 8q – 25
What is the level of production at which the efficiency of production is the highest? It is
difficult to answer this question by only looking at the data. However, using our method, is
sufficient to find at which q the second derivative f”(q) becomes zero:
f”(q) = 30q – 2 = 0 q = 15.
Q
y
f(q)
13
We have thus very easily found the most efficient level of production, using the concept of
the second derivative of a function.
In most economic models, the following class of two-parameter production functions is
used: y=kq
b
; here, k and b are positive constants. It is easy to see that, depending on the value of the
parameter b determines, the shape of the production function is either everywhere convex or
everywhere concave. In fact, let 01. Then,
f” = kb(b-1) < 0,
which means that for any q, the function f is concave. On the other hand, let b>1. Then,
f” = kb(b-1) >0,
which means that for any q, the function f is convex.
COST FUNCTIONS
If the prices of inputs are known, we can also describe the financial side of production, using a
cost function. Let us describe the total cost of producing the quantity of output y by C(y). Normally,
function C has the following properties:
(1)
C is twice differentiable continuous;
(2)
C is increasing.
The following two related concepts are important for financial and economic decisions of the firm:
marginal cost m(y) and average cost c(y).
Marginal cost m(y) indicates how much an additional unit of output costs to the firm.
Mathematically, it is simply the first derivative of the C(y) total cost function:
m(y) = C’(y)
Average cost c(y) indicates, for any level of production y, how much each unit of output produced
costs for the firm, on average. Mathematically,
c(y) = C(y)/y
How are these two functions related to each other? We can find it out using the properties of the
derivative. In particular, we can prove the following proposition.
Proposition. If m(y) > c(y), then c(y) is increasing. If m(y) < c(y), then c(y) is decreasing. At the
minimum of c(y), m(y) = c(y).
Proof: Using the rules of differentiation, we have
y
y
c
y
m
y
y
y
C
y
C
y
y
C
y
y
C
y
y
C
dy
d
y
c
)
(
)
(
)
(
)
(
'
)
(
1
)
(
'
)
(
)
(
'
2
Then, if m(y) > c(y), then c’(y)>0, i.e. c(y) is increasing. If m(y) < c(y), then c’(y)<0, i.e. c(y) is
decreasing. Denote the point at which m(y) = c(y) by y
0
. We see that at this point, c’(y
0
) = 0. This
implies that y
0
is an extremum point of the function c(y). Therefore, at the minimum of c(y), m(y) =
c(y). QED.
These relationships between the different cost functions are depicted on Figure 2.
Figure 2. Relationship between cost functions
2)
y
m, c
c(y)
m(y)
14
Normally, the cost of function of the firm has the form
C(y) = A + B(y)
where A is a constant. A thus denotes the fixed cost: for example, even before starting to produce
the first unit of output, the firm has to install the machines, rent an office, etc. All these
expenditures are independent of the level of output. Even if the firm produces zero units of output,
C(0) = A > 0.
B(y) denotes the variable cost of production, normally these are expenditures associated with hiring
workers, buying raw materials, etc.
Let‘s suppose, for example, that A = 125 and that B(y) is a quadratic function:
B(y) = 5y
2
How can we use the proposition derived above to find the output level that has the lowest average
cost of production? The marginal cost is
m(y) = d[125+5y
2
]/dy = 10y
The average cost is c(y) = [125+5y
2
]/y = (125/y) + 5y
From the Proposition above, it is sufficient to find the level of output such that marginal and
average costs are equal:
(125/y) + 5y = 10y y = 5.
We have thus very easily found the level of production with the lowest average cost, thanks to our
proposition that exploits some of the differentiation rules.
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