Rate of Change, Marginal Cost and Marginal Revenue for CUET Applied Maths
About 5 min to learn · 79 questions
Rate of change, marginal cost and marginal revenue are part of Section B2 of CUET Maths, the Applied Mathematics section you answer if you choose Applied Mathematics instead of Section B1. They are derivatives put to work in business, so the calculus you already know from Section A does most of the job. Learn each idea here, from areas and volumes changing with time to cost, revenue and profit functions, marginal cost, marginal revenue and maximising profit, with worked examples, time-saving shortcuts and the traps CUET sets, then practise on free questions in CUET's own formats, each fully solved.
A small bakery sells cakes. The more it bakes, the more it spends and the more it earns, and the owner wants to know how each extra cake changes those totals. That question, how fast one quantity changes as another does, is a derivative, and this chapter applies it to everyday quantities and to business.
For x units, the cost C(x) is the fixed cost C(0) plus the variable cost; the revenue is R(x)=px, price times quantity; and the profit is P(x)=R(x)−C(x). The average cost is xC(x), and the break-even point is where R(x)=C(x).
When the price falls as more is sold, the demand function p=f(x) gives the price, and the revenue is x×f(x). For the bakery, cakes sell at p=70−x rupees when x are sold a day, so R(x)=70x−x2.
Marginal cost is the derivative of total cost, MC=C′(x). It is close to the cost of making one more unit when x units are already being made, the (x+1)th.
The bakery's daily cost is C(x)=200+10x+x2, so MC=10+2x. At 15 cakes, MC=40: the sixteenth cake costs about ₹40 more.
Watch out
Marginal cost is not the average cost. At 15 cakes the average is 15C(15)=15575≈38.3 rupees, but each extra cake costs about ₹40.
Marginal revenue is the derivative of total revenue, MR=R′(x), the extra revenue from selling one more unit. If every unit sells at a fixed price, MR equals that price; if the price falls with sales, MR is less than the price.
For the bakery, R(x)=70x−x2 gives MR=70−2x. At 15 cakes the price is ₹55 but MR=40: selling one more cake lowers the price of the others too.
Profit P=R−C is greatest where P′(x)=0, that is where marginal revenue equals marginal cost, provided P′′(x)<0 there. Revenue alone is greatest where MR=0, and average cost is least where it equals marginal cost.
Example 2 · The bakery's best output
With R(x)=70x−x2 and C(x)=200+10x+x2, how many cakes give the greatest profit, and what is it?
MR=MC: 70−2x=10+2x, so x=15. And P′′(x)=−4<0, a maximum.
The cost of making x units is C(x)=2x2+8x+200 rupees. What is the least possible average cost per unit?
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AnswerD · ₹48
Average cost =2x+8+x200; its derivative 2−x2200=0 at x=10.
At x=10: 20+8+20=48 rupees per unit.
Worth noting
10 is the output where the least average cost occurs, not the cost.
NTA's Mathematics / Applied Mathematics syllabus has three sections: Section A1, which every candidate answers, then Section B1 (Mathematics) or Section B2 (Applied Mathematics), of which a candidate answers one. Each section lists units and topics but no chapters, so the chapters here are ours. Where both B sections list a topic that Section A also lists, its questions sit once, in Section A.