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Integration refers to the act or process of uniting different things.

Or

Is the calculation of an integral to find many useful quantities such as area volume and displacement.

Business integration is the process where a business merge or take over another business. Integration can be used in business or economics to calculate the various economic problem as i mentioned and explained below;

1. Cost functions from marginal cost functions

If C is the cost of producing an output x, then marginal cost function MC = dc/dxUsing integration, as the reverse process of differentiation, we obtain, Cost function C = ∫ ( MC ) dx + k

Where k is the constant of integration which is to be evaluated.

2. Revenue functions from Marginal revenue functions

If R is the total revenue function when the output is x, then marginal revenue MR = dR/dx Integrating with respect to ‘ x ’ we get

Revenue Function, R = ∫ ( MR ) dx + k. Where ‘k’ is the constant of integration which can be evaluated under given conditions, when x = 0, the total revenue R = 0,

Demand Function, P=R/x, x ≠ 0

3. Consumer’s surplus:

This theory was developed by the great economist Marshal. The demand function reveals the relationship between the quantities that the people would buy at a given price. It can be expressed as p = f (x)

Let us assume that the demand of the product x = x0  when the price is p0. But there can some consumer who is ready to pay q0 which is more than p for the same quantity x0. Any consumer who is ready to pay the price more than p0 gains from the fact that the price is only p0. This gain is called the consumer’s surplus.

Its formula is as follows;

 

 

 

 

 

4. Producer surplus

A supply function g(x) represents the quantity that can be supplied at a price p. Let p0 be the market price for the corresponding supply xo . But there can be some producers who are willing to supply the commodity below the market price gain from the fact that the price is p0. This gain is called the producer’s surplus. Mathematically, producer’s surplus (PS) can be defined as,

PS = (Area of the rectangle OAPB) − (Area below the supply function from x = 0 to x = x0 )

 Its formula is as follows;

 

 

 

 

 

 

 

 

 

References

Paul M. Duvall, Steve Matyas, Andrew GloverReleased June 2007 Publisher(s): AddisonWesley ProfessionalISBN: None

 

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