Chapter Seven

Integral Calculus in Economics

Introduction
Dear students, in previous units you have discussed differential calculus and its applications. In
this you will learn the second branch of calculus known as Integral Calculus. Integral calculus
and differential calculus have inverse meanings and processes. Differentiation is the process of
converting the total function in to marginal functions but integration is the process of converting
marginal function in to aggregate functions. Integration is mainly divided in to two parts;
indefinite and definite integrals. In this unit you will discuss the meaning of integration, rules
of integration and application of integration on economic variables.
Learning Objectives: The aim of this unit is to introduce you with the concept and
techniques of integration. After completing this unit you will be able to
 Define the concept of integration
 Use different integration rules to compute integrals of various types of functions requiring
 Solve integral oriented economic problems
 Differentiate areas in which integral calculus is being applied.
1. Indefinite Integral
Definition: The function F is an anti-derivative of the continuous function f if and only if for all
X in the domain of f such that F′ (X) = f (X).

3
Example: The function F(X) = 1/3 x is the anti-derivative of f(X) = X because 2
( )
d 1 3
dx 3
X = X2
.
2
f (x ) = x
Observe that the function f has other anti-derivatives. Some of these are:
1
F 1 ( x ) = x3 + 7
3

1 3
F2 ( x ) = x − 132
3

1 3 52
F3 (x ) = x + and so on .
3 3

1 3
F (x ) = x +C
3
In general the function, where C is any arbitrary constant, is the anti-derivative
of f(X) = X2.

1|Page
 −2
X3
Example: For the function f(x) = , if we final the anti derivation of this function, we have
−2
X3
to find a function whose derivative can generate the value . Some of these are:
1
F1 ( x ) = +2
x2

1
F2( x ) = −30
x2

1 93
F3 (x ) = + and so on
x 2 4

1
F (x) + C,
x2
In general the function where C is any constant, is the anti derivative of the
−2
f (x ) = 3
x
function
F (x) f ( x ) , then F ( x ) + C
Theorem 1 If is anti derivative function of where C is an arbitrary
f (x)
constant, is also the anti derivative of
F ( x ) and G ( x ) f (x) [a,b],
Theorem 2 If are anti derivatives of the function in the interval
F = G ( x ) + C , for all E [ a , b ]
then
Definition: The set of all anti derivatives of a continuous function is called the indefinite
integral of f and is denoted symbolically by

∫f ( x ) dx
. The function f is called the integrand and x is called the variable of integration.

∫f ( x ) dx = F ( x ) + C

f ( x ) = 3 x2
Example: Find the integral of the function
Solution: we have to find the anti derivation of this function

2|Page
∫ f ( x ) dx = f ( x ) + C from the definition.
Therefore, ∫ 3 x2 dx = x3 + C , more over , Form the definition of integration, it is clear that:
d
dx
[∫ f ( x ) dx ] = f ( x )

Basic Rules of Integration

Just as there are rules of derivation, there are also certain rules of interaction. The following are
important rules of integration.

f (x)
i. Rule of power function. If is given in certain power function, its integration can be
x n+1
f ( x ) = x n then ∫ x n dx = +C .
n +1
easily calculated with this rule. If This is because

( )
d xn + 1
dx n + 1
= x n ( n ¿ −1 )

Example: Find the integration of the following functions

f (x) =
1 1
3 f (x) =
f (x) = x x2 f ( x ) = dx x
a). b). c) d).
Solution: Since most of them are power functions, we can use power rule for finding their
integration.

x 3+1 1
∫ x 3 dx =
3+1
+ C = x4 +
4
a). C

x−2 +1
∫ x 2 dx =∫ x dx = −2 + 1 = −1x +C
1 −2

b).

x 0+1
∫ dx = ∫ 1 dx = ∫ x = ∫ x dx = 0 + 1 + C = x + C
0 dx o

c).

1 x−1+1 x o
∫ x dx = ∫ x dx = −1+1 = O
−1

d). which Is undefined because any number divided by

zero is not defined. So, this function can't be closed under the rule of this power. That is why we

3|Page
 x n+1
∫ x n dx = n+c
+C
n = −1.
said that for all values of n except Therefore, we have to look for
1
∫ x dx=ln |x| + c
other way to find the integration.
ii. Coefficient rule: The integral of the product of a constant and a function of x is equal to
the constant times the integral of a function.

∫ K . f ( x ) dx = K ∫ f ( x ) dx
Where, K is a constant.

∫ 3 x 2 dx = 3 ∫ x 2 dx = 3 ( 13 x 3) + C = x 3 + C
Example: 1)

2)
∫ 2e x dx = 2 ∫ e x dx = 2e x + C

iii. Summation Rule: The integral of the sum of two functions is the sum of their integrals.

∫(f ( x ) + g ( x )) dx = ∫ f ( x ) dx + ∫ g ( x ) dx

Example:
∫ 2 x dx = ∫ x dx + ∫ x dx
1 2 1 2
= x + x +C
2 2

= x2 + C
iv. Difference Rule: The integral of the difference of two functions is the difference of their
integrals

∫ ( f ( x ) − g ( x ) ) dx = ∫ f ( x ) dx − ∫ g ( x ) dx

Example:
∫ ( x −6 ) dx = ∫ x ( dx ) − ∫ 6 dx
1 2
= x −6 x + C
2

4|Page
 v. Integration by Parts

∫ f ( x ) . g ' ( x ) dx = f ( x ) . g ( x ) − ∫ f ' ( x ) .g ( x ) dx

f (x)
Here, we have to be systematic enough when we are assigning which one is and which one
g' ( x ) g' ( x )
is . Assign a function whose anti-derivative is found easily as and a function whose
f (x)
derivative is found easily as .
xe 2 x
Example: Find the integration of

Solution:

∫ xe2 x dx
let f ( x ) = x

1 2x
g1 ( x ) = e 2 x ⇒ g ( x ) = e
2

1 1
∫ xe2 x dx = x 2 e2 x − ∫ 1 . e2 x dx
2

1 2x 1
=
2
xe −
2
∫ e 2 x dx

=
1
2
xe 2 x−
1 1 2x
2 2 ( )
e +C

1 1
= xe 2 x − e2 x + C
2 4

1 2x
= e ( 2 x −1 ) + C
4

x 2 ln x dx
Example: Find the integration of

5|Page
 1 3
x
Solution:
∫x 2 x
ln dx
, let f(x) = ln and g
x '
( x )= 2
x , implying that g(x) =
3

1 11 1 1
∫ x 2 lnx dx ln 3 x −∫ x 3 x dx 3 x ln − 3 ∫ x dx
x 3 3 3 x 2

= =
1 3 x 1 1 3 1 3
x ln − ( x )+C x (3 ln x −1)+C
3 3 3 9
= =
vi. Integration by substitution: this is the rule which helps to find the integration of
functions whose derivative is found by using chain rule.

∫ f ( g( x ))∗g' ( x)=F ( g( x))+C , for any differentiable function g that is not a constant function.

If u = g(x),
∫ f (u )du=F (u)+C=F (g ( x ))+C
2
2 xe x dx
Example: Find the integration of
du
∫
2
2 xe x dx x 2
2x
Solution: , let u = du = 2xdx and solve for dx =
2 2 du
∫ 2 xe x dx=∫ 2 xe x dx=∫ 2 xe u 2 x =∫ e u du=e u +C x2
and substitute u by and the solution for
2
∫ 2 xex dx=e x +C
2

2 x (x 2 +1)4 dx
Example: Find the integration of
du
Solution:
∫ 2 x( x 2 +1) 4 dx
, let u=
x +1 2
and du = 2xdx and solve for dx =
2x

du 1
∫ 2 x ( x 2+1)4 dx=∫ 2 xu 4 2 x =∫ u 4 du= 5 u5+C x 2 +1
Therefore, , after this substitute u by and
1
∫ 2 x ( x 2+1)4 dx= 5 ( x 2+1)5 +C
the final solution is given as

vii. The exponential rule: It states that

∫ e x dx=e x +C

6|Page
 (3 x−7 )5 dx
Additional example: Compute the integration of

1 6
(3 x−7 ) +C
(3 x−7 ) 6
18
∫ (3x−7)5 dx ∫ (3 x −7)5 dx= 13 6
+C
Solution: = =

2. Definite Integrals

Meaning of Definite Integrals

All the integrals cited in the preceding section are of the indefinite variety: each is a function of a
variable and hence possesses no definite numerical value. After here, for a given indefinite

integral of a continuous function

f (x)
,
∫ f ( x ) dx = F ( x ) + C
. If we choose two values of x in the
domain say a and b, the indefinite integral can be changed in to definite integral.
f (x )
Definition: Let be a function with an anti derivative that we donate it by F(x). Let a and b
f (x ) F (x)
be any two real numbers such that and exist for all values of x in the closed interval
f (x )
with end points a and b. Then definite integral of from x = a to x = b
b
b
∫ f ( x ) dx and is defined by ∫ f ( x ) dx=F ( b ) −F (a)
a a
Is denoted by: . The numbers a and b are
called limits of integration, a the lower limit and b the upper limit. Usually, a < b but not
necessarily.
b
1
Example: a)∫ x dx = (b ¿ ¿ 5−a )¿
4 5

a 5
3
∫ 1t dt = [ lnt ]1 = ln3 − ln1 = ln3
3

1
b)
2

0
3x
( )
1 3x 2 1 6 1 0
∫ e dx = 3 e = 3 e − 3 e
0
1
= (e6 − 1)
3
c) .
Note: In a definite integral since constants are canceling of each other, there is no need to include
a constant.
7|Page
Properties of Definite Integral
i. Property I: The interchange of the limits of integration changes the sign of the
definite integral.
b a
∫ f ( x ) dx = − ∫ f ( x ) dx
a b

4 2
∫ 3 xdx = − ∫ 3 x dx
2 4
Example:

( )
3 24
( )
2
3 2
= x =− x
2 2 2 4

=
3
2
3
( 4 ) − ( 2 )2 = −
2
3 2 3 2
2 (
( 2) − ( 4 )
2 )
=
3
2
3 3 3
(
( 16 ) − ( 4 ) = − ( 4 ) − ( 16 )
2 2 2 )
¿ 24−6=−(6−24 )

= 18 = −(−18 )

18 = 18

ii. Property II: A definite integral has a value of zero when the two limits of integration
are identical.
a
∫ f ( x ) dx = F ( a ) − F ( a ) = o
a

iii. Property III: A definite integral can be expressed as a sum of finite number of
definite sub integrals.
d b c d
∫ f ( x ) dx = ∫ f ( x ) dx + ∫ f ( x ) dx + ∫ f ( x ) dx
a a b c
b b
∫−f ( x ) dx = − ∫ f ( x ) dx
a a
iv. Property IV:
b b
∫ Kf ( x ) dx = K ∫f ( x ) dx
a a
v. Property V:
8|Page
 b b b
∫ ( f ( x ) + g ( x )) dx = ∫ f ( x ) dx + ∫ g ( x ) dx .
a a a
vi. Property VI:
3. Economic Applications of Integrals
Integrals have several uses in economics variable analysis. The following are some of the areas:
A) Developing a total function from marginal function
The process of integration can yield a total function if the marginal function is given.
Example: If the marginal cost (Mc) of a firm is given by an equation
' 3
C (Q ) = − 4 Q +6 Q−80
and the fixed cost of production is 90 Birr, we can get the total cost of
production that can be computed from MC function by integrating it
∫ MC dQ=TC
TC=∫ (−4 Q3 +6 Q−80 ) dQ

¿−4 ∫ Q dQ+6 ∫ Q dQ−80∫ dQ

3

TC = −Q3 + 3Q2 − 80 Q + C
Since C is the fixed cost, it can be replaced by 90.
TC = −Q3 + 3Q2 − 80 Q + 90
Therefore, the total cost equation is given as:
B) Investment capital Formation

Integration is important to show the capital stock in a given time period and the rate of capital
formation. Capital formation is the process of adding to a given stock of capital. Capital Stock
If K ( t ) dk / dt
can be expressed as a function of time periods, is the stock, is the rate of capital
formation and it is identical to the rate of net investment flow at time t. Thus, capital stock K and
net investment I are related by the following equations.
dk
= I(t )
dt
k (t ) = ∫ I (t ) dt

Example: Suppose that the net investment flow is given by the equation I (t) = 3t ½ and the
initial capital stock is 900. What will be the capital stock over periods?

9|Page
Solution: K (t) =
∫ I (t )dt = ∫ 3t ½ dt
3∫ t
= ½ dt
3/2
= 2t +C. But C is the initial capital stock and must be replaced by 900.
3
2
2 t +900
K (t) =
C) Finding the area of the region
One of the application of definite integration is finding the area of a region bounded by f(x), the
X-axis and the vertical lines X = a and X = b.
Note: The area of the region R, denoted by A(R), bounded by f, the X-axis, the vertical lines X =
a and X = b is given by;
b
∫ f ( x )dx
a
A(R) = provided that two conditions hold. These are:
[a , b]
1. f must be continuous in
[a , b]
2. f(x) > 0 for all x E
[a , b]
If f is continuous and non-positive in the interval , the area of the region bounded by f, x-
axis and the lines X = a and X = b is given by:
b
−∫ f ( x )dx
a
A(R) =
Fundamental Theorem of calculus
Let f(x) be a continuous non- negative function in a < X< b and let F(x) be an anti derivative of
f(x). Then A, the area between Y = f(x), the X-axis and vertical lines X = a and X = b is given by
the definite integral:
b
∫ f ( x )dx=F (b )−F (a )
a
A=
Example: Evaluate the area of the region bounded by the function
2
y = 3 x + 2 x + 5, the x − axis and the lines x = 1 and x =3
Solution:
3
3
A= ∫ ( 3 x 2 + 2 x + 5 ) dx = [ x 3 + x2 + 5 ]1
1

10 | P a g e
 A = ( 3 )3 + (3 )2 + 5 ( 3 ) − ( 13 + 12 + 5 (1 ))
= 27 + 9 + 15 − 7
= 51 − 7
= 44 square units

11 | P a g e