Exponential Functions Exponential functions are functions that change at a constant percent rate....

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Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when it results in an increase and the decay rate when it results in a decrease. • Example. If you have a starting annual salary of $40000, and you get a 6% raise each year, what will your resulting salary be in subsequent years? Here, the growth rate is 6%. After 1 year, your salary is (1.06)(40000) = 42400 After 2 years, your salary is (1.06)(42400) = 44944

Transcript of Exponential Functions Exponential functions are functions that change at a constant percent rate....

Page 1: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Exponential Functions• Exponential functions are functions that change at a

constant percent rate. This percent rate will be called the growth rate when it results in an increase and the decay rate when it results in a decrease.

• Example. If you have a starting annual salary of $40000, and you get a 6% raise each year, what will your resulting salary be in subsequent years? Here, the growth rate is 6%.

After 1 year, your salary is (1.06)(40000) = 42400

After 2 years, your salary is (1.06)(42400) = 44944

and so on...

After t years, your salary is (1.06)t(40000).

Page 2: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Use of Maple to graph the salary from the previous slide

> plot(40000*(1.06)^t,t=0..20,color=black);

Page 3: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• Example. Suppose that you invest $10000 in the latest “dotcom” venture which allows two people anywhere to get married on the web. Unfortunately, you find that the value of your investment at the end of each year is 5% less than it was at the beginning of the year. Here, the decay rate is 5%.

After 1 year, the value is (0.95)(10000) = 9500

After 2 years, the value is (0.95)(9500) = 9025

and so on ...

After t years, the value is (0.95)t(10000).

Page 4: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Use of Maple to graph the investment value of previous slide

>plot(10000*(0.95)^t,t=0..80,color=black);

Page 5: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• For an exponential function, we have

New amount = (growth factor) (Old amount)

where the old amount is present at the beginning of a period and the new amount is present at the end of a period.

• In the salary example, the growth factor is 1.06 per year.

• In the investment example, the growth factor is 0.95 per year. Note that we use the term “growth factor” even though the value of the investment is decreasing or decaying.

Page 6: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• The formula for an exponential function Q = f(t) is given by

where the parameter a is the initial value of Q (at t = 0) and the parameter b is the growth factor. If a > 0, then b > 1 gives exponential growth and 0 < b < 1 gives exponential decay. The growth factor or base is given by

where r is the decimal representation of the percent rate of change.

• In the salary example, a = 40000, b = 1.06, and r = 0.06.

• In the dotcom example, a = 10000, b = 0.95, and r = –0.05.

0,b ,ab f(t) t

r, 1 b

Page 7: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Comparing exponential and linear functions

• For a table that gives y as a function of x with x constant: If the difference of consecutive y-values is constant,

the table could represent a linear function.

If the ratio of consecutive y-values is constant, the table could represent an exponential function.

• Example. Which function is linear? exponential?

x 20 25 30 35 40

f(x) 30 45 60 75 90

g(x) 1000 1200 1440 1728 2073.6

Page 8: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Finding a formula for an exponential function

• To find a formula for the exponential function on the previous slide, we must determine the values of a and b in the formula g(x) = abx. From the table, we have

• From the formula, we have

• Thus,

• Finally, we solve a(1.03714)20 = 1000 for a, which yields

2.11000

1200

g(20)

g(25)

.bab

ab

g(20)

g(25) 520

25

.03714.11.2 b and 2.1b 55

253.4821.03714

1000a

20

Page 9: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Comparison of exponential and linear functions

• The 19th century clergyman and economist, Thomas Malthus, assumed that the food supply increases linearly and the population increases exponentially. This assumption combined with the following fact led to a gloomy prediction of the future.

• It can be shown that an exponentially increasing quantity will, in the long run, always outpace a linearly increasing quantity. For the example shown in the table below, the exponential outpaces the linear function at some t value between 4 and 5.

t 0 1 2 3 4 5

4t+2 2 6 10 14 18 22

2t 1 2 4 8 16 32

Page 10: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Parameters for exponential and linear functions

• The general formulas for exponential and linear functions both have two parameters. Hence, two data points are sufficient to determine a particular function of either type.

• The two parameters for linear functions are the slope and the vertical intercept.

• The parameters a and b in the formula abt determine the shape of the corresponding graph. In the current lecture, we assume that a > 0. A graph with a < 0 can be easily obtained by reflection across the t-axis of one of the graphs with a > 0. If a = 0, the formula yields the zero function. As we did before, we assume that b > 0. Note that the value of an exponential function at 0 is ab0 = a.

Page 11: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• Graphs of exponential functions Q = f(t) = abt with b > 1

• These functions are both increasing since their graphs rise as t increases. Note that the greater the value of b, the more rapidly the graph rises. These graphs satisfy and we say that the graph has the t-axis as a horizontal asymptote. Alternatively, we write

Q = 50(1.2)t

Q = 50(1.4)t

tas 0Q

t0.f(t) lim

Page 12: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• Graphs of exponential functions Q = f(t) = abt with 0 < b < 1

• These functions are both decreasing since their graphs fall as t increases. Note that the smaller the value of b, the more rapidly the graph falls. These graphs satisfy and we again say that the graph has the t-axis as a horizontal asymptote. Alternatively, we write

Q= 50(0.8)t

Q= 50(0.6)t

tas 0Q

t0.f(t) lim

Page 13: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Concavity and rates of change

• Again consider the salary example.

• Since the rate of change increases with time, the graph bends upward. We say such graphs are concave up.

4 years

4 years

smaller increase

larger increase

Page 14: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Concavity and rates of change, continued

1 hr

Larger increase

time (hours)

distance (miles)

40

30

20

10

50

60

1 2 3 4 5

• Exponential functions Q = abt with a > 0 are all concave up. We can consider the graph showing the distance traveled by a certain bicycle rider as a function of time.

• Since the bicycle rider’s rate of change decreases with time, the graph bends downward. We say such graphs are concave down.

1 hr

Smaller increase

Page 15: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Motivating the number e using compound interest

• Suppose we invest $1.00 at 100% interest once a year. At the end of the year, we have $2.00.

• Suppose we invest $1.00 at 50% interest twice a year. At the end of the year, we have $2.25.

• Suppose we invest $1.00 at 25% interest four times a year. At the end of the year, we have $2.44141.

• As the frequency of computation increases, the balance at the end of the year approaches $2.71828..., and this limiting value is referred to as the number e.

Page 16: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

• The number e = 2.71828... is an irrational number which is often used as the base of an exponential function. Base e is often referred to as the “natural base”.

• Example. Solve graphically for x: ex = 100.

• Using a calculator to find the intersection, x ≈ 4.6052.

ex

x = ?

Page 17: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Continuous growth and the number e

• If Q = abt, b > 0, this relation can be rewritten as:

where ek = b. The value k is called the continuous growth rate.

• The value of the continuous percent growth rate may be given as a decimal or a percent. If t is in years, for example, then the units of k are per year; if t is in minutes, then k is per minute.

• Example. If you have a starting annual salary of $40000, and you get a 6% raise each year, what is the continuous growth rate of your salary, Q? We have Q = 40000(1.06)t, so a = 40000 and b = 1.06. Using a calculator, we can solve ek = 1.06 to get:

,ae Q kt

year.per 058.0k

Page 18: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Compound Interest

• What if your salary increase was not 6% compounded yearly, but 6% compounded over a shorter period? Then the formulas used to compute your salary might be:

quarterly, compounded ,4

0.06140000

4t

monthly, compounded ,12

0.06140000

12t

or year, a n times compounded ,n

0.06140000

nt

ly.continuous compounded ,e40000 0.06t

Page 19: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Effective annual yield

• When the interest (or salary increase) of an account is compounded more frequently than once a year, the account effectively earns more than the nominal rate, which is 6% in the salary example. The effective annual rate gives the interest (or salary increase) actually earned by the account.

• Example. When your salary is compounded monthly (see previous slide), after one year you have:

and the effective annual rate is 6.168%. When your salary is compounded continuously, after one year you have:

and the effective annual rate is 6.184%.

168).40000(1.06 5)40000(1.00 12

0.06140000 12

12

184),40000(1.06 e40000 0.06

Page 20: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

General formulas for compounding

• If interest at an annual (nominal) rate of r is compounded n times a year, then r/n times the current balance is added n times a year. Therefore, with an initial deposit of $P, the balance t years later is:

• If interest on an initial deposit of $P is compounded continuously at an annual (nominal) rate of r, the balance t years later can be calculated using the formula:

.n

r1PB

nt

.ePB rt

Page 21: Exponential Functions Exponential functions are functions that change at a constant percent rate. This percent rate will be called the growth rate when.

Summary for exponential functions