Nonlinear functions are functions whose graphs are not straight
lines. While there are many types of nonlinear functions, this course
will focus on three that are commonly used in business: parabolic functions, demand functions, and exponential functions. A basic graphic representation of each of these functions is shown below.
In this course, you may notice that graphs of functions often appear
only in the upper righthand quadrant on a set of axes, in the region
where both the x and y values are positive. This is because, in business situations, a function's x and y
values usually stand for nonnegative amounts, such as time, units
produced, dollar amounts, and so on. Therefore, when the functions
above are used in a business context, they will usually appear entirely
in the upper righthand quadrant (called the first quadrant) on a set
of axes.
Parabolic Functions
A parabolic function is a symmetric, Ushaped function that has x^{2} as its highest term. The basic form of this function is organized into an equation below on the right.
This form is useful because it tells you a number of things about
the shape of the parabolic function (illustrated above on the left),
allowing you to graph the function quickly and to understand several
key features.
1. 
The direction of the parabola is determined by the constant c.
 If the constant c is positive, as in the graph above, the parabola opens upward in the shape of a U.
 If the constant c is negative, the parabola opens downward in the shape of an inverted U.

2. 
The sharpness of the parabola is also determined by c. The further the constant is from zero, the steeper the curve will be.

3. 
The parabola's highest or lowest point, known as the vertex, has the coordinates (a, b).

Consider the following production function, in which a company's marginal output in units per employee, f(x), depends on how many workers are employed, x.
You can recognize that this function is a parabola because its highest term, (x – 5)^{2}, is squared. Simply by looking at the function's formula, you can determine a number of things about the parabola's shape.
Because the constant c, –.5, is negative, the parabola opens downward.
Because the absolute value of constant c, –.5, is between 0 and 1, the parabola is relatively wide.
The parabola's highest point, the vertex, has the coordinates (5,
10). The vertex is the point at which marginal production is maximized.
When 5 people are employed, 10 units of output are produced per
employee.
This function is graphed below.
The graph below illustrates how the constant c influences the width
of a parabolic function. This graph illustrates the parabolic functions
–.5(x – 5)^{2} + 10 and –2(x – 5)^{2} +
10. The constant c is –.5 and –2, respectively. Because the constants
are negative, both functions open downward. As you can see, the
further the constant is from 0, the sharper the curve. When c has the
value of –2, the curve is sharper than when c is –.5.
Demand Function
A demand function has a general form , which can also be written as x^{1}. The demand function used often in business to describe demand; it is represented in equation form below on the right.
This form of the function tells you some things about the shape and
behavior of the demand function, which is illustrated above on the left.
Graphically, the constant c determines how close the graph will be to the x and y axes. The smaller c is, the closer the graph is to the origin, the point (0, 0).
In general, demand functions will approach but will never cross the x or y axes.
Consider the following production function, in which the demand for a company's cookies, f(x), depends on the price of the cookies, x.
When graphed on a coordinate plane, demand functions have two
sections that are mirror images of each other. In business situations,
only the section in the first quadrant is used because the values being
examined are positive. For example, the demand for cookies and the
price of cookies would not be negative. Therefore, the company's demand
function for cookies would be illustrated in this way.
The constant, 2, determines how close the graph is to the x and y
axes. If the demand for cookies increases, the constant in the demand
function would increase. How would this change the shape of the demand
function? Consider the following graph, which shows the original demand
function, where c is 2, and the increased demand function, where c is 5.
Notice that the larger c is, the further away the graph is from the origin (0, 0).
Exponential Function
Any function where a constant (a) is raised to a power of x
is an exponential function. Exponential functions in business take the
form of exponential growth and decay functions. In business scenarios,
exponential functions often appear in the equation form that appears
below on the right.
This form tells you two important things about the function's shape, which is graphed above on the left.
The point (0, c) is the function's yintercept.
The sign of the exponent x (positive or negative) indicates the direction of the function.
 If the exponent is positive, the function increases to the right. (This is known as "exponential growth.")
 If the exponent is negative, the function decreases to the right. (This is known as "exponential decay.")
The exponential function is commonly used for investments with
compounded interest. For example, imagine that you put $10 into an
account that compounds annually at a rate of 7 percent. The function
used to find the value of this investment at a future point in time is
below.
FV = the future value
N = the number of years in the future
Simply by looking at this function, you can tell that it is an
exponential function because it has a constant, 1.07, raised to a power N. Using this function, you can quickly determine two things about its shape.
Because the constant c is 10, the function's yintercept is (0, 10).
The exponent N is positive, which means the function is increasing as N increases to the right.
Think about the business situation and you can see that this
information makes sense. Consider the graph above with the following
scenario—the yintercept tells you that at the time of the
initial investment, $10 was deposited. This investment will increase
over the years, as indicated by the positive exponent. You can find the
exact shape of the function by calculating the value of the investment
for a number of years and then plotting the coordinates.
1. Name the following nonlinear functions.
a. f(x) = 4(x – 2)^{2} + 6
b. f(x) = 6,400(1.05)^{x}
c. f(x) =
Solution 1
2. Given the following function, answer the questions below.
f(x) = 20,000(1.1)^{x}
a. What type of nonlinear function is this?
b. What is the yintercept?
c. When x = 3, what does f(x) equal?
Solution 2
3. Given the following function, answer the questions below. f(x) = 3(x – 4)^{2} + 7
a. What type of nonlinear function is this?
b. What is the vertex?
c. Is the function thin or wide compared to a parabola where c = 1?
Solution 3
4. An individual puts $1,500 into a bank account that has an
interest rate of 7 percent. The future value of the investment is
modeled by the function FV = 1,500(1.07)^{T}, where FV is the future value and N is the number of years in the future. Using this information, answer the following questions about this function.
a. What type of nonlinear function defines this relationship?
b. What is the yintercept?
c. How much money will the individual have in 10 years?
Solution 4
5. The demand for book bags is modeled by f(x) = , where x equals the number of book bags demanded and f(x) is the price.
a. What is the price when nine book bags are demanded?
b. After it is found that the book bags have faulty straps, the demand changed to f(x) = , where x = number of book bags demanded and f(x) is the price. Is this new demand closer or further from the origin (0, 0)?
Solution 5
