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Title: Differentiation in economics
Description: A summary of differentiation rules and their economic applications.

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EECM 3714

Lecture 4: Unit 4
Differentiation

Renshaw, Ch
...
4-10,13
04 March 2022

OUTLINE
Renshaw, Ch
...
4-10 & 13
1
...
Differentiation rules
3
...
Examples
5
...

β€’ Look at fig
...
1a and 6
...
When we move from P to Q, we measure the slope of 𝑦 = π‘Žπ‘₯ + 𝑏 as the
change in y, Dy, divided by the change in x, Dx
...


The diff
...
measure the slope, or rate of change of y as x
changes, between P and Q
β€’ In fig
...
1a the diff
...
is positive because Dy is positive; in
fig
...
1b it is negative because Dy is negative
...
6
...
3

Δ𝑦
Ξ”π‘₯

is the same in both, but the curves are very different
...
quot
...

β€’ Another problem: the diff
...
also varies with distance from P to Q
...
4 to address this problem, we can use the slope of the tangent to the

curve at P as the measure of slope of curve at that point
...
5)
β€’

Δ𝑦
Ξ”π‘₯

then approaches a limiting value, which

measures slope of tangent at P
...

βˆ†π‘¦
βˆ†π‘₯β†’0 βˆ†π‘₯

β€’ Derivative is lim

𝑑𝑦

= 𝑑π‘₯

β€’ So if 𝑦 = 𝑓(π‘₯) then the slope of the function is
βˆ†π‘¦
βˆ†π‘₯β†’0 βˆ†π‘₯

𝑓 β€² π‘₯ = lim

𝑑𝑦

= 𝑑π‘₯

RULES OF DIFFERENTIATION
β€’ β€œDifferentiation” means finding derivative of a function
...

β€’ For any function 𝑦 = f(π‘₯), we write its derivative as:
either

d𝑦
dπ‘₯

or f β€² π‘₯

β€’ The notation fβ€²(π‘₯) is obviously more compact
...
Power rule

y=x

n

2
...
Additive constant

y = f( x ) + B

4
...
Power rule: if 𝑦 = π‘₯ 3 , we have 𝑛 = 3, so

d𝑦
dπ‘₯

= 3π‘₯ 3βˆ’1 = 3π‘₯ 2

2a
...
Multiplicative constant:if y = Ax, then

𝑑𝑦
𝑑π‘₯

=𝐴

3
...
Sum or difference: 𝑦 = π‘₯ 3 + π‘₯ 2 ,

d𝑦
dπ‘₯

d𝑦
dπ‘₯

= 3π‘₯ 2

= 3π‘₯ 2 + 2π‘₯

RULES OF DIFFERENTIATION II
5
...
Product

7
...
Inverse function

y = f(u ) where u = g( x )

y = uv

where u and v are
functions of x

u
y=
v

where u and v are
functions of x

y = f( x )

dy dy du
=
dx du dx
dy
dv
du
=u
+v
dx
dx
dx

dy
=
dx
dy
=
dx

v

du
dx

dv

βˆ’ u dx
v2

1
dx
dy

EXAMPLES FOR RULES 5 βˆ’ 8:
5
...
Product: given 𝑦 = (π‘₯ 2 + 1)(π‘₯ 3 + π‘₯ 2 )
Create 2 new variables:𝑒 = π‘₯ 2 + 1 and 𝑣 = π‘₯ 3 + π‘₯ 2
...
Quotient: given 𝑦 =

π‘₯ 2 +1
π‘₯ 3 +π‘₯ 2

Create 2 new variables: 𝑒 = π‘₯ 2 + 1 and 𝑣 = π‘₯ 3 + π‘₯ 2
dv
d𝑒
2
So:
= 3π‘₯ + 2π‘₯ and
= 2x
dπ‘₯


Title: Differentiation in economics
Description: A summary of differentiation rules and their economic applications.