CH 7

CHAPTER 7 RULES OF DIFFERENTIATION
AND HEIR USE IN COMPARATIVE I P
STATICS
The central issue of comparative statics is finding a rate of change which is identifiable win
the problem of finding the derivative of some function y fax Provided
only an infinitesimal change
in x is being considered
Eventhough he derivative is just the limit of the diererence Quotient g g cu as u so we
dont need to find me limit each time as there are various rules of differentiation to find the
derivatives directly
andrewstudynotes.com
7 1 Rules of Differentiation For a function or One variable

lets discuss the rules applitable respectively to the following types of a single IV
Y K Cconstant function
Y x
Y x Power anition
All these have smooth continuous graphs and hus differentiable everywhere
Constant Function Rule

The derivative of a constant action 7 6 or fax k is zero symbolically 7 fax 6 the
derivative i
Ey dy o or f x 0
Alternatively given y fax n the derivative is

Y fax k o
This is showing hat as an operator symbol thatgives instructions to perform an operation
The symbol is saying to tone the derivative or or to differentiate with respect to variable x
The function to be operated on is y fax or h
The proof is as follows Given text k we have foul k for any value of N Thus he value
of f an as defined in G 13 is
sin fig tay.tn x ifu II 15,8 0
Since fkn represents all value of x at all it can be generalised to 54 7 0
Notethe difference between f exo o and flex1 0 The former is referring to a specific
value a x i.e Yo while the latter is saying that the derivative function f has a value a
Zero for all values of x 217122 3
Al discussed the derivative has its geometric counterpart in the slope or a curve The graph or
a constant unction say fixed lost r 19 1200 is just a straight horizontal line with a
Zeroslope throughout which means that the derivative must be zero for all valves a Q
er
dda 1200 O
Power Function Rule

The derivative or a power auction is Y f x x is n xn symbolically
x nx n t or f ex n xn l 17.17
We'll provide the proof where net although this applies for any real valued Power of X
F ex X L Xo 1
The proof is from the definition of fkn in G 14 Given fix x the derivative or any value
of X say X N is
5 an di 5411 Isi YI firs 1 1
Since N represents we can write f ex l Proving this is

any value a x net Graphically
a 45 line with his slope a ti throughout
For the lose a larger integers n lit 3 first note thefollowing identities
Xt N 2 terms on me right
M1 x2 t Nxt N 3 terms on me right
Le
i 1ICILNINI
Int xn t Nen z
t Nexn s t t Nn n terms on the right C21
On the basis or 7.7 we can express me derivative co the power function feel x at X N as
sin ftp.sc
f x1niYI
tim 3t
x on xn it Nxn 2 f N'x Nn by 7.2
Isn xn t In Nxn 2 t t BuNn sum limit theorem
Nh t Nn t t N a total co n terms
l
n Nn 17.37
N is any valve or x mus it can be generalised to
f 1 7 nx n t
We can illustrate the rule for when n isnt a positive integer
Find the derivative y Xo with 7.1

Xo andrewstudynotes.com
0 x 7 0
Y 4 3 whith we can rewrite as ye x 3

x3 3 4
Y JI whith Jx X
If
12
x 12 2
Derivatives are actions or the IU x such as 5 ex 3x which ie we substitute direeren

value of x would result in the different value co me derivative
f ch 3 1 3 and F 27 3 272 12
Itmust be emphasised hat one must find the derivative cirst and then substitute dieterent values
or x
Power Function Rule Generalized
When a multiplicative constant c appears in the power function i e fax Cx thederivative is

exn Cnx or fax Cn xn l
We can provide the proof as follows consider hat eor any value a x say X N the
derivative is
n
f en Idn toffee lit exist Inge
Int Product limit theorem
Iii Iid
c 44151 limit or a constant
from 7.3
Again N is any value a x so it can be generalised to f ext an x
7 2 Rules a Diererentiating Involving Two or More functions or the Same Variable

We'llextend the rules to two differentiable unctions with the same variable say fix and gox We
want to differentiate the sum dieeerenceproduct or Quotient with those two unctions
More concretely 3 2 and 12 how do

given two functions fax gox7 9 we get the derivative
or 3 2 tgx or 3 2 g x
Sum Dierevence Rule

The derivative of a sum diererenie of two functions is he sumidiecerence or mederivative a
the two functions
fax I go
Tx fax I got flex I g ex
The proof involves thedefinition of the derivative and various limit theorems we'll just discuss
the validity and illustrate its application
ÉÉf ux we get U2 x But 14 3 5 t g so y can be seen as the sum of two functions
fax7 5 3 and according to the role we have

go gx
9 5 3 9 3 5 3 t 9 3
15 2
t 27 2 42 2
We can extend this to more functions so

E fax I gex the x flex Ig ex th ex
This is a really powerful rule to find the derivative of any polynomial anction as its just me
Sum of Power functions
Cax t bx to Zax tb
74 2 3 3 7377 28 3 76 2 3 to
We can apply this to the well known principle mat fixed cost doesnt arrect Mc given
93 49 t to a 775
the MC anation for infinitesimal output change is the limit Yaa or hisderivative a C
302 89710
whereas It represents FC and its eliminated through the derivation process thus not accenting MC
In general is a primitive function 7 text represents a total function then the derivative
d dx
is its marginal anction We can plot both functions graphically
In Fig 7 la a linear total function is

seen to have a constant marginal function
In Fig 7 lb a non linear gives rise to

a curved MC
In fig 7 to the nonsmoothness or he

total function will result in a gap or the
Mc auction in contrast with 7 lb
Thus the smoothness of a primitive

function can be linked to the contuinity or
its derivative action
Instead co saying that a function is

smooth and differentiable everywhere we
can say hats its a continuously diererentiable unction
The collowing notations are used
f e C'd or fE C f is continuous
f ec or feC f is continuously differentiable
Product Rule
The derivative of his product of two differentiable functions is equal to me first anction times
he derivative or he second unction pus the second auction times he derivative or he airsa unction
tax g ex fax go t g ex day sext
fax g Cal t golf ext

whish can be rearranged into
f'ex gex t tax g ex 7.4
y.catfiz
IIamhTderivative Yhens cxi
a zanag'cxl ox according to 7.9
2
12 37 6 7 t 2C 3
lox tidy
This can be check by multiplying fix g txt and differentiate the result
fix g ex
xt 3 7
6 3 t gx2
18 x't lox
Lets provide the proof for 74 to give an intuition
9
fix 9413 big 54794
is 4.51
By adding and subtracting fax and go.nl in the numerator thereby leaving the original magnitude
uncharged we can transform theQuotient on the right side or 7.5 as follows
faxe g x fax gCN fax gcn SCN g CN
fax
gagged t gon
scyffn
Substituting his car the Quotient on the right of 7.5 and toning its limit we men get
Ii texting 9939ft thing gon fine

toff
sext got
y
We can evaluate the 4 limits expressions The first one is 510 and the third is genl
the limit a a constantThe remaining to G 13 respectively
two are according gin and f en
mus 7.5 reduces to
fax gex FCN G CN gens f CN 7 t

y
Since N represents value of X we can replace every N terms win x

any
We can extend this to the case a 3 functions
textgex hey t fax g'ex next t sext gax h'ex 7 6

f ai g ex Lex
We can see his from repeated application of 7.4 Assume g x hex is ex so that we
can have fax x derive his and then do the same with the rest the result will be the
same with 7.6
The product rule is preferable man the alternative a fax and directly and
multiplying get
differentiate by product a hot as its applicable when he anctions are given in the general
form while he alternative approach requires specirit unctions We can illustrate his
Finding Marginal Revenue Function From Average Revenue function

to we are given
AR 15 Q tort revenue
men MR can be found by multiplying AR win a n get p
REAR Q 150 Q2
dieserenticting R
MR It 15 29
But in AR is given in the form of AR 5cal hen R ion also be
REAR Q FCA Q
and hows the alternative approach wont work But as R is a product a feat and a itself we can
use the product rule to get

MR 9T feat I t Q f Q
f Cal ta f sa 7.7
Such
general result can tell us something significant about the MR Recall fca denotes he
AR action we can rearrange 7.7 to get
MR AR MR FCK Q F'CQ 7.7
This is saying that the difference between HR and AR will always be af'cal
The first component Q denotes output and its always positive t ca represents the slope or me
AR curve plotted against Q Since AR and Price are the same thing
ARE I PE P
The AR is men simply the inverse or the demand curve or the Product of the firm i e he demand
curve plotted after the Pand Q axes are reversed
Under pure competition he AR is a straight horizontal line f ca7 0 and from 7.7 MR An o
for all possible Q hows the MR and AR curves must coincide
Under imperfect competition the AR love is normally downward scoping as in Fis 7.7 so that
5 EI CO and from 7.7 MR ARCO for all Positive levels of output In his case he MR curve
must lie below the AR curve
The conclusion just stated is Qualitative
referring to the position of both curves

But 7.7 also contains Quantitative information
about me MR lurve i e it will always fall
short a me AR curve at any output Q by
precisely the amount Qf Ca
Lets look at G N for hat output the

expression Qf Cal becomes NF CN if we
can find the magnitude of Nf N we can
know how ear below the AR point G the corresponding MR point must lie
The magnitude a N is already specified while 5 an is simply the slope or he AR tree

at point G where Q N i.e the slope of the tangent line IM measured by the ratio of the two
distances 0310M
We see hot 0J om 746 besides we're trying to rind Ho the output under consideration N
Thus the distance Nf N by which he MRcurve must lie below AR at output N is
NS CN HG A
HE
Accordingly if we mark k 6 43 directly below me MR curve then point K must be a point on
the MRcurve
The same procedure can be used to find all otherpoints on the MR curve All we must do for
any chosen point G on the curve is to first Find a tangent line to the AR curve at G hat will
meet the vertical axis at some point I
Note hot we must find the value of the derivative at the relevant output t en before
being able to draw thetangent line except for a linear AR curve as thetangent line is simply
he given line itself
Quotient Rule
The derivative of the Quotient or two functions fax I gext is
g 541851,5Gt
In the numerator or the rhs expression we find two productterms each involving the derivative of
each anstion note that f ex appears in the positive term while g ex in the negativeterm
7 5
II 291,42 Fair
To Provide the Proof For any valve or x N we have
FI w
Im tense ao
The Quotient expression following the limit sign can be rewritten in the form
fax g N FCN gox
gexigca
By adding and subtracting fan goal in the numerator and rearranging we get
fan gcn t fans gon fan g ex
go.ly
ffcx gcn
x N
gig
fan
gon
59 919ft
Substituting into 7.8 and taking the limit
go.im Ihsan 3 99111J

E EY x'smugly
FCN G CN by 6.13
gg gcn fl CN
Again N is x proving the Quotient wie
Relationship Between Marginal Cost and Average Cost Functions

We can see the elonomic application er he Quotient rule by considering the rate a change of
avg Cost when output Varies
Given a Tc unction C C Q the AC is a Quotient or two functions or Q since ACECca la

devined iet 970 The rate or change of AC with respect to a ion be fond as
I G cccaig.ca I focal CI 7g
Fromthis it follows mat for 670
is c ca
E CEI C 107
Cef Eo
Since c'Cal MC and ca a AC the economic meaning of 7.10 is he slope of the
AC is positive zero negative ire the Mc curve lies above intersects or lies below the AC
curve
This is illustrated here in the TC auction
a3 1292 t GOA
To the left 9 6 AC is declining and has MC lies
or
below it and vile versa to me right At 9 6 Ac has a
slope a Zero and MC AC
73 Rules a Diorerentiation Involving functions of Diererent Variables
We'll now consider two differentiable nations each has a distinct IV
Chain Rule
to we have a differentiable function Z fay and we have Y g ex then the derivative a 2
with respect to x is eaval to his derivative a z win respect to y times the derivative a Y with
respect to x symbolically
It g dg thy g ex G in
Theres an intuition
for his role Given Ax there must be a corresponding At via Yg ex and his
Ax will bring about a AZ via 2 564 Thus heres a chain reaction
AX ay I AZ
The two linus entail two difference Quotients AY Ax and A2 Ay which when multiplied
5 Ex
which is a difference Quotient relating Az to Ax Taming the limit or ecru or this will turn them
into a derivative i.e we'll have dady Cdt dx d7dx which is 7.11
We can extend this easily given Z fay y gal and x how then
II df dat Ew f ey g ex how
and similarly with higher powers
F Z 342 4 2 5 then
It GYC2
124 1262 5
12 Z Y 3 4 73 Ex 2
of I 3 2
3 2
ÉÉIhIu hate me useniness a me chain role by considering differentiating 2 1 2 3 27

Without the chain rule we'll have to multiply out he 17th Power expression first With thechain
2
role we can take a shortcut by defining a new intermediate variable 7 3 2 so
2 7 and 4 42 3 2
d
The derivative dx is hen
d
dx It of 17416 2 73
17 x2 3 2716 2 37 377122 617172
16 28 9 40
Shuo
6hr0
ÉÉÉ a r revenue anction Rascal where a gait kind dat we have

E data 94
f Cal g ca
d
In economic terms drida is the MR anction and de is the marginal physical product or lab
MPR hen has the connotation co marginal revenue product or labor CMRPelanction
Imisis just proving the well known economic results that MRM MR MR
Inverse Funition Rule

If the function Y fix represents a one to one mapping ii e ie the tuition is such hat each
valve a Y is associated with a unique value a x tu anition will have an inverseanition
x f Cy t is a symbol like f instead a a reliprocal
The existence co an inverse means hat not only given a value a x will produce a uniaue
value a Y a unique value co x will also be produced given a value a 7 This is a unia
class a unctions known as strictly monotonic Cor monotone actions
Given fax ie successively larger values or the lux always lead to successively larger
values a taxi i.e iz
x1 X2 3 Fix 7 FCxal
then the action f is said to be a strithy increasing unction While it successive increase in
x always lead to successive decrease in fax i.e

x1 7 2 7 Fix C f exit
then the function is said to be a strictly decreasing unction In either case an inverse
function f exists
A practical way to test strict monotonicity is whether the derivative fix always adhere to
his fame algebraic sign Geometrically he slope is either always upwards downwards
So firm's demand curve Q FCP that has a negative slope throughout is strictly decreasing
a
as such it has me inverse P 5 Cal which gives the AR curve since PEAR
Émmatation
4 5 25
d
has dx 5 Which is positive regardless a x thus the auction is strictly increasing An invers
exists and Lou now it can be found by solving 4 5 25 for X i.e
X FY 5
d
Thisinverse function is also strictly increasing because dy 1570 for all values of Y
Generally is exist men boh the original and he inverse must beshiny monotonic
an inverse
K 5 exists hen f is an inverse or 5 i.e f and f must be an inversefunction a eachother

Its easy to verify hot his graph a Y fix and x f ey are the same with the axes reversed
For inverse functions me rule or differentiation in

dildy dude
This means that he derivative a the inverse is he relipnia a the derivative or the original as such
dxidy musttake me some sign as dyidx To verily we can look at example 5 where dyedx
is 5 and dxidy is 115
When the inverse isnt easily obtained the inverse function rule will be very useful
ÉenI
ttx rind dxidy Since
dy dx 5 41 170
for any value x he given function is strictly increasing and an inverse exists which we can
find as
d
dy dy dx 54 1
While its only appliiable for a one to one function we can add restrictions to make a anction
two separate auctions so earn being strictly monotonic in the vesmitted domain
come
7 4 Partial Differentiation
Before applying derivative to iomparative statins we must discus partial derivative where we can
find the derivative a a anation or morethan one variable
Partial Derivatives
Consider
7 5 Cx x2 xn 7.12
where Xi i t 2 i n are all independent at each other so each can vary without affecting theomer
I t undergoes a change Ax while x2 xn remain fixed there will be a corresponding change
in y AY The direerence Quotient can be expressed as

f x't Axl x2 xn fcxi.kz ien
If Ax
7.13
If we take the limit of lax as Ax so that limit will constitute a derivative a partial
derivative a Y with respect to xi similar partial derivatives can be definedwith other lbs The process
is called partial diecerentiation
Part dice uses the symbol 2 instead of d so

2
2x or Xxi Y so xi is an operator
symbol We can also use use fi ta f instead d f'cx7 so in the case a Y tcu v w we
have fu fu Fw Now we can define
f
IF I alimo If
Techniques a Partial Diererentiation
The main difference of partial direerentiation is that we're holding In 17 variables constant while
holding one variable to vary Theidea staid be similar win handling ionstents in direerentiation
EI fr xz 3 xi tx x taxi rind he part der Note hat ie we'rediorerentiating 272 1
we're treating Xi as a constant Assuch xu will drop out ie its an additive constant but will be
retained if its a multiplicative constant So
2
2 1 If Gx t x2
Similarly
24
2 2 fi x t8 2
Partial derivatives are themselves unctions a x and ti so we may write

fi fi Cx Xel and fr fr Cx exit
So for ex V27 1,3 we have
fi Ci 3 fr 1,37 25
g
I cu u cut a cut zu we can the part der Win the product rule Holding u constant
fr utu 3 t I 301 20 2 30 tut 6

Holding u constant
fu Cuty CL t o 30 20 2 Uta
ÉÉ u an icon tsu we can use the Quotient rule

302 30 20030 24
I contour t4 tt
t
Geometric Interpretation or Partial Derivatives
We can geometrically illustrate the concept of Partial derivative Consider production unction a Chill
2912k Cor Qu 20
We can hurs have two part der and 21 Cor Qe
Qu relates to the change of output with change in capital holding labour fixed and the same
idea with Qu in respect to labour So Qu is the MPPu while Qc is MPP
Geometrically we can depiif G Ch L as a production surface in 3 space shown in Cig7 u
Q is plotted vertically so theheight will

indicate the total output given a point
Ck L in the base plane 627 The domain
should consist of theentire nonnegative
Quadrant but we'll consider a subset or it
he rectangle OkoB lo
Now say we hold ko constant and allow

variations in C We are thus only interested
in the segment kob and only the curve

koCDA is relevant mus we may interpret theslope of the curve koCDA as he rate of shange in
Q with respectto changes in C while k it lived at ko This curve represents the total Physical product
a labor TPR for a fixedamount a k ko
When 1 4 Qe is equal totheslope of the curve at pointC and so on Qc is also a function
of k because we can fix ko at various levels
Gradient Vectors
All thepartial derivatives or a unction is called the gradient vector or gradient of auction fi
grad taxi xz xn fi fi Snl
where Fiz dy 2xi we can also use it So tf Cx Xz Ant
75 Application to Comparative Static Analysis

Finally we ran now see how he eavilibrium value a an endogenous variable will changegiven a
change in the exogenous parameters
Market Model
Lets consider me one commodity model a 3.1 which can be written in the form a two equations
Q atbp demand
Q std P supply
with
p GI 7.19
at aging 7.15
To find how an infinitesimal change in one variable affect P one only has to differentiate one
Parameter sum as Yaa which the sign shows the direction a P will move when the Parameter
a changes
Note the difference between 129 which is appropriate to thedemand anation alone while
24129 refers to
the equilibrium Quantity Thus he part der A P and a are referred to as
comparative static derivatives
Concentrating on p for now we have the following four Part der
111 Ita
outtake
an
31
04
171 Ib
Since all parameters are restricted to being positive we can conclude
17.107
311 37 o and
3 co
We can plot them so each diagram represents a change in one or the parameters We are
Plotting Q on thevertical
gig y.gg pictures an increase in the parameter a to a This
means that a higher vertical intercept for he demand curve
While the slope of b doesnt change the increase in a results
in a parallelshier of the demand are to D
It then creates a new eauilibrium Pt which is what
JPA
sa 70 is saying although for the sake of exposition we've
shown the change to be larger than what the derivative concept

implies
There are certain advantages of using part der to obtainthe result instead of just using
graphs to do so There are two major advantages for his
first the graphical method is subject to dimensional restrictions as heres a limit of how many
endogenous and parameters can be graphically represented
Second he differential result yields a higher level of generality meaning hat 716 will remain
valid regardless of the parameters as longas thesigns are latisfied
So the comparative statics confusions of his model are applicable to an infinite numbers of
combinations a linear demand and supply actions
National Income Mode

We will expand the simple Ch national incomemodel with three endogenous Y C and
Y Ct Iot Go
a P CY TI Cd 0 OCP I 7.171
T rt ft too o c
E
not 2
There are explanations for the restrictions on the values co the parameters L is positive because
in autonomous consumption 13is positive as its MPC tis positive as there are othersources
a income other man taxi and finally f represents income tax rate so it cant be loot
We can solve the model by substituting the third into the second and substitute me resultinto
the first
4 02 t.io
9 1
We can thus obtain 6 comparative shhis derivatives Among these three have special Policy
significance
If i.pt 70 17 s
24
ait
so 7.207
I
Rea art to t 607
i
9.4 16 56
341 1 13 13817 Iggy 5h72
05 41
719 gives us the government expenditure multiplier whith has a positivesign because P is Cl
and 13870 7.20 is he nonincome tax multiplier it shows how a change in T will arrest the
equilibriumincome This is negative in the present modes because the denominator is positive
and the numerator negative Finally 7.11 pint a multiplier but it tells us how much an increase
in f will lower heavilibrium income
Input Output Model
In matrix form the solution or an open input output model is x I A d k we denote

the inverse I Al by V vis hun for instance the solution for a three industry economy
can be written as x Vd or
aim us an
V31 V32 V33
The general answer to the rate of change a the solution x with respect to exogenous
zinal demands di di and do is

21 Vik 17.23
Odu
To see his multiply out Vd in 7.22 and express the solution as
X Wild t viz de f vis do
at ride tunedn turds
x Usidl fuzzda t Vasdz
In this system a three equations each gives a particular solution value as a function co the
exogenous final demand Port der co these produces g comparative statics derivative
III III III
Vii Un V3
7.23
It un sun
4 147 Y 17,5 us
147
which is on expansion a 7.23
Reading 7.27 as hree distinct columns we may combine the three derivatives in each column into
a vector matrix
G
c 3 Ii
Since these are basically the columns of the matrix V by former consolidation we can summarise
the nine derivatives in a single matrix derivative 242d Given x Vd we can write
ve A
3 andrewstudynotes.com
Thus the inverse co the Leontine gives the summary or the comparative statics derivatives These
are useful as they provide the answer to me Question If we change he planning targets as
reelected in Cdi da edn how must we change he output goals to meet the direct and
indirect requirements to avoid bottlenesu
7 6 Note on Jacobian Determinants

Partial derivatives are also users in testing whether here exists functional dependence linear
or nonlinear among a set of n functions in n variables this is related to the Iciobian determinants
Consider
71 271 3 2
7 24
71 4xi tizz x g xp
If we get all 4 Part der
3 exit tax taxation
33 L
31
and arrange them into a square matrix in a prescribed order called a Jacobian matrix
denoted I and takes its determinant the result will be the Jacobian determinant 111
3
131 III III Exiting taxation
Also can be expressed as
1 1 Ii l
More generally
Yi t C Xuxa xn
Ya 5 x axe Xn
Yn S CX an xn
we can derive a total a n part dev Adopting the notation fi 2x we can write
t i 1
241 2x 74112xn
Ii
7 27
am am
A Jacobian test for me existence a functional dependants is provided by the following theorem 1a
the value is zero then the functions are hnitionally linearly or nonlinearly dependent
As an example thetwo anations in 7.24 he Jacobian as given in7.25 has the value
1 I 24 x t 36 2 Caux t36 27 0
Thus the Jacobian vanishes and the two unctions are linearly dependant
In the case of linear anitions the idea a IA 1 0 is he some win the Jacobian so Ako
is just a special application a me Jacobian criterion a functional dependence
2 717122
10 51
1h7
1243g

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CHAPTER 7 RULES OF DIFFERENTIATION

AND HEIR USE IN COMPARATIVE I P

Eventhough he derivative is just the limit of the diererence Quotient g g cu as u so we

7 1 Rules of Differentiation For a function or One variable

Constant Function Rule

Alternatively given y fax n the derivative is

This is showing hat as an operator symbol thatgives instructions to perform an operation

sin fig tay.tn x ifu II 15,8 0

Since fkn represents all value of x at all it can be generalised to 54 7 0

Zero for all values of x 217122 3

Power Function Rule

Since N represents we can write f ex l Proving this is

We can illustrate the rule for when n isnt a positive integer

Find the derivative y Xo with 7.1

Y 4 3 whith we can rewrite as ye x 3

Derivatives are actions or the IU x such as 5 ex 3x which ie we substitute direeren

Power Function Rule Generalized

When a multiplicative constant c appears in the power function i e fax Cx thederivative is

7 2 Rules a Diererentiating Involving Two or More functions or the Same Variable

More concretely 3 2 and 12 how do

Sum Dierevence Rule

ÉÉf ux we get U2 x But 14 3 5 t g so y can be seen as the sum of two functions

fax7 5 3 and according to the role we have

We can extend this to more functions so

In Fig 7 la a linear total function is

In Fig 7 lb a non linear gives rise to

In fig 7 to the nonsmoothness or he

Thus the smoothness of a primitive

its derivative action

Instead co saying that a function is

The collowing notations are used

tax g ex fax go t g ex day sext

fax g Cal t golf ext

Lets provide the proof for 74 to give an intuition

faxe g x fax gCN fax gcn SCN g CN

Ii texting 9939ft thing gon fine

fax gex FCN G CN gens f CN 7 t

Since N represents value of X we can replace every N terms win x

We can extend this to the case a 3 functions

textgex hey t fax g'ex next t sext gax h'ex 7 6

Finding Marginal Revenue Function From Average Revenue function

use the product rule to get

for all possible Q hows the MR and AR curves must coincide

The conclusion just stated is Qualitative

referring to the position of both curves

Lets look at G N for hat output the

The magnitude a N is already specified while 5 an is simply the slope or he AR tree

To Provide the Proof For any valve or x N we have

go.im Ihsan 3 99111J

Relationship Between Marginal Cost and Average Cost Functions

avg Cost when output Varies

Given a Tc unction C C Q the AC is a Quotient or two functions or Q since ACECca la

Fromthis it follows mat for 670

and similarly with higher powers

ÉÉIhIu hate me useniness a me chain role by considering differentiating 2 1 2 3 27

ÉÉÉ a r revenue anction Rascal where a gait kind dat we have

Inverse Funition Rule

x f Cy t is a symbol like f instead a a reliprocal

class a unctions known as strictly monotonic Cor monotone actions