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Chapter 2: Differentiation

ADVANCED MATHEMATICS FOR ECONOMICS

Department of Mathematics, Faculty of Fundamental

Science 1

Hanoi - 2024

1 / 44 Chapter 2: Differentiation
Chapter 2: Differentiation

1 2.1 Derivatives

2 2.2 Techniques of Differentiation

3 2.3 Applications of Derivatives

2 / 44 Chapter 2: Differentiation
Chapter 2: Differentiation

1 2.1 Derivatives

2 2.2 Techniques of Differentiation

3 2.3 Applications of Derivatives

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2.1.1 Slope and Rates of Change
The Slope of a Line
The slope of the nonvertical line passing through the points
(x1 , y1 ) and (x2 , y2 ) is given by the formula

y2 − y1 ∆y
Slope = = .
x2 − x1 ∆x

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 Note: If the line has the equation y = mx + b, then its slope is m.

Rates of Change
The average rate of change of f (x) as x varies from x = c to
x = c + h is defined by

f (c + h) − f (c)
Rateave = .
h
The rate of change of f (x) at x = c is

f (c + h) − f (c)
Rateins = lim .
h→0 h

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6 / 44 Chapter 2: Differentiation
2.1.2 The Derivative

The Derivative of a Function at a Point

Let f be a function defined in an open interval containing c.
The derivative of the function f at c, denoted as f ′ (c), is
defined by

f (c + h) − f (c)
f ′ (c) = lim
h→0 h
provided this limit exists.
f (x) − f (c)
f ′ (c) = lim
x→c x−c

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 Note:
The slope of the tangent line to the curve y = f (x) at the
point (c, f (c)) is f ′ (c).
The rate of change of f (x) with respect to x when x = c is
f ′ (c).

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 Example 1: A toy company can sell x electronic gaming systems
at a price of p(x) = −0.01x + 400 dollars per gaming system. The
cost of manufacturing x systems is given by C(x) = 100x + 10, 000
dollars. Find the rate of change of profit when 10,000 games are
produced. Should the toy company increase or decrease
production?

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 The Derivative as a Function
Let f be a function. Given any number x for which f ′ (x)
exists, we assign to x the number f ′ (x). So we can regard f ′
as a new function, called the derivative of f and defined by

f (x + h) − f (x)
f ′ (x) = lim
h→0 h
The domain of f ′ is the set {x|f ′ (x) exists}.

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 Other Notations:
dy df
The derivative of y = f (x) is sometimes written as or .
dx dx
In this notation, the value of the derivative at x = c is
written as
dy df
or .
dx x=c dx x=c

Differentiable Functions
A function f is said to be differentiable at c if f ′ (c) exists.
A function is said to be differentiable on an open interval if
it is differentiable at every point in the interval.

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2.1.3 Continuity and Differentiability

Theorem
If f is differentiable at c, then f is continuous at c.

Note: The converse of the above theorem is false; that is, there
are functions that are continuous but not differentiable.

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Chapter 2: Differentiation

1 2.1 Derivatives

2 2.2 Techniques of Differentiation

3 2.3 Applications of Derivatives

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2.2.1 Rules of Differentiation, Higher-Order
Derivatives

Rules of Differentiation
If u = u(x) and v = v(x) be differentiable functions, then

(ku)′ = ku′ for any constant k

(u + v)′ = u′ + v ′
(u − v)′ = u′ − v ′
(uv)′ = u′ v + uv ′
 u ′ u′ v − uv ′
=
v v2

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 Basic Differentiation Formulas
1. (c)′ = 0 if c is a constant
2. (xα )′ = αxα−1 for α ∈ R
3. (ex )′ = ex , (ax )′ = ax ln a
1 1
4. (ln x)′ = , (loga x)′ =
x x ln a
5. (sin x)′ = cos x
6. (cos x)′ = − sin x
1
7. (tan x)′ =
cos2 x
1
8. (cot x)′ = − 2
sin x

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 Example 2: Find the derivative of each of the following
functions.
2
a) f (x) = x4 +
x
b) f (x) = (2x2 − 3)ex
x+9
c) f (x) = 2
x − 7x + 1

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 Higher-Order Derivatives
If f is a differentiable function, then its derivative f ′ is also a
function. The derivative of f ′ is called the second derivative
of f , denoted by f ′′ .
f ′′ = (f ′ )′ .
If y = f (x), then the second derivative of y with respect to x
′′ ′′ d2 y
is written as y or f (x) or 2 .
dx

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 The third derivative f ′′′ is the derivative of the second
derivative: f ′′′ = (f ′′ )′ .
In general, the nth derivative of f , denoted by f (n) , is the
derivative of the (n − 1)th derivative:

f (n) = [f (n−1) ]′ .

If y = f (x), the nth derivative is denoted by

dn y
y (n) or f (n) (x) or .
dxn

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 Example 3: Find the second derivative of the function

f (x) = 4x3 + 5x2 − 6x + 1.

Example 4: Find the fifth derivative of the following functions.

a) y = sin x
1
b) y =
x

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2.2.2 The derivative of the composite function

The Rule
If y = f (u) and u = g(x) are both differentiable functions, then

dy dy du
= · .
dx du dx

Example 5: Find the derivative of the following functions.

a) y = (3x2 + 1)3
b) y = sin5 (2x + 1)
c) y = 2sin 3x
d) y = ln(4x3 + x)

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 p
Example 6: Let y = 4 + 3f (x) and suppose that f ′ (1) = 4 and
dy
= 6. Find f (1).
dx x=1

Example 7: Find the nth derivative of the following functions.

1
a) f (x) = for any constant c
x+c
2x + 1
b) f (x) =
3x − 2

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2.2.3 Implicit Differentiation

An equation defines a function implicitly if the function

satisfies that equation.
An equation may define many different functions implicitly.

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 Implicit Differentiation
Suppose an equation defines y implicitly as a differentiable
function of x. To find y ′ , use the following steps:
1) Differentiate both sides of the equation with respect to x.
2) Solve the resulting equation for y ′ in terms of x and y.

Example 8:
a) Find y ′ if y − xy 2 + x2 + 1 = 0.
b) Find the slope of the tangent line to the curve

y − xy 2 + x2 + 1 = 0

at the point (1, 2).

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Chapter 2: Differentiation

1 2.1 Derivatives

2 2.2 Techniques of Differentiation

3 2.3 Applications of Derivatives

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2.3.1 Marginal Analysis and Approximations
Using Increments

In economics, the use of the derivative to approximate the change

in a quantity that results from a 1-unit increase in production is
called marginal analysis.

Marginal Cost
If C(x) is the total cost of producing x units of a commodity,
then the marginal cost of producing x0 units is C ′ (x0 ).
For x0 sufficiently large, C ′ (x0 ) approximates the additional
cost incurred when the level of production is increased from
x0 to x0 + 1.

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 Marginal Revenue and Marginal Profit
Suppose R(x) is the revenue generated when x units of a
commodity are produced, and P (x) is the corresponding profit.
When x0 units are being produced, then
The marginal revenue is R′ (x0 ). For x0 sufficiently large,

R′ (x0 ) ≈ R(x0 + 1) − R(x0 ).

The marginal profit is P ′ (x0 ). For x0 sufficiently large,

P ′ (x0 ) ≈ P (x0 + 1) − P (x0 ).

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 Example 9: A manufacturer estimates that when x units of a
particular commodity are produced, the total cost will be
1
C(x) = x2 + 4x + 57 dollars, and furthermore, that all x units
5
1
will be sold when the price is p(x) = (36 − x) dollars per unit.
4
a) Find the marginal cost and the marginal revenue.
b) Use marginal cost to estimate the cost of producing the fifth
unit.
c) What is the actual cost of producing the 20th unit?
d) Use marginal revenue to estimate the revenue derived from
the sale of the 20th unit.
e) What is the actual revenue derived from the sale of the 20th
unit?

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 Approximation by Increments
If a function f is differentiable at x0 and ∆x is a small
change in x, then

f (x0 + ∆x) ≈ f (x0 ) + f ′ (x0 )∆x.

If ∆f = f (x0 + ∆x) − f (x0 ), then

∆f ≈ f ′ (x0 )∆x.

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 Example 10: The daily output at a certain factory is

Q(L) = 900L1/3 units,

where L denotes the size of the labor force measured in worker-

hours. Currently, 1,000 worker-hours of labor are used each day.
Use calculus to estimate the number of additional worker-hours of
labor that will be needed to increase daily output by 15 units.

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 Differentials
The differential of x is dx = ∆x.
If y = f (x), where f is a differentiable function, then the
differential of y is defined by

dy = f ′ (x)dx.

Example 11: Find the differential of y = x3 + 7x − 2.

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2.3.3 Increasing and Decreasing Functions;
Extrema

Increasing and Decreasing Functions

Let f be a function defined on an interval I, and let x1 , x2 be any
two numbers in I.
A function f is called increasing on I if

f (x1 ) < f (x2 ) whenever x1 < x2 .

f is called decreasing on I if

f (x1 ) > f (x2 ) whenever x1 < x2 .

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33 / 44 Chapter 2: Differentiation
 Theorem
If f ′ (x) > 0 for all x ∈ (a, b), then f is increasing on (a, b).
If f ′ (x) < 0 for all x ∈ (a, b), then f is decreasing on (a, b).

Example 14: Find the intervals of increase and decrease for the
x2
function f (x) = .
x−2

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 Relative Extrema
Let f be a function with domain D and c ∈ D.
f has a relative maximum (or local maximum) at c if there
exists an open interval I containing c such that I ⊂ D and

f (x) ≤ f (c), ∀x ∈ I.

f has a relative minimum at c if there exists an open interval

I containing c such that I ⊂ D and

f (x) ≥ f (c), ∀x ∈ I.

f has a relative extremum at c if f has a relative maximum

at c or f has a relative minimum at c.

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36 / 44 Chapter 2: Differentiation
 Fermat’s Theorem
If f has a relative extremum at c and f is differentiable at c, then

f ′ (c) = 0.

Critical Numbers and Critical Points

A critical number of a function f is a number c in the domain
of f such that either f ′ (c) = 0 or f ′ (c) does not exist.
The point (c, f (c)) is called a critical point of f .

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 The First Derivative Test for Relative Extrema
Suppose that c is a critical point of a continuous function f .
(i) If f ′ changes from positive to negative at c, then f (c) is a
relative maximum of f .
(ii) If f ′ changes from negative to positive at c, then f (c) is a
relative minimum of f .
(iii) If f ′ does not change sign at c, then f has no relative
maximum or minimum at c.

Example 15: Find the relative extrema of the following

functions
a) f (x) = x4 − 6x3
ex
b) f (x) =
x

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 The Second Derivative Test for Relative Extrema
Suppose f ′ (c) = 0, f ′′ is continuous on an interval containing c.
(i) If f ′′ (c) > 0, then f has a relative minimum at c.
(ii) If f ′′ (c) < 0, then f has a relative maximum at c.

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 Absolute Extrema
Let f be a function with domain D and c ∈ D.
f has an absolute maximum (or global maximum) at c if

f (x) ≤ f (c), ∀x ∈ D.

f has an absolute minimum at c if

f (x) ≥ f (c), ∀x ∈ D.

If f has an absolute maximum at c or an absolute minimum

at c, we say f has an absolute extremum at c.

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41 / 44 Chapter 2: Differentiation
 Extreme Value Theorem
If f is continuous on [a, b] then f has an absolute maximum and
an absolute minimum on [a, b].

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 How to Find Absolute Extrema of a Continuous
Function f on [a, b]
1) Find all critical numbers of f in (a, b).
2) Compute f (x) at the critical numbers found in step 1 and at
the endpoints x = a and x = b.
3) The largest of the values found in Step 2 is the absolute
maximum of f , the smallest of these values is the absolute
minimum of f .

Example 16: Find the absolute maximum and absolute minimum

of the function f (x) = x3 − 3x2 + 1 on [−1, 3] .

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2.3.4 The Optimal Choice in Economics

Example 17: A manufacturer estimates that when q thousand

units of a particular commodity are produced each month, the total
cost will be C(q) = 0.4q 2 + 3q + 40 thousand dollars, and all q units
can be sold at a price of p(q) = 22.2 − 1.2q dollars per unit.
a) Determine the level of production that results in maximum
profit. What is the maximum profit?
b) At what level of production is the average cost per unit
C(q)
A(q) = minimized?
q

44 / 44 Chapter 2: Differentiation