7.1.

4 Differentials and small changes (incremental changes)

The rate of change of y w.r.t x [where y = f(x)] has already been defined many times
as ∆ y /∆ x
∆y ∆y ∆y
=
∆x ∆x
→ ∆ y= ( ) ∆x
∆x
And, as ∆ x becomes infinitesimal, these small changes, ∆ x, ∆ y are written as ‘dx’
and ‘dy’ respectively, so the differential of y may be written as
Where dy: differential of y
dx: differential of x
Example:
A supply function is given by the equation P=Q 2.
(a) Find the derivative of P
(b) Find the differential of P
(c) If Q increased by 3%, use differentials to find the approximate change in P
Solution:
(a) The derivative of P simply involves ordinary differentiation as studied in
Chapter 6:
P=Q 2
dP
=2 Q
dQ
(b) Using equation above, where y tends to P and x tends to Q. the differential of
P is defined as
dP
d P= ( )
dQ
dQ

d P=( 2 Q ) d Q
(c) The increase in Q written as
3
∆ Q= ( )100
Q
Note: 3% of Q is never just 3/100, it must be 3% of Q. if you are given a 3%
increase in pay, would you be satisfied with a rise of 3/100 or would you
prefer to get a rise of 3/100 × present pay?
dP
∆ P≅ ( )
dQ
∆Q

3Q 2Q 3 Q 6 6
∆ P≅ ( )
100
2Q≅ ≅
1 100 100
Q2 ≅
100
P

Incremental changes
Incremental changes are small changes in the dependent variable (y), which result
from changes in the independent variable(s). The formula for incremental changes is
derived from equation above, where the differentials dx and dy are replaced by ∆ x
dy
( )
and ∆ y, small changes, but not infinitesimally small changes in x and y. ∆ y ≅
dx
∆x
This formula, often referred to as ‘the small changes’ formula or ‘incremental
changes’ formula, which gives the approximate change in y as a resukt of a small
changes in x, is illustrated graphically in figure below.

Differentials for functions of two variables

The argument for the differential of a function of one variable may be extended to
functions of two variables, so the total differential of z=f ( x , y ), a function of two
variables, is written as
ϑf ϑf
dz= ( ) ( )
ϑx
d x+
ϑy
dy
Or for small changes (incremental changes).
ϑf ϑf
∆ z= ( ) ( )
ϑx
∆ x+
ϑy
∆y