DIFFERENTIAL CALCULUS: THE DERIVATIVE AND THE RULES OF DIFFERENTIATION

𝑑𝑓 𝑑𝑦
Given a function y = f(x), the derivative of the function at x, written 𝑓 ′ (𝑥), y’, 𝑑𝑥 , or 𝑑𝑥 is
defined as

𝑓(𝑥 + ∆𝑥) − 𝑓(𝑥)

𝑓′(𝑥) = lim
∆𝑥→0 ∆𝑥

provided the limit exists.

𝑓(𝑥 + ℎ) − 𝑓(𝑥)
𝑓′(𝑥) = lim
𝑘→0 ℎ

where 𝑓′(𝑥) is read “the derivative of f with respect to x” or “f prime of x.” The derivative of
a function, 𝑓′(𝑥) or simply 𝑓′ is itself a function which measures both the slope and the
instantaneous rate of change of the original function at a given point.

DIFFERENTIABILITY AND CONTINUITY

A function is differentiable at a point if the derivative exists (may be taken) at that point. To
be differentiable at a point, a function must (1) be continuous at that point and (2) have a
unique tangent at that point. Continuity alone, however, does not ensure (is not sufficient
condition for) differentiability.

DERIVATIVE NOTATION
The derivative of a function can be written in many different ways. If 𝑦 = 𝑓(𝑥), the
derivative can be expressed as:

𝑑𝑓 𝑑𝑦 𝜕𝑦 𝑑
𝑓′(𝑥) 𝑓′ 𝑦′ [𝑓(𝑥)] or 𝐷𝑥 ⌈𝑓(𝑥)⌉
𝑑𝑥 𝑑𝑥 𝜕𝑥 𝑑𝑥

RULES OF DIFFERENTIATION
Differentiation is the process of finding the derivative of a function. It simply involves
applying a few basic rules or formulae to a given function. In explaining the rules of
differentiation for a function such as 𝑦 = 𝑓(𝑥), other functions such as 𝑔(𝑥)and ℎ(𝑥) are
commonly used, where g and h are both unspecified function of x and assumed to be
differentiable.

1. The Constant Function Rule

The derivative of a constant function, 𝑓(𝑥) = 𝑘, where k is a constant, is zero.

Given 𝑓(𝑥) = 𝑘, 𝑓′(𝑥) = 0

Example:
5
Given 𝑓(𝑥) = 3, 𝑓′(𝑥) = 0
Given 𝑓(𝑥) = −9, 𝑓′(𝑥) = 0

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2. The Power Function Rule (Power Rule)
The derivative of a power function, 𝑓(𝑥) = 𝑘𝑥 𝑛 , where k is constant and n is any real
number, is equal to the coefficient k times the exponent n, multiplied by the variable x
raised to the (𝑛 − 1) power.

Given 𝑓(𝑥) = 𝑘𝑥 𝑛 , 𝑓′(𝑥) = 𝑘 ∙ 𝑛 ∙ 𝑥 (𝑛−1)

Example:
Given 𝑓(𝑥) = 6𝑥 3 , 𝑓 ′(𝑥) = 6 ∙ 3 ∙ 𝑥 (3−1) = 18𝑥 2
Given 𝑓(𝑥) = 7𝑥 2 , 𝑓 ′(𝑥) = 7 ∙ 2 ∙ 𝑥 (2−1) = 14𝑥
Given 𝑓(𝑥) = 𝑥 5 , 𝑓 ′(𝑥) = (1) ∙ 5 ∙ 𝑥 (5−1) = 5𝑥 4

3. The Rule for Sums and Difference

The derivative of a sum of two functions, is equal to the sum of the derivatives of the
individual functions. Similarly, the derivative of the difference of two functions is equal to
the difference of the derivatives of the two functions.

Given: 𝑓(𝑥) = 𝑔(𝑥) ± ℎ(𝑥) 𝑓′(𝑥) = 𝑔′(𝑥) ± ℎ′(𝑥)

Example:
Given: 𝑓(𝑥) = 16𝑥 4 − 5𝑥 3 𝑓′(𝑥) = (16 ∙ 4 ∙ 𝑥 (4−1) ) − (5 ∙ 3 ∙ 𝑥 (3−1) ) = 64𝑥 3 − 15𝑥 2
Given: 𝑓(𝑥) = 6𝑥 2 + 4𝑥 + 9 𝑓 ′ (𝑥) = 6 ∙ 2 ∙ 𝑥 (2−1) + 4 ∙ 1 ∙ 𝑥 (1−1) + 0 = 12𝑥 + 4

4. The Product Rule

The derivative of a product of two functions is equal to the first function times the
derivative of the second function plus the second function times the derivative of the first
function.

Given: 𝑓(𝑥) = 𝑔(𝑥) ∙ ℎ(𝑥) 𝑓′(𝑥) = 𝑔(𝑥) ∙ ℎ′(𝑥) + ℎ(𝑥) ∙ 𝑔′(𝑥)

Example
Given 𝑓(𝑥) = (4𝑥 5 )(3𝑥 − 2)

Let: 𝑔(𝑥) = 4𝑥 5 ℎ(𝑥) = (3𝑥 − 2)

𝑔′(𝑥) = 4 ∙ 5 ∙ 𝑥 (5−1) = 20𝑥 4 ℎ′(𝑥) = 3

Then substituting the appropriate values in the specified places in the product rule
formula,
𝑓′(𝑥) = 4𝑥 5 (3) + (3𝑥 − 2)(20𝑥 4 )

Simplifying algebraically,
𝑓′(𝑥) = 12𝑥 5 + 60𝑥 5 − 40𝑥 4 = 𝟕𝟐𝒙𝟓 − 𝟒𝟎𝒙𝟒

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5. The Quotient Rule
The derivative of a quotient of two functions is equal to the denominator times the
derivative of the numerator, minus the numerator times the derivative of the denominator,
all divided by the denominator squared.

𝑔(𝑥) ℎ(𝑥)∙𝑔′ (𝑥)−[𝑔(𝑥)∙ℎ′ (𝑥)]

Given: 𝑓(𝑥) = ⁄ℎ(𝑥), where ℎ(𝑥) ≠ 0. 𝑓′(𝑥) = [ℎ(𝑥)]2

6𝑥 3 5
Example: Given: 𝑓(𝑥) = (𝑥 ≠ − 2)
(2𝑥+5)

Let: 𝑔(𝑥) = 6𝑥 3 ℎ(𝑥) = (2𝑥 + 5)

𝑔(𝑥) = 6 ∙ 3 ∙ 𝑥 (3−1) = 18𝑥 2 ℎ(𝑥) = 2

Then substituting the appropriate values in the specified places in the quotient rule
formula,
ℎ(𝑥)∙𝑔′ (𝑥)−[𝑔(𝑥)∙ℎ′ (𝑥)]
𝑓′(𝑥) = [ℎ(𝑥)]2

(2𝑥+5)(18𝑥 2 )−[(6𝑥 3 )(2)]

𝑓 ′ (𝑥) = ⌊(2𝑥+5)⌋2
Simplifying,
36𝑥 3 +90𝑥 2 −12𝑥 3 24𝑥 3 +90𝑥 2 6𝑥 2 (4𝑥+15)
𝑓 ′ (𝑥) = (2𝑥+5)2
= (2𝑥+5)2
= (2𝑥+5)2

6. The Generalized Power Function Rule

The derivative of a function raised to a power 𝑓(𝑥) = [𝑔(𝑥)]𝑛 , where 𝑔(𝑥) is a
differentiable function and n is any real number, is equal to the exponent n times the
function 𝑔(𝑥) raised to the (𝑛 − 1) power, multiplied in turn by the derivative of the
function itself 𝑔′(𝑥).

Given: 𝑓(𝑥) = [𝑔(𝑥)]𝑛 𝑓′(𝑥) = 𝑛[𝑔(𝑥)](𝑛−1) ∙ 𝑔′(𝑥)

Example. Given 𝑓(𝑥) = (𝑥 2 + 8)3 , let 𝑔(𝑥) = 𝑥 2 + 8, then 𝑔′ (𝑥) = 2𝑥. Substituting these
values in the generalized power function formula

𝑓′(𝑥) = 3[(𝑥 2 + 8)](3−1) ∙ (2𝑥)

Simplifying algebraically, 𝑓′(𝑥) = 6𝑥[(𝑥 2 + 8)]2

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7. The Chain Rule
Given a composite function, also called a function of a function, in which y is a function of u
and u in turn is a function of x, that is y = f (u) and u = g (x), then y = f[g(x)] and the
derivative of y with respect to x is equal to the derivative of the first function with respect
to u times the derivative of the second function with respect to x.

𝑑𝑦 𝑑𝑦 𝑑𝑢
= ∙
𝑑𝑥 𝑑𝑢 𝑑𝑥

Given: 𝑦 = (4𝑥 3 + 7)5 . To use the chain rule, let 𝑦 = 𝑢5 and 𝑢 = 4𝑥 3 + 7. Then 𝑑𝑦⁄𝑑𝑢 =
(1) ∙ 5 ∙∙ 𝑢(5−1) = 5𝑢4 and 𝑑𝑢⁄𝑑𝑥 = 4 ∙ 3 ∙ 𝑥 (3−1) + 0 = 12𝑥 2 . Substituting these values

𝑑𝑦
= 5𝑢4 ∙ 12𝑥 2 = 60𝑥 2 𝑢4
𝑑𝑥

Then express the derivative in terms of a single variable, simply substitute (4𝑥 3 + 7) for u.

𝑑𝑦
= 60𝑥 2 (4𝑥 3 + 7)4
𝑑𝑥

HIGHER-ORDER CONDITIONS
The second-order derivative, written as 𝑓"(𝑥), measures the slope and the rate of change of
the first derivative, just as the first derivative measures the slope and the rate of change of
the original or primitive function. The third-order derivative [𝑓′′′(𝑥)]measures the slope
and rate of change of the second-order derivative and so forth. Higher-order derivatives
are found by applying the rules of differentiation to lower-order derivatives as illustrated
below.

Given: 𝑦 = 𝑓(𝑥), common notations for the second-order derivative includes: 𝑓 ′′ (𝑥), 𝑦",
𝑑 2 𝑦⁄𝑑𝑥 2 , 𝐷2 𝑥 ; for the third-order derivatives, 𝑓 ′′′ (𝑥), 𝑦 ′′′ , 𝑑 3 𝑦⁄𝑑𝑥 3 , 𝐷3 𝑥; and so on.

USES OF DERIVATIVES

Marginal Concepts
Marginal revenue in economics is defined as the change in total revenue brought about by
the sale of additional good. Marginal cost is defined as the change in total cost incurred
from the production of an extra unit. Since total revenue (TR) and total cost (TC) are both
functions of their levels of output (Q), marginal revenue (MR) and marginal cost (MC) can
each be expressed mathematically as derivative total function

Given: TR = TR(Q), MR = dTR/dQ

TC = TC(Q) MC = dTC/dQ

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Example:
𝑑𝑇𝐶
If 𝑇𝐶 = 𝑄 2 + 5𝑄 + 72, then 𝑀𝐶 = 𝑑𝑄 = (1)(2)(𝑄)(2−1) + 5(1)(𝑄)(1−1) + 0 = 𝟐𝑸 + 𝟓
𝑑𝑇𝑅
If 𝑇𝑅 = −3𝑄 2 + 95𝑄, then 𝑀𝑅 = = −6𝑄 + 95
𝑑𝑄

Example: Given the demand function 𝑃 = 80 − 3𝑄, the marginal revenue can be found by
first finding the total revenue function and then taking the derivative of that function with
respect to Q. Thus,
𝑇𝑅 = 𝑃𝑄 = (80 − 3𝑄)𝑄 = 80𝑄 − 3𝑄 2
and 𝑀𝑅 = −6𝑄 + 80

If Q = 5, 𝑀𝑅 = −6(5) + 80 = 50, If Q = 7, 𝑀𝑅 = −6(7) + 80 = 38,

Optimization

Example: Given the following total revenue (TR) and total cost (TC) function, maximize
profit (π) for the firm as follows: (1) set-up the profit function, (2) find the critical value(s)
where π is at relative extremum [test the second-order condition], and (3) calculate the
maximum profit.

Given:
𝑇𝑅 = 3300𝑄 − 26𝑄 2 ,
𝑇𝐶 = 𝑄 3 − 2𝑄 2 + 420𝑄 + 750, assuming 𝑄 > 0.

(a) Set up the profit function: 𝜋 = 𝑇𝑅 − 𝑇𝐶

𝜋 = 3300𝑄 − 26𝑄 2 − (𝑄 3 − 2𝑄 2 + 420𝑄 + 750)
𝜋 = 3300𝑄 − 26𝑄 2 − 𝑄 3 + 2𝑄 2 − 420𝑄 − 750
𝜋 = −𝑄 3 − 24𝑄 2 + 2880𝑄 − 750 → 𝑝𝑟𝑜𝑓𝑖𝑡 𝑓𝑢𝑛𝑐𝑡𝑖𝑜𝑛

(b) Take the first derivative of the profit function, set it equal to zero, and solve for Q to find
the critical value(s).

Take the first derivative of the profit function, set it equal to zero
𝜋 = −𝑄 3 − 24𝑄 2 + 2880𝑄 − 750
𝜋 ′ = −3𝑄 2 − 48𝑄 + 2880 = 0

Solve for Q to find the critical value(s).

Factoring
𝜋 ′ = −3𝑄 2 − 48𝑄 + 2880 = 0
𝜋 ′ = −3(𝑄 2 + 16𝑄 − 960) = 0
𝜋 ′ = −3(𝑄 − 24)(𝑄 + 40) = 0
𝑄1 = 24 𝑢𝑛𝑖𝑡𝑠 𝑄2 = −40 𝑢𝑛𝑖𝑡𝑠 → 𝑐𝑟𝑖𝑡𝑖𝑐𝑎𝑙 𝑣𝑎𝑙𝑢𝑒𝑠

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(c) Take the second order derivative and evaluate it at the positive critical value. Then
check the sign for concavity to be sure in represents a relative maximum. Ignore the
negative critical value. It has no economic significance and will prove mathematically to be
relative minimum.

Second order derivative

𝜋 = −𝑄 3 − 24𝑄 2 + 2880𝑄 − 750
𝜋 ′ = −3𝑄 2 − 48𝑄 + 2880 = 0
𝜋 ′′ = −6𝑄 − 48

𝜋 ′′ (𝟐𝟒) = −6(24) − 48 = −192 < 0, concave, relative maximum

𝜋 ′′ (−40) = −6(−40) − 48 = 192 > 0, convex, relative minimum

Profit is maximized at Q = 24 units where

𝜋(24) = −(𝟐𝟒)3 − 24(𝟐𝟒)2 + 2880(𝟐𝟒) − 750
𝜋(24) = 𝑃𝐻𝑃40,722

Profit is minimized at Q =−40 units where

𝜋(−40) = −(−40)3 − 24(−40)2 + 2880(−40) − 750
𝜋(−40) = −𝑃𝐻𝑃90,350.00

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