Derivatives of Exponential Functions

Simone Moriconi∗

January 31, 2018

1 Introducing a simple exponential function

In this hand-out we review very simple notions, which regards the derivatives of exponential
functions. These are the type of derivatives that are useful to solve exercises in the course of
Microeconomics - MSc in Finance.
Let us consider a simple exponential function y(x) = xa . Let us depict y on the vertical
axis on the cartesian space, and x on the horizontal axis. Let a be a positive number i.e. a > 0.
Depending on the precise value taken by a, the function has the shape described in figure 1. If
a = 1 the function is linear (black line in figure 1). If a > 1, the function will be convex (blue
line in figure 1). Finally if a < 1, the function will be concave (red line in figure 1).

2 The first derivative of an exponential function

The derivative of the exponential function y = xa with respect to x is to be computed according
the following general rule:
dy(x) 0
= y (x) = a ∗ xa−1 . (1)
dx
This derivative measures the slope of the function y(x) for each value of x. Find below some
examples:

dy(x) 1
if a = 1/2 → y = x1/2 → dx
= 12 ∗ x 2 −1 = 21 ∗ x−1/2 = 12 x1/2
1
(2)
dy(x)
if a=1 → y=x → dx
= 1 ∗ x1−1 = 1 ∗ x0 = 1 ∗ 1 = 1 (3)
if a = 3 → y = x3 → dy(x) dx
= 3 ∗ x3−1 = 3 ∗ x2 (4)
∗
Associate Professor of Economics, Department of Economics and Quantitative Methods, Iéseg School of
Management E-mail: s.moriconi@ieseg.fr

1
 It is can be easily seen when a = 1, the first derivative is a constant, i.e. does not vary
with x itself. In graphical terms this means that the slope is the same for any level of x. This
is indeed the case when the function y(x) is linear in x. (black line in figure 1). Conversely,
whenever a 6= 1 as in examples 3 and 4, the value of the first derivative depends with the value
of x itself. This means that the slope of the function is not constant, which is indeed the case
of the red and blue lines in figure 1. In particular, it can be easily verified that, when a > 1,
the slope of the function is increasing with x. For example, in the case of a = 3 from equation
4 above we obtain:

dy(x)
if x=1 → dx
= 3 ∗ 12 = 3 ∗ 1 = 3,
dy(x)
if x=2 → dx
= 3 ∗ 22 = 3 ∗ 4 = 12,
dy(x)
if x=3 → dx
= 3 ∗ 32 = 3 ∗ 9 = 27,
....

In fact 3 < 12 < 27 < .... This is the interpretation of the blue curve in figure 1 being convex:
whenever a > 1 the slope of the function increases with x. Simmetrically, consider now
the second example, where a = 1/2:

dy(x) 1 1
if x=4 → dx
= 2 41/2
= 12 ∗ 12 = 14 ,
dy(x) 1 1
if x = 16 → dx
= 2 161/2
= 12 ∗ 41 = 18 ,
dy(x) 1 1
if x = 25 → dx
= 2 251/2
= 12 ∗ 15 = 10 1
,
....

The slope of the function is now decreasing when x increases as 1/4 > 1/8 > 1/10 > .... This
is indeed the interpretation of the red curve in figure 1 being concave: whenever a < 1 the
slope of the function y(x) decreases when x increases. Simmetrically, when a < 1, the
slope of the function is decreasing with x.

3 derivative of composite functions

A more general version of the exponential function seen above is the obtained by premultiplying
the function by another scalar. For example, we can write the function z(x) = bxa with b > 0.
In this case, we should always keep in mind to premultiply the derivative itself by the scalar.
The general rule then becomes:
dz(x)
= b ∗ a ∗ xa−1 . (5)
dx

2
 Figure 1: concave and convex functions

All properties already stated hold the z(.) function. In particular the b > 0, will modify
the slope of the function, but will never change its concavity or convexity. The concavity or
convexity of a function will only depend on the exponent. Finally, it is important to recall the
following important properties of derivatives of composite functions:
dh(x) df (x) dg(x)
if h(x) = f (x) + g(x) → = +
dx dx dx
dh(x) df (x) dg(x)
if h(x) = f (x) − g(x) → = −
dx dx dx
These simple properties allow to compute all type of derivatives that combine different types
of exponential function. For example:
dh(x) df (x) dg(x)
if h(x) = f (x) + g(x) = 5x + 2x2 → = + = 5 + 2 ∗ 2x2−1 = 5 + 4x
dx dx dx
dh(x) df (x) dg(x)
if h(x) = f (x) − g(x) = 5x − 2x2 → = − = 5 − 2 ∗ 2x2−1 = 5 − 4x
dx dx dx

4 the second derivative

The concept of first derivative just described, is useful during the course of microeconomics to
find the slope of a function, and relatedly to compute the marginal value of revenues, costs, prof-
its etc. From time to time, we may also apply the concept of second derivative (i.e. derivative
of a derivative). So the second order derivative of our general exponential function is:
0
d2 y(x) dy (x)
2
= = a(a − 1) ∗ xa−2 , (6)
dx dx
which follows by the application of the general rules above to the first derivative function
0
y (x) = axa−1 .