ECON111:

Mathematics for Economics and Business

(Differentiation and Optimisation (1/3))

Dr Yigit Oezcelik

Yigit.Oezcelik@liverpool.ac.uk
Management School (ULMS)

Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 1 / 20

Outline

We learn derivatives and some rules to obtain the derivatives:

We will learn how to differentiate functions.
Differentiation rules
Reading:
Renshaw Chapters 6, 7, 8, 9, 13

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 Differentiation

Differentiation

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 Differentiation Derivatives and Differentiation

Derivatives and Differentiation (1/2)

A linear function can be expressed as

y = f (x) = mx + c,

where m is the slope parameter.

Given two sets of coordinates (x1 , y1 ) and (x2 , y2 ) the slope is
given by
y2 − y1 ∆y
m= =
x2 − x1 ∆x
The constant slope measures the sensitivity of the value of the
function f (or dependent variable y) to the change of its
argument x.

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 Differentiation Derivatives and Differentiation

Derivatives and Differentiation (2/2)

If the function is non-linear, we can use the derivative to measure
the sensitivity of the function to the change of its argument x.
Consider a function y = f(x).
The derivative of f(x) at a given input value x is the slope of the
tangent line to the function curve at x, usually denoted by
dy
or f ′ (x).
dx
NOT REQUIRED: More formally,
f (x + h) − f (x)
f ′ (x) = lim .
h→0 h
Differentiation is the process of deriving a mathematical
expression for the derivative.
Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 5 / 20
 Differentiation Differentiation Rules

Derivatives of Constant and linear functions

If y = f (x) = c, which is a constant function, the differentiation
rule is
dy df (x)
f ′ (x) ≡ = = 0,
dx dx
i.e. the derivative of a constant is zero.
Example:
f (x) = 123 =⇒ f ′ (x) = 0
If y = f (x) = mx + c, which is a linear function, the
differentiation rule is
dy df (x)
f ′ (x) ≡ = = m,
dx dx
i.e. the derivative of a linear function is its slope parameter.
Example:
f (x) = 12x + 3 =⇒ f ′ (x) = 12
Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 6 / 20
 Differentiation Differentiation Rules

Derivatives of Polynomial Functions (1/2)

If y = f (x) = axn , which is a polynomial function with a as a
constant, the differentiation rule is
dy df (x)
f ′ (x) ≡ = = n · a · xn−1 ,
dx dx
noting that a polynomial function reduces to a linear function
when n = 1.
This rule is known as the power rule or the polynomial rule.
If n = 0, this gives the constant function rule.
If n = 1, this gives the linear function rule.
We can transform fractions and roots into polynomials and apply
this rule:
√ m a
f (x) = n xm = x n or f (x) = n = a · x−n
x
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 Differentiation Differentiation Rules

Derivatives of Polynomial Functions (2/2)

Example:
f (x) = 3x2 =⇒ f ′ (x) = 2 · 3x2−1 = 6x

1 1 3
f (x) = x3 + 2x + 1 =⇒ f ′ (x) = 3 · x3−1 + 2 = x2 + 2
4 4 4
Question: Differentiate following function:
√ 3
f (x) = 2 x +
x
Solution:
√ 3
f (x) = 2 x + = 2x0.5 + 3x−1
x
f ′ (x) = 0.5 · 2x0.5−1 + (−1) · 3x−1−1 = x−0.5 − 3x−2
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 Differentiation Differentiation Rules

The Chain Rule (1/3)

In some cases, functions can be nested.

Consider the function

y = f (u(x)),

where f is a function of u, and u is a function of x.

The chain rule gives

dy df (u(x)) du(x)
= · = f ′ (u(x)) · u′ (x)
dx du dx
This is the derivative of f with respect to (w.r.t.) u multiplied by
the derivative of u w.r.t. x.

Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 9 / 20

 Differentiation Differentiation Rules

The Chain Rule (2/3)

Example: Differentiate the following function with respect to x
y = (2x + 3)10
First, identify f(x) and u(x).
u(x) is a function that has been inserted into f(x).
Upon closer inspection of y once can see that u(x) = 2x + 3.
to find f(x) replace u(x) with an x which gives us f (x) = x10 .
Now we need f’(x) and u’(x). f ′ (x) = 10x9 and u′ (x) = 2.
Now we can use all this information to determine
dy
dx
= f ′ (u(x)) · u′ (x).
We need u′ (x) and f ′ (u(x).
To get f ′ (u(x)), replace x with u(x), so we get 10(2x + 3)9
dy
Combining all yields dx = 10(2x + 3)9 · 2 = 20(2x + 3)9
Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 10 / 20
 Differentiation Differentiation Rules

The Chain Rule (3/3)

Question: Differentiate P with respect to Q.
P = (2Q + 1)3
Solution:
Determine u(Q) and f(Q)
u(Q) = 2Q + 1
Replace u(Q) with Q to get f(Q):
f (Q) = Q3
Now determine u’(Q) and f’(Q)
f ′ (Q) = 3Q2 and u′ (Q) = 2
Replacing Q in f’(Q) with u(Q)=2Q +1 and combining all
3(2Q + 1)2 · 2 = 6(2Q + 1)2 .
Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 11 / 20
 Differentiation Differentiation Rules

The Product Rule (1/3)

Functions can be connected through multiplication.
Consider the function

y = u(x) · v(x)

which is the product of two functions u and v.

Both functions u and v have the argument x.
The Product rule gives
dy
= u(x) · v ′ (x) + u′ (x) · v(x)
dx
This is the product of u and the derivative of v w.r.t. x added to
the product of v and the derivative of u w.r.t. x.
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 Differentiation Differentiation Rules

The Product Rule (2/3)

Example: Differentiate the following function with respect to x
y = x2 (2x + 1)3
First determine u and v:
u(x) = x2 and v(x) = (2x + 1)3
Determine u’(x) and v’(x)
u′ (x) = 2x and v ′ (x) = 6(2x + 1)2
(see second example for chain rule for the derivation of v’(x),
just replace Q with x)
Now combine everything:
dy
= x2 · 6(2x + 1)2 + 2x · (2x + 1)3 = 2x(2x + 1)2 (5x + 1)
dx
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 Differentiation Differentiation Rules

The Product Rule (3/3)

Question: Differentiate P with respect to Q.

P = 3Q2 (Q + 2)3

Solution:
Determine u(Q) and v(Q)
u(x) = 3Q2 and v(x) = (Q + 2)3
Determine u’(x) and v’(x)

u′ (x) = 6Q and v ′ (x) = 3(Q + 2)2

Now combine everything:

dP
= 3Q2 · 3(Q + 2)2 + 6Q · (Q + 2)3 = 3Q(Q + 2)2 (5Q + 4)
dQ
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 Differentiation Differentiation Rules

The Quotient Rule (1/3)

Functions can be connected through division.
Consider the function
u(x)
y=
v(x)

which is the quotient of two functions u and v.

Both functions u and v have the argument x and v ̸= 0 for all x.
The Quotient rule gives

dy u′ (x) · v(x) − u(x) · v ′ (x)

=
dx v(x)2

Where u’ is the derivative of u w.r.t. x and v’ is the derivative of

v w.r.t. x.
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 Differentiation Differentiation Rules

The Quotient Rule (2/3)

Example: Differentiate the following function with respect to x

1 + x2
y=
2 − x3
First determine u and v:
u(x) = 1 + x2 and v(x) = 2 − x3
Determine u’(x) and v’(x)

u′ (x) = 2x and v ′ (x) = −3x2

Now combine everything:

dy (2 − x3 ) · 2x − (1 + x2 )(−3x2 ) 4x − 2x4 − (−3x2 − 3x4 )
= =
dx (2 − x3 )2 (2 − x3 )2

Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 16 / 20

 Differentiation Differentiation Rules

The Quotient Rule (3/3)

Question: Differentiate P with respect to Q.
−Q2 + 3
P =
Q
Solution:
Determine u(Q) and v(Q)
u(x) = −Q2 + 3 and v(x) = Q
Determine u’(x) and v’(x)
u′ (x) = −2Q and v ′ (x) = 1
Now combine everything:
dP −2Q · Q − ((−Q2 + 3) · 1) −Q2 − 3
= =
dQ Q2 Q2
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 Differentiation Differentiation Rules

Rule for Natural Exponential Functions

The natural exponential rule is applied when y = ef (x) , then
dy
= f ′ (x) · ef (x)
dx
where f(x) is the first order derivative of f(x) w.r.t. x.
Example:
dy
y = e−2x =⇒ = −2e−2x
dx
Question: Differentiate P with respect to Q
3 +Q
P = e2Q
Solution:
3 +Q dP 3
P = e2Q =⇒ = (6Q2 + 1)e2Q +Q
dQ
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 Differentiation Differentiation Rules

Rule for Natural Logarithm Functions

The natural exponential rule is applied when y = lnf (x), then
dy f ′ (x)
= ,
dx f (x)
where f(x) is the first order derivative of f(x) w.r.t. x.
Example:
dy −2 1
y = ln(−2x) =⇒ = =
dx −2x x
Question: Differentiate P with respect to Q
P = ln(2Q3 + Q)
Solution:
dP 6Q2 + 1
P = ln(2Q3 + Q) =⇒ =
dQ 2Q3 + Q
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 Differentiation Differentiation Rules

Thank you!
Do you have any questions?
Yigit.Oezcelik@liverpool.ac.uk

Dr Yigit Oezcelik (ULMS) Week 06 30/10/23 20 / 20