- Di erentiate logarithmic functions

Objective 1. Di erentiating logarithmic functions to a base e.

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Objective 2. Di erentiating logarithmic functions to a base other than e.
First step: we can convert the logarithm to natural logarithms via the change-of-base formula.

Second step: di erentiate the resulting expression

IOW: but don’t memorize
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 - Di erentiate exponential functions

Objective 1. Applying the exponential formula

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This graph is called the normal
curve and it is bell shaped.
Objective 2. To di erentiate an exponential function with a base other than e.

First step: express b^u as an exponential function with the base e.

Second step: differentiate.

IOW: but don’t memorize
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- Calculate elasticity of demand and supply.
- Determine whether demand/supply is elastic, inelastic, etc.

Objective 1. To analyze the economic concept of elasticity

Elasticity of demand is a means by which economists measure how a change in the price of a
product will affect the quantity demanded. That is, it measures consumer response to price
changes. More precisely, it can be de ned as the ratio of the resulting percentage change in
quantity demanded to a given percentage change in price:

Convention:
- Horizontal axis: q-axis
- Vertical axis: p-axis

Elastic vs inelastic goods

Example. A price increases by 5% and the quantity demanded decreases by 2%,

what is the elasticity of demand?
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 Objective 2. To understand the point elasticity of demand

Perfectly inelastic. Inelastic. Elastic. Perfectly elastic.

PED = 0 PED < 1 PED > 1 PED = ∞

Example. Find the point elasticity of demand for the demand function p = 1200 -
q². Evaluate it for q = 10. If price were to increase by 1%, what would be the
change in demand? And if price decreased by 0.5%?
 Objective 3. To understand the relationship between elasticity and revenue
Elasticity of demand affects changes in revenue (marginal revenue).
Hence, total revenue r is increasing on intervals for which demand is elastic, and total
revenue is decreasing on intervals for which demand is inelastic. Thus, we conclude from the
preceding argument that as more units are sold, a manufacturer’s total revenue increases if
demand is elastic but decreases if demand is inelastic. That is, if demand is elastic, a lower
price will increase revenue. This means that a lower price will cause a large enough increase
in demand to actually increase revenue. If demand is inelastic, a lower price will decrease
revenue. For unit elasticity, a lower price leaves total revenue unchanged.

Ex. If you owned a coffee shop and wanted to increase your prices, this ‘responsiveness’ is
something you need to consider. When you increase prices, you know quantity will fall, but by
how much?
If we were to calculate elasticity at every point on a demand curve, we could divide it into these
elastic, unit elastic, and inelastic areas, as shown below. This means the impact of a price
change will depend on where we are producing.

The rst thing to note is that revenue is

maximized at the point where elasticity is unit
elastic.
If elastic: The quantity effect outweighs the
price effect, meaning if we decrease prices, the
revenue gained from the more units sold will
outweigh the revenue lost from the decrease in
price.
If inelastic: The price effect outweighs the
quantity effect, meaning if we increase prices,
the revenue gained from the higher price will
outweigh the revenue lost from less units sold.
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- Apply implicit di erentiation

Objective 1. To discuss the notion of a function de ned implicitly

Implicit differentiation is a technique for differentiating “functions” that are
not given in the form y = f(x) nor in the form x = g(y).
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Objective 2. To determine derivatives by means of implicit di erentiation

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b) Is q a uniquely de ned function of p?
c) Find dq/dp for p = 2.
d) Estimate q if p = 2.01.
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 13

- Apply logarithmic di erentiation

Objective 1. To describe the method of logarithmic di erentiation

A technique called logarithmic differentiation often simpli es the differentiation
of y = f(x) when f(x) involves products, quotients, or powers.
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Objective 2. To show how to di erentiate a function of the form u^v

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- Evaluate higher order derivatives.
*We can skip higher order implicit di erentiation

Objective 1. To nd higher-order derivatives directly (implicitly)

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