Chapter 12

Point elasticity of demand, η

Measures how customer demand is
affected by a change in price
η= p dq
p is price per unit at which q units
q dp are demanded.

|η(p)| > 1 demand is elastic

|η(p)| = 1 unit elasticity
|η(p)| < 1 demand is inelastic
 Elasticity and Rate of Change

dr 1+1
= p( )
dq η
For a given percentage change in price:
-greater percentage in quantity demanded, demand is elastic
-lesser percentage in quantity demanded, demand is inelastic
and conversely.
 Example 2 pg 542
Determine the point of elasticity for
the following demand equation
given p=15

q=p2 - 40p + 400, q > 0

η= p dq
q dp
Demand
=15 (-10) = -6 is elastic
for p=15
25
Implicit Differentiation

If an equation implicitly defines y

as a function of x (as opposed to
defining it explicitly in the form
y=f(x) as the usual practices do),
then dy/dx can be found by
implicit differentiation, and then
solve the resulting equation for
dy/dx.
Implicit Differentiation

d (yn)= nyn-1 dy
dx dx

More generally,

d dy
(f(y))= f’(y)
dx dx
Implicit Differentiation – Example 2 pg 547

Find dy/dx if x3 + 4xy2 – 27 = y4

Use product rule
d(x3 + 4xy2 – 27) = dy4
dx dx
dy dy
=> 3x + 8xy dx + 4y = 4y dx
2 2 3

dy dy
=> 8xy - 4y 3
= - 3x2 - 4y2
dx dx

dy
=> (8xy - 4y3) = - 3x2 - 4y2
dx
dy
=> = - 3x2 - 4y2 = (3x2 + 4y2)
dx
(8xy - 4y3) (4y3 – 8xy)
Logarithmic Differentiation

If f(x) consists of products, quotients, or powers.

1. Take the natural logarithm of both sides of y=f(x)

to obtain ln y = ln f(x)
2. Simplify ln f(x) by using properties of logarithms
3. Differentiate by sides of ln y = ln f(x) with respect
to x
4. Solve for y’
5. Express the answer in terms of x only
(substituting f(x) for y)

This method can also be used to differentiate y=u v,

where both u and v are functions of x.
Logarithmic Differentiation – Example 4 pg 551

Find derivative of y = (1 + ex)lnx

This equation has a form y=uv, where u = 1 + ex) and

v=ln x (the form is similar to example 2 page 550)

ln y = ln [(1 + ex)lnx]

ln y = (ln x) ln [(1 + ex)]

y’ = 1 ln [(1 + ex)] + ln x ( 1 . ex)

y x 1 + ex

y’ = (1 + ex)lnx (ln(1+ex) + exlnx )

x 1 + ex
Newton’s Method

Use to approximate the roots of

the equation f(x)=0 provided that
f(x) is differentiable:
f(xn)
xn+1 = xn - , n=1,2,3
f’(xn)
Higher-order derivatives

Since the derivative f’(x) is itself a function, it

can be successively differentiated to obtain
the second, third, and other higher-order
derivatives [f’(x), f’’(x),……, fn(x)].
Higher-order Differentiation – Example 1 pg 557

Find all higher-order derivatives of f(x)= 6x3-12x2+6x-2

f’(x)= 18x2 – 24x

f’’(x)= 36x -24

f’’’(x)= 36

f4(x)= 0
Higher-order Differentiation –

-Evaluation (example 3 pg 558)

-Rate of Change (example 4 pg 558)

-Implicit differentiation (example 5 and 6 pg 558-559)