Topic 7: Rules of

Differentiation

1.Rules of Differentiation

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Differentiation is all about measuring change!
Measuring change in a linear function:

y = a + bx
a = intercept
b = constant slope i.e. the impact of a unit
change in x on the level of y

y2  y1
b = y =
x x2  x1
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 If the function is non-linear:
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e.g. if y = x2
30
y=x2

20

10

0
0 1 2 3
X 4 5 6

y y 2  y1
x
= x2  x1
gives slope of the line
connecting 2 points (x1, y1) and (x2,y2) on a
curve
(16-4)
 (2,4) to (4,16): slope = /(4-2) = 6
 (2,4) to (6,36): slope = (36-4)/(6-2) = 8 3
The slope of a curve is equal to the slope of
the line (or tangent) that touches the curve
at that point
Total Cost Curve

40

35

30

25
y=x2

20

15

10

0
1 2 3 4 5 6 7

which is different for different values of x

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Example:A firms cost function is
Y = X2
X X Y Y
0 0
1 +1 1 +1
2 +1 4 +3
3 +1 9 +5
4 +1 16 +7

Y = X2
Y+Y = (X+X) 2
Y+Y =X2+2X.X+X2
Y = X2+2X.X+X2 – Y
since Y = X2  Y = 2X.X+X2
Y
X
= 2X+X

The slope depends on X and X

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The slope of the graph of a function
is called the derivative of the
function

dy y
f ' ( x)   lim
dx x0 x
• The process of differentiation involves
letting the change in x become arbitrarily
small, i.e. letting  x  0
• e.g if = 2X+X and X 0
  = 2X in the limit as X 0
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 the slope of the non-linear
function
Y = X2 is 2X
• the slope tells us the change in y that
results from a very small change in X
• We see the slope varies with X
e.g. the curve at X = 2 has a slope = 4
and the curve at X = 4 has a slope = 8
• In this example, the slope is steeper
at higher values of X 7
 Rules for Differentiation
(section 4.3)

1. The Constant Rule

If y = c where c is a constant,
dy
0
dx

dy
e.g. y = 10 then dx  0

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2. The Linear Function Rule
If y = a + bx
dy
b
dx
dy
6
e.g. y = 10 + 6x then dx

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3. The Power Function Rule
If y = axn, where a and n are constants
dy
 n.a .x n 1
dx

dy 0
i) y = 4x => dx  4 x 4

dy
ii) y = 4x 2
=> dx  8 x

-2dy 3
iii) y = 4x => dx  8 x
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4. The Sum-Difference Rule
If y = f(x)  g(x)
dy d [ f ( x )] d [ g ( x )]
 
dx dx dx

If y is the sum/difference of two or more

functions of x:
differentiate the 2 (or more) terms
separately, then add/subtract
dy
(i) y = 2x2 + 3x then  4x  3
dx
dy
(ii) y = 5x + 4 then dx  5 11
5. The Product Rule

If y = u.v where u and v are functions of x,

(u = f(x) and v = g(x) ) Then
dy dv du
u v
dx dx dx

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 Examples

dy dv du
If y = u.v  u  v
dx dx dx

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i) y = (x + 2 )(a x + b x )

 x  2 2 ax  b   ax 
dy 2
 bx
dx

ii) y = (4 x 3-3 x + 2 )(2 x 2+ 4 x )

dy   4 x 3  3 x  2  4 x  4   2 x 2  4 x   12 x 2  3 
dx      
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6. The Quotient Rule
• If y = u/v where u and v are functions of x
(u = f(x) and v = g(x) ) Then

du dv
v u
dy dx dx
 2
dx v
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 du dv
v u
u dy dx dx
If y  then 
v dx v2

Example 1

y
 x  2
x  4 

dy

 x  4 1  x  2 1

2
dx x  4 2
x  4 2

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7. The Chain Rule
(Implicit Function Rule)

• If y is a function of v, and v is a function of

x, then y is a function of x and

dy dy dv
 .
dx dv dx

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 dy dy dv
 .
Examples dx dv dx
2 ½
i) y = (ax + bx)
let v = (ax2 + bx) , so y = v½
1
dy 1
dx 2
 2

 ax  bx 2 .2ax  b 

ii) y = (4x3 + 3x – 7 )4
3 4
let v = (4x + 3x – 7 ), so y = v
dy
dx
 3 3
 2
 4 4 x  3 x  7 . 12 x  3 
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8. The Inverse Function Rule
dy 1

If x = f(y) then dx dx
dy
• Examples
i) x = 3y2 then
dx dy 1
dy
 6y so dx  6 y
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ii) y = 4x then
dy dx 1
 12x 2 so dy  12 x 2
dx 18
 Differentiation in Economics
Application I

• Total Costs = TC = FC + VC
• Total Revenue = TR = P * Q
  = Profit = TR – TC
• Break even:  = 0, or TR = TC
• Profit Maximisation: MR = MC

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