Business Economics

Optimizing Techniques
& Derivatives
Dr. Qais Aslam
Expression of Economic Relationships
Can be expressed in terms of
Table,
Graphs and
Formulas
Expression of economic
relationships in terms of equations
is useful, because it allows us to use
the powerful techniques of
differential calculus (derivatives) in
determining the OPTIMAL solutions
of an economic problem
 Total, Average and Marginal
Relationships
The
Relationship between Total, Average and Marginal
are important to measure and calculate the optimal in an
Optimization Analysis
This method explains the relationships between the
variables in Revenue, Product (output), Cost, Profit,
Demand, Supply, Price or Profit analysis
Totals are calculated by adding up al the economic
values in a certain analytic relationships
Averages are calculated by dividing the Total Values by
total quantity of inputs or outputs (Average = )
Marginal is the rate of change in the equation; this is also
the slope of the total function and is calculated
(a) by subtracting the second last value from the last
value or n- (n-1)
(b) by the formula = where measures rate of change
And ( c) through derivatives or
 Derivative: The Rule of
Differentiation in Calculus
Concept of derivation is closely related to
concept of Margin which measures the
rate of change in an economic function
Rule One: CONSTANT FUNCTION RULE
The derivative of a constant function is
ZERO

or
 Rule Two: Power Function Rule
The derivative of a power function,
or y = or
Exponent b is multiplied with the coefficient
a and the power of the equation diminishes
by one
Rule Three: Sum & Difference Rule (Plus or
Minus)
The derivative of a sum or difference is
equal to the sum (difference) of the
derivative on the individual term
V than +(-)
 Rule Four: Product Rule (Multiplication) :
The derivative of a product of two
expressions is equal to the first
expression multiplied by the derivative
of the second expression plus the
second equation multiplied by the
derivative of the first expression, when
y = u . v than
+V.
 Rule Five: Quotient Rule (Division)
The derivative of the quotient of two
expressions is equal to the
denominator multiplied by the
derivative of the numerator, minus the
numerator times the derivative of the
denominator, all divided by the
denominator squared
If y = than
-u. /