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Unformatted text preview: st derivative). EXAMPLE: Two different payment schemes: Payment Scheme Pay Payment A $100 Payment B 50% of $200 50% of $0 • We prefer payment scheme A instead of payment scheme B because B is riskier . The Expected value of A = $100 The Expected value of B = 0.5*(200) + (0.5)*(0) = 100 Those who choose A also have a diminishing marginal utility. People who prefer A experience less utility with each additional dollar they earn. Addition Rule : • If f(x) = g(x) + h(x) SUMMARY • He just wants us to know how to take derivatives and then use those tools to analyze profits and functions. • This is the extent of the calculus we will be doing in this class. HOMEWORK: • Read the Calculus Appendix (CA) • Complete the rest of the worksheet...
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 Spring '09
 Nonnenmacher
 Economics, Calculus, Derivative, Utility, Diminishing Marginal Utility

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