September 4, 2009
Reading
Baye, Ch 2. pp. 3545.
Lecture 7
Collect HW#2 Wednesday.
REVIEW___________________________________________________:
I. Chapter 1.
The Fundamentals of Managerial Economics
B. Components of Effective Decision Making
b. Continuous Decisions (review)
2. Comparing MB to MC
0
100
200
300
400
500
600
0
5
6
7
8
9
10
Output
TC TB
0
20
40
60
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100
0
1
2
3
4
5
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8
9
10
Output
MB, MC
Observe the role of marginals and totals on each graph

b. Continuous Decisions.

Our incremental changes are off just a bit

To calculate the slope of the line tangent to a curve AT A POINT, we take a
derivative. That is, to calculate the slope of the line tangent to
10 QQ
2
at Q=4, for example, find
]
[
)
4
(
)
4
(
10
[
]
4
)
4
(
10
[
lim
2
2
0
Q
Q
Q
Q
Q
Q
∆


∆

+
∆



→
∆
Which reduces to
Q
Q
∆
+
→
∆
2
lim
0
This is the idea of a derivative
MR
MC
TR
MC
MR
Profit
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b. Continuous decisions
2. Some rules for derivatives
3. Working with EXCEL
c. Incremental Decisions
Lecture_____________________________________________________________
Comments
I assume that you all have been exposed to simple differential calculus.
The
above development was done only to complete a little intuition pertaining to calculus.
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 Fall '08
 SHRESTHA
 Economics, Derivative, Slope, continuous decisions, derivatives practice sheet, Collect HW, Managerial Economics B.

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