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
80
100
0
1
2
3
4
5
6
7
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
This preview has intentionally blurred sections. Sign up to view the full version.
View Full DocumentPreview__________________________________________________________
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.
This is the end of the preview.
Sign up
to
access the rest of the document.
 Fall '08
 SHRESTHA
 Economics, Derivative, Slope, continuous decisions, derivatives practice sheet, Collect HW, Managerial Economics B.

Click to edit the document details