2.5 Marginal Analysis & Approximations...

2.5 Marginal Analysis & Approximations... - MAC2233...

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MAC2233 (2.5) MDC- North Marginal Analysis  is the use of the derivative to approximate change in a quantity that results from a one-unit increase  in production.  Suppose  R(x)  is the revenue generated when  x  units of a particular commodity are produced and  P(x)  is  the corresponding profit.  When  x = x 0  units are being produced, then: Marginal Revenue   is   R’(x) .   It approximates   R(x 0   + 1) – R(x 0 ),   the additional revenue generated by  producing one more unit. Marginal Profit  is  P(x 0 ) .   It approximates  P(x 0  + 1) – P(x 0 ),  the additional profit generated by producing one  more unit. Marginal Cost:    If   C(x)   is the total cost of producing   x   units, then the marginal cost is   C’(x) , which  approximates the additional cost   C(x 0  + 1) – C(x 0 when the level of production is increased by one unit. Approximation by Increments:  
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2.5 Marginal Analysis & Approximations... - MAC2233...

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