Chapter 2 Handouts What is a derivative

The formula we use measures the slope of the red line

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Unformatted text preview: increase in output in this range, rather than at one spot exactly. The formula we use measures the slope of the red line shown above (slope = rise/run = change in TR / change in Q here). But what if we wanted to be much more precise and measure marginal revenue exactly at point B or C? To do that, we’d need to approximate the slope at that point, as shown by the yellow or blue lines which lies tangent (a line that touches the curve only at one point) to the TR curve. So how to we know the slope of these lines? If we have a graph, we could measure the slope of these tangents by using the formula rise/run. We can do the same thing though if we have an equation for the TR curve and using calculus. Differentiation is just really a fancy term for “slope finding” – because that’s what it does. By taking a derivative you get an equation that when you substitute in values for an independent variable, will give you the slope at any point exactly. 1 MBA 6651 Differentiation: What is It? Dr. Wendy Bailey By using taking the derivative of total revenue with...
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