Please give five(5) areas in Economics where Differentiation (Calculus) is Applied, give an area then a brief introduction

Economics Dec 14, 2020

Please give five(5) areas in Economics where Differentiation (Calculus) is Applied, give an area then a brief introduction.

Expert Solution

1. Marginal cost: It is nothing but the cost associated in producing 1 extra unit of a good. It's achieved by differentiating cost function with respect to quantity.

2. Marginal revenue: It is the additional revenue generated by producing 1 extra unit of a good. It's achieving by differentiating revenue function with respect to quantity.

3. Profit maximization: Achieved by differentiating the profit function and equating it to 0.

4. Marginal rate of substitution: Marginal rate of substitution is the rate at which a consumer can give up some amount good 1 in exchange for good while maintaining the same utility.

5. Marginal utility: The benefits gained from consuming one additional unit of a good.

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