(elastic demand) and positive if it is less than unity (inelastic
demand).
Total expenditure is maximized when is equal to zero.
As can be seen from Equation 8.4 , this occurs when elasticity is
equal to −1.
9. The distinction between an incremental change and a marginal
change is the distinction for the function between
and the derivative. The latter is the limit of the
former as approaches zero. We shall meet this distinction
repeatedly—in this chapter in reference to marginal and
incremental utility and in later chapters with respect to such
concepts as marginal and incremental product, cost, and revenue
Where Y is a function of more than one variable—for example,
—the marginal relationship between Y and X is the
partial derivative rather than the total derivative
10. The hypothesis of diminishing marginal utility requires that we
can measure utility of consumption by a function
where are quantities of the n products consumed. It
really embodies two utility hypotheses: first,which says that the consumer can get more utility by increasing
consumption of any specific product; second,dTE/dp
Y =Y(X)
ΔY/ΔX dY/dX
ΔXY =f(X,Z)
∂Y/∂X dY/U=U(X 1 ,X 2 ,...,Xn)X 1 ,...,Xn∂U/∂Xi> 0