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Microeconomics: Math Review

This document provides a math review of concepts related to microeconomics including: 1) Calculating the slope of a line using rise over run and determining the equation of a line given its slope and y-intercept. 2) Finding the intersection point of two lines by setting their equations equal to each other and solving the system of equations. 3) Approximating the slope of a curve at a point and defining the true slope as the derivative, or dy/dx, at that point. 4) Calculating the area of basic geometric shapes like rectangles and triangles using appropriate formulas involving length, width, base, and height. 5) Interpreting the area under a cost curve as the total

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Dennis Lee
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48 views9 pages

Microeconomics: Math Review

This document provides a math review of concepts related to microeconomics including: 1) Calculating the slope of a line using rise over run and determining the equation of a line given its slope and y-intercept. 2) Finding the intersection point of two lines by setting their equations equal to each other and solving the system of equations. 3) Approximating the slope of a curve at a point and defining the true slope as the derivative, or dy/dx, at that point. 4) Calculating the area of basic geometric shapes like rectangles and triangles using appropriate formulas involving length, width, base, and height. 5) Interpreting the area under a cost curve as the total

Uploaded by

Dennis Lee
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Microeconomics

Math Review

Y
20

y-intercept (b) = 15
16

The slope of a line is constant (its the same no matter where you measure it).
slopeAB (m)
C

12

rise 15 1.5 run 10

Equation of the Line


slopeCD rise 6 (m) 1.5 run 4

rise rise

y mx b y 1.5 x 15

D
run run

B
5 10 15

Y
20

16

Heres a line with a positive slope.


slopeAB rise 9 0.5 run 18
D
rise

12

slopeCD
8

rise 4 0.5 run 8

Equation of the Line


rise

y mx b y 0.5 x 4

C A
run run

y-intercept = 4
5 10 15

Y
20

Solving a system of 2 equations: Find the intersection of the 2 lines.

16

Equation of Line 1 y 1.5 x 15


12

Equation of Line 2
Line 2

y 0.5 x 4

Line 1

10

15

System: 1.5 x 15 0.5 x 4 2x 11 x 5.5 y 0.5x 4 6.75, or y -1.5x 15 6.75

Y
20

The slope of a curve is not constant, it changes at every point.


An approximation to the slope at A is the slope of the line between A and another point on the curve. The closer the other point, the better the approximation.

16

slopeA
12

dy 5 5 dx 1

slopeAB
8

y 7 2.33 x 3

B
4

As the other point gets infinitesimally close to A, we have the true slope. We also call it the y 11 slopeAC 0.92 derivative of y with respect to x at x 12 A, or dy/dx. We call the green line the tangent line to A. The slope of the tangent line is equal to the slope of the curve at A. Notice it only touches the curve at one point (A).

C
5 10 15

Y
20

What is the area of this rectangle?


16

12

width
8

length

area length* width 12 * 9 108

10

15

Y
20

What is the area of this triangle?


16

12

1 1 area * base * height 12 *11 66 2 2


height

base
5 10 15

Y
20

16

Sometimes you have to be a little creative in choosing your base and height

12

height base
8

1 1 area * base * height * 8 *11 44 2 2


4

10

15

Y
20

The area under a curve can have an important economic interpretation.


For example, suppose the x-axis measures pounds (in thousands) and the y-axis measures costs per pound, in dollars, for a supplier of crab legs.

16

12

Then the area under the curve out to 10,000 units represents the total cost of supplying 10,000 pounds of crab legs. Formally, the area under a curve is called an integral. In this case, we can calculate it with simple geometry rather than using calculus.
5 10 15

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