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Has anybody seen anything this expression before?

Economics Asked on April 8, 2021

Suppose that $z(cdot)$ is the demand function of an individual (consumer/investor) and $p$ is the price of the commodity/asset demanded. Does anybody know what is the intuition behind the following expression?
begin{align}pz^{‘}(p)+z(p)end{align}

It seems to me like the derivative of $(pz(p))^{‘}$ with respect to $p$. What is the intuition behind this? Has anybody seen anything this expression before?

2 Answers

$pcdot z(p)$ is total revenue (price times quantity), and so its derivative $frac{mathrm d}{mathrm dp}pz(p)=pz'(p)+z(p)$ is marginal revenue.

Correct answer by Herr K. on April 8, 2021

You're correct. Many useful things can be shown by taking this derivative.

Perhaps you were confused because you are used to solving for quantity rather than price - in which case you are more likely to take the derivative of R = z * p(z) with respect to z which gives you p(z) + z * dp(z)/dz

Answered by Dek on April 8, 2021

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