<p>You can see the applications in microeconomics. A tiny example could be on elasticity of demand. </p>

<p>Let's say </p>

<p>$$ D = \frac{tC}{P+t} $$</p>

<p>where $P, t, C$ are respectively price, tax and constant. If you like to see the effect of tax change on demand you can use the difference quotient ;</p>

<p>$$\Delta D = \frac{(t + \Delta t C)}{P + t + \Delta t} - \frac{tC}{P + t}$$</p>

<p>I skip the intermediary calculations. This one yields ;</p>

<p>$$\frac{\Delta P}{\Delta t} = \frac{P.C}{(P+t)^{2}+\Delta t.(P+t)}$$</p>

<p>Hope that it helps.</p>

CC BY-SA 3.0
2015-08-25T18:39:26.090Z
2015-08-25T18:39:26.090Z
optimal control
<p>When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable?  Real world examples seem to be lacking in textbooks on basic mathematical economics. </p>

<macroeconomics><microeconomics>
Real world example of using difference quotient vs. derivative
Hexatonic
# Real world example of using difference quotient vs. derivative

(Asked by: username_0 on 2015-08-25)

When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable? Real world examples seem to be lacking in textbooks on basic mathematical economics.

**Tags:** macroeconomics, microeconomics


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## 1 answers

### Answer by username_1 on 2015-08-25. Score: 1 | Accepted answer

You can see the applications in microeconomics. A tiny example could be on elasticity of demand.

Let's say

$$ D = \frac{tC}{P+t} $$

where $P, t, C$ are respectively price, tax and constant. If you like to see the effect of tax change on demand you can use the difference quotient ;

$$\Delta D = \frac{(t + \Delta t C)}{P + t + \Delta t} - \frac{tC}{P + t}$$

I skip the intermediary calculations. This one yields ;

$$\frac{\Delta P}{\Delta t} = \frac{P.C}{(P+t)^{2}+\Delta t.(P+t)}$$

Hope that it helps.


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