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Lesson 2:: Continuous Discounting

This document provides an overview of Lesson 2 of Learning Module 2 which covers: 1. Defining, differentiating, and applying logarithmic functions. 2. Solving problems using logarithms, including taking derivatives of polynomial functions. 3. Covering topics such as logarithm facts, derivatives of logarithms, base conversion, elasticity, regression using natural logarithms, and examples of optimizing selling time using exponential functions.

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42 views

Lesson 2:: Continuous Discounting

This document provides an overview of Lesson 2 of Learning Module 2 which covers: 1. Defining, differentiating, and applying logarithmic functions. 2. Solving problems using logarithms, including taking derivatives of polynomial functions. 3. Covering topics such as logarithm facts, derivatives of logarithms, base conversion, elasticity, regression using natural logarithms, and examples of optimizing selling time using exponential functions.

Uploaded by

LittleMinn
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ECON 6305 – Learning Module 2

Exponents and Logarithms

• After completing this module, the student will be able to:


Lesson 1:
– Define, differentiate and apply exponential functions
– Solve problems using continuous compounding and
continuous discounting

Lesson 2:
– Define, differentiate and apply logarithmic functions
– Solve problems using logarithms including taking
derivatives of polynomial functions
Logarithms and natural logs

•  

• In words, y is the power to which one raises b in


order to get x

• We will often use b = e, or natural logs, expressed as


ln
Logarithm Facts

•  
, for every positive number x

ln(x) + ln(y)
Derivatives of logarithms

•  
By the chain rule:
Base Conversion

•  

ln(

Note: assuming b > 1


Graph of ln(x)
Elasticity

•  

=
Regression using natural logarithms

•   Regress on

is our estimate of

To find the elasticity of y with respect to dependent variables,


run a ln-ln model.
Derivative of Exponential Functions (cont.)

• An
  alternative method for computing for
exponential functions; suppose
Linearizing functions

•  
To linearize exponential functions such as a Cobb-
Douglas production function:
Example: Optimum Selling Time

•  Can sell wine now for $K or let the value grow


according to , with an interest rate r. When
would we optimally sell the wine?

• Taking the time value of money into account, the


value of the wine at some future time is:

• Take the ln:


Example: Optimum Selling Time (cont.)

•   the critical value (when the slope = 0)


Find

Self test LM 2.2 Finding Derivatives Using Logarithms

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