U.S.

President Richard Nixon, when campaigning for a second term

in office announced that
the rate of increase of inflation was decreasing,
which has been noted as
"the first time a sitting president used the third derivative to advance
his case for reelection."
Since inflation is itself a derivativethe rate at which the purchasing
power of money decreasesthen the rate of increase of inflation is
the derivative of inflation, or the second derivative of the function of
purchasing power of money with respect to time. Stating that a
function is decreasing is equivalent to stating that its derivative is
negative, so Nixon's statement is that the second derivative of
inflationor the third derivative of purchasing poweris negative.
Nixon's statement allowed for the rate of inflation to increase,
however, so his statement was not as indicative of stable prices as it
sounds.

Value of $:

V()

Inflation I t =
Rate if inflation RI t = I t = V()
Rate in inflation decreases

0 > RI t = I t = V()

Decreasing MC(x)

C(x)
MC(x)

x+1

Decreasing MC(x)
MC(x)

C(x)
MC(x)

x+1

x+1

Increasing MC(x)

C(x)
MC(x)

MC(x)

x+1

x+1

Average cost AC(x) = C(x)/x

C(x)

C(x)

Average cost AC(x) = C(x)/x

C(x)

C(x)

= tg = slope of radius vector

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing MC(x)

Decreasing AC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Increasing MC(x)

Minimal AC(x) at x0

x0

AC minimizer
MC

AC

AC minimizer
MC

AC

C '( x) x C ( x)

2
x
MC ( x0 ) AC ( x0 )
AC '( x)

x0

C '( x)
x

C ( x)
x 0

Profit maximizer

Case 1. Perfect Competition p = const

Perfect Competition p = const

MC=MR
(MC=p)

MC

AC

p = MR = AR

Revenue R(x)=px=SoxAp

Perfect Competition p = const

MC=MR
(MC=p)

MC

AC

p = MR = AR

Revenue R(x)=px=SoxAp
Cost C(x)=AC(x)x=SoxBq
q

MC=MR
(MC=p)

MC

AC

p = MR = AR

Revenue R(x)=px=SoxAp
Cost C(x)=AC(x)x=SoxBq
q

Profit

P(x)=R(x)-C(x)=SqBAp

Profit maximizer
P(x) = R(x) - C(x), P(x) = R(x) C(x) = 0
R(x) = C(x),

MR = MC

MC=MR
(MC=p)

MC

AC

p = MR = AR

R(x*)=px*=Sox*Ap
B

x0

x*
Profit maximizer

MC=MR
(MC=p)

MC

AC

p = MR = AR

R(x*)=px*=Sox*Ap
B

x0

x*
Profit maximizer

C(x*)=AC(x*)x*=Sox*Bq

MC=MR
(MC=p)

MC

AC

p = MR = AR

R(x*)=px*=Sox*Ap
C(x*)=AC(x*)x*=Sox*Bq

q
B

P(x*)=R(x*)-C(x*)=SqBAp

x0

x*
Profit maximizer

Final
MC

AC

MR

Final
MC

AC

MC=MR, P max

MR
p=AC, P=0, br.ev.

p=AC, P=0, br.ev.

MC=AC, AC min

Perfect Competition p = const

MC

AC

= p

MR = p

MC

AC

= p

MR = p

MC

AC

()

= p

MR = p

=
= ()

MC

AC

MR = p

= p

P =R(x) - C(x)

=
= ()

MC

AC

MR

Break even
no profit

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

max profit at
MR = MC

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

MC

AC

MR

Break even
no profit

AC min, P max, brake even points

MC

AC

MC=MR, P max

MR = p
p=AC, P=0, br.ev.

p=AC, P=0, br.ev.

MC=AC, AC min

Pure Monopolist p(x) = b - ax

MC

Profit maximizer

AC

p(x) = AR=b-ax

x0

b/a

Pure Monopolist p(x) = b - ax

Profit maximizer

MC

AC

R(x)=x(b-ax)=bx-ax2

MR(x)=b-2ax

p(x) = AR=b-ax

b/a

Profit maximizer

Pure Monopolist p(x) = b - ax

MC

AC

R(x)=x(b-ax)=bx-ax2

MR(x)=b-2ax

p(x) = AR=b-ax
MR=b-2ax

b/2a

b/a

Profit maximizer

Pure Monopolist p(x) = b - ax

MR = MC
MC

p*

AC

A
p(x) = AR=b-ax
MR=b-2ax

x*

b/2a

b/a

Profit maximizer

Pure Monopolist p(x) = b - ax

MR = MC
MC

AC

R(x*)=x*p*=Sox*Ap*

p*

A
p(x) = AR=b-ax
MR=b-2ax

x*

b/2a

b/a

Profit maximizer

Pure Monopolist p(x) = b - ax

MC

AC

R(x*)=x*p*=Sox*Ap*

C(x*)=AC(x*)x*=Sox*Bq

p*

p(x) = AR=b-ax

B
MR=b-2ax

x*

b/2a

b/a

Profit maximizer

Pure Monopolist p(x) = b - ax

MC

AC

R(x*)=x*p*=Sox*Ap*

C(x*)=AC(x*)x*=Sox*Bq
P(x*)=R(x*)-C(x*)=SqBAp*
p*

p(x) = MR=b-ax

B
MR=b-2ax

x*

b/2a

b/a

Pure Monopolist p(x) = b - ax

AC min, P max, brake even points
b

MC

p=AC, P=0, br.ev.

AC

p=AC, P=0, br.ev.

MC=MR, P max

p =
=

MC=AC, AC min

Pure Monopolist p(x) = b - ax

Pure Monopolist p(x) = b - ax

MC

AC

p =
=

MC=AC, AC min

MC

AC

p =
=

MC=AC, AC min

MC

AC

= p

=
=

MC

AC

= p

=
=

MC

AC

= p

()

=
= ()

=
=

P =R(x) - C(x)
MC

AC

= p

()

=
= ()

=
=

MC

AC

=
=

Break even
no profit

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

max profit at
MR = MC

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

MC

AC

=
=

Break even
no profit

Elasticity