UNIT 3 PARTIAL DIFFERENTIATION

Structure
3.0 Objectives
3.1 Introduction
3.2 Concept of Partial Derivative
3.2.1 Partial Derivative Defined
3.2.2 Higher Order Partial Derivatives
3.2.3 Cross- Partial Derivative

3.3 Total Differential

3.3.1 Total Derivative

3.4 Differentiation of Function of Functions

3.4.1 Derivatives of Implicit Functions

3.5
3.6
3.7
3.8
3.9
3.10

Application in Economics
Homogeneous Functions and Their Properties
Let Us Sum Up
Key Words
Some Useful Books
Answers or Hints to Check Your Progress

3.0 OBJECTIVES
After going through this unit, you will be able to:

extend the differentiation technique from single variable to multivariate

cases; and

include some new concept of derivative associated with will be

introduced. Then we will discuss the properties of some special functions.

3.1 INTRODUCTION
So far, we have considered the functions of a single independent variable.
However, most of the economic problems deal with the multivariate cases.
For example, utility of a consumer depends on the consumption of multiple
commodities and the production of a commodity depends on factors like land,
labor, and capital and so on.
Like this, other examples can be included to capture more interesting
economic problems. Therefore, there is a need to analyse the concept of
derivative for the class of functions with more than one independent variables.

3.2 CONCEPT OF PARTIAL DERIVATIVE

For simplicity, we shall start with function of two independent variables. Let
the function be y = f(x1, x2). When we take such a function y = f(x1, x2), with
two independent variables, change in y can be examined as result of a change
in either x1 or x2, or by both by assuming these to be independent. Thus, if we
change only x1, it will not affect x2 but only y. The rate of change in y,
assuming x2 to remain constant, can be obtained by finding partial derivative
46

of y with respect to x1. Similarly, if x2 is changed alone, the rate of change in

y can be obtained from the partial derivative of y with respect to x2.

Partial Differentiation

Proceeding one-step further and assuming that x1 and x2 are related to each
other, if we change x1, there will be change in x2 (even when x2 is not changed
exogenously), as a result of the change in x1. Thus, whenever we change the
dependent variable, y is affected in two ways: first, directly by the change in
x1 and secondly, indirectly by the change in x2 via the change in x1. The rate of
change of y due to a change in x1 in this case is measured by total derivative
of y with respect to x1.

3.2.1 Partial Derivative Defined

Partial derivative is referred to the derivative of a multivariate function when
only one of the independent variables is allowed to change, other variables
remaining constant.
As an example, consider the bivariate function,
U = f(x1, x2).
If we let only x1 to change, x2 remaining constant, the rate of change of U with
respect to x1 is called the partial derivative of U with respect to x1. Let the
change in x1 is x1, x2 remaining constant. The corresponding change in U is
U. Then the difference quotient is given by

U f ( x1 + x1 , x20 ) f ( x1 , x2 0 )
=
x1
( x1 + x1 ) x1
If we try to obtain the limiting value of this difference quotient as x1 0, we
get the partial derivative of U with respect to x1. This is denoted by
U f
,
or simply f1.
x1 x1
Thus, f1 =

lim f ( x1 + x1 , x20 ) f ( x1 , x2 0 )
U
=
x1 0 x1 x1 0
x1
lim

Similarly,
f2 =

lim f ( x10 , x2 + x2 ) f ( x10 , x2 )

U
=
x2 0 x2 x2 0
x2
lim

Example: Find the partial derivative of the function

f(x1, x2), = x13 + 2x12 x2 + 3 x1 x2 + 4x22.

To obtain f1 we have to differentiate the above function with respect to x1,
treating x2 as constant.
Thus, f1 = 3x12 + 4x1 x2 + 3x2
Similarly, f2 = 2x12 + 3x1 + 8x2
Note that these partial derivatives are functions of the some dependent
variables as in case of the original function f.
we write, If y = f(x1, x2),
then f1=f1(x1, x2), f2=f(x1, x2).
This is because first derivative at any point was not only dependent on the
value of the independent variable, but also on the other variables, which are

47

Introduction to
Differential Calculus

kept constant. First order partial derivative gives us the marginal values. For
example, if the function y=f(x1, x2) defines the total utility of the commodities
U
x1, x2, then
, gives us additional utility that can be obtained from the use
x1
U
of one additional unit of x1. Thus,
is the marginal utility of xi (i =1, 2).
xi

3.2.2 Higher Order Partial Derivatives

We have already seen, if y = f(x1, x2), then fi(x1, x2) (for i=1, 2) gives the
partial derivatives.
So long as this is true, we can repeat the process of partial differentiation and
get higher order partial derivatives. However, once the first order partial
derivative ceases to be a function of some choice variables as the primitive
function, higher order partial derivatives are no longer obtainable.
Example:

i) Differentiate z = 6x3+5x2+10xy partially with respect to x twice.

Ans:
zx = 18x2 + 10x + 10y
Zxx

= 36x + 10

ii) Find f11, f22 for the function

f ( x1, x 2 ) = ex1+x2 + 3x1 x2

Ans:
f1 = ex1+x2 + 3x2
f2 = ex1+x2 + 3x1
Thus,
f11 = ex1+x2 + 3
f22 = ex1+x2 + 3

3.2.3 Cross- Partial Derivatives

Consider the function f(x1, y2). The partial derivative of the function gives f1
and f2 (defined above) .The crosspartial derivatives are defined as follows:
f12 =

f 1
f
And f 21 = 2
x 2
x1

By Youngs theorem, f12 = f21.

More generally, for a n-variable function y = f(x1, ---, xn).
fji = f ij (for all i, j = 1, 2,-------, n)
Note that such a condition holds when both the partial derivatives exist and
one of them is continuous.
48

Partial Differentiation

Example:

i)

f ( x, y ) = x3 + y5 + 4x2y4 + 2 xy, find fxy and fyx.

fx = 3x2 + 8xy4 + 2y
fy = 5y4 + 16x2 y3 + 2 x
fxy = 32x y3 + 2 = fyx
ii) f ( x1, x 2 ) = log (x12 + x22). Find the second order partial derivatives.
2 x1

f1 =

x1 + x 2

, f2 =

f 11 =

x1 + x 2

2( x 2 x1 )
2

( x1 + x 2 ) 2

f12 = f 21 =

4 x1 x2
( x 12 + x2 2 ) 2

f 22 =

2 x2
2

2( x1 x 2 )
2

( x1 + x 2 ) 2

Check Your Progress 1

1) A production function is given by

Q=

1 2 2
L K
2

where, Q = level of output

L = Labor input employed
K = Capital input employed
Find the marginal productivities of labor and capital.

2)

f ( x, y ) = x + y. Find fxx, fyy.

49

Introduction to
Differential Calculus

3)

f ( x, y ) = y sin x2 + x3 cos y. Find fxx, fyy.

4)

f ( x, y ) = e2x +2y, prove that fxy - fyx = 0.

3.3 TOTAL DIFFERENTIAL

Consider the function y = f(x1, x2). By its total differential, we measure the
total change in y due to a change in both x1 and x2 (where x1, x2 are assumed
to be independent of each other).
However, the change measured by total differential of y is only a linear
approximation of the actual change.
The rate of change of y due to a small change in x1, keeping x2 constant is
already noted above as f1. If the volume of change in x1 is dx1, then the
measured change in y due to a change in x1 will only be equal to f1 dx1.
Similarly, if the volume of change in x2 is dx2, then the measured change in y
due to a change in x2 will be f2 and fx2. Thus, if dy denotes the total change in
y when x1 is changed by dx1 and x2 is changed by dx2 ,we can write,
dy = f1 dx1 + f2 dx2.
This is called the total differential of the function y = f(x1, x2).
Example: Find the total differential of the function

y = a x12 + 2h x1 x2 + b x22
dy = 2 a x1dx1 + 2h (x1 dx2 + x2 dx1) + 2 bx2dx2
= 2 (ax1 + h x2) dx1 + 2 (bx2 + h x1) dx2
Check Your Progress 2

1)

Find the total differential of the function

y = Sin x1 + Cos x2

50

Partial Differentiation

3.3.1 Total Derivative

Through total derivative, we measure the rate of change of the dependent
variable owing to any change in a variable on which it depends, when none of
the variables is assumed to be constant.
Let y = f(x1, x2), such that, x1 = g(t) and x2 = h(t).
Then we can write
dy y dx1 y dx 2
.
.
+
=
dt x1 dt x 2 dt
= f1

dx1
dx
+ f2 2
dt
dt

This is the total derivative of y with respect to t.

The above result can easily be extended for a n- variable case, namely,
y = f(x1, x2, -----, xn).
If x1 = x1(t), x2 = x2(t), ---, xn = xn(t), then
dx
dx
dy dx1
=
+ f2 2 + + fn n .
dt
dt
dt
dt
Example:

i)

q = 4x1 + 3x2.
x1 = t3 + t2 + 1, x2 = t3 - t2 - t
Find

dq
dt

dx
dx
dq
= f1 . 1 + f 2 . 2
dt
dt
dt

where, f 1 =

q
q
, f2 =
.
x1
x 2

In our example, f1 = 4, f2 = 3.
Also,

dx1
dx
= 3t 2 + 2t , 2 = 3t 2 2t 1 .
dt
dt

dq
= 4(3t 2 + 2t ) + 3(3t 2 2t 1)
dt
= 21t 2 + 2t 3
ii)

u = x12 + x22 such that x1 = 2x22+2 obtain

du
.
dx 2

Since x1 = g(x2) we get

dx
du
= f1 . 1 + f 2
dx 2
dx 2

51

Introduction to
Differential Calculus

f 1 = 2 x1 , f 2 = 2 x 2 ,

dx1
= 4 x2
dx 2

= 2 x 2 (4 x1 + 1)

= 2 x 2 4(2 x 2 + 2) + 1
2

= 8 x 2 (2 x 2 + 2) + 2 x 2

3.4 DIFFERENTIATION OF FUNCTION OF

FUNCTIONS
The formula for total differential can be used to find the derivatives of various
types of functions of function. Let us consider a few cases.
Suppose z = f (u) where u is a function of x and y. Here dz = f'(u).
du.

Case I:

u
dz dz u
=
.
= f ' (u ).
dx du x
x
u
z dz u
=
.
= f ' (u ).
x
y du y

Case II:
i)

Suppose, z is a function of x and y which are themselves function

of a single independent variable, t.

dz = f(x,y) where x = (t ), y = (t ) . Then,

dz =

z
z
.dx + .dy
x
y

But,

dx
= (t ) or, dx = ' (t ).dt
dt

and

dy
= ' (t ) or, dy = ' (t ).dt
dt

z
dz = ' (t ) + . '(t ) dt
y
x

z
dz z
= . ' (t ) + . ' (t )
y
dt x

So,
=

z dx z dy
. + . .
x dt y dt

Case III: If z = f(x, y) where y is a function of x, then

dz =
or,

z
z
.dx + .dy
x
y

dz z z dy
=
+ . .
dx x y dx

Case IV: Suppose z is a function of x and y where x and y are themselves

functions of two independent variable u and . i.e.,

z = f(x, y) where x = (u , ) .
52

y = (u , ).

Assume that all functions have known partial derivatives.

Here, dz =

z
z
.dx + .dy ,
x
y

where, dx =
and dy =

Partial Differentiation

x
x
.du + .du
u
u

y
u
.du + .du .
u
u

Putting these values in expression for dz we get

dz =

y
x
z x

z y
.du + .du + .du + .du
u
x u
u

y u

z x z y
z x z y
= . + . du + .
+ . d .
x u y u
x y
The partial derivative of z with respect to u is the ratio of dz and du when is
kept constant.
Similarly, the partial derivative of z with respect to is the ratio of dz and
d when u is kept constant. If is kept constant, d = 0 so that
z z x z y
= . + .
u x u y u
and

z z x z y
= .
+ .
x y

Rules for finding differentials are similar to those of finding derivatives.

Suppose, u, and w are functions of k and y. Then,
i)

d (u ) = du du

ii)

d (u ) = ud + du

iii)

u du ud
d =
2

iv)

d (logx) =

v)

z=

dx
x

u dz du d dw
, =
+

w z
u

3.4.1 Derivatives of Implicit Functions

There is an implicit functional relation between x and y, such that with a given
rise of variation, the values that x and y can take are not independent of each
other but connected in some definite way.
Thus, if the value of x is fixed, the value (or values) that y can take are fixed
and not arbitrary. Converse is also true.
The implicit function can be expressed in the form f(x, y) =0.
e.g., ax + by + c = 0
or, 2x2 + 3xy + 4y2=0

53

Introduction to
Differential Calculus

Some inverse functions can be expressed in terms of one variable. For

example, the first function can be written as
x=

c + by
c + ax
.
or, y =
a
b

These two explicit functions are said to be inverse to each other.

However, all implicit functions may not be expressed in explicit forms where
the two variables have been separated. For example, for the second function
we cannot express x in terms of y or conversely.
Consider an implicit function f(x,y) =0, where the two variables cannot be
separated. Assume that y is a function of x. Here the concept of total
dy
differential can be used to find the total derivative .
dx
The function f(x, y) = 0 can be taken as z = f(x, y) where z equals zero.
Now, dz = fx.dx + fy.dy = 0
(Since z is constant)
Thus,

dy
fx
= .
dx
fy

Example:

f(x, y) = 2x2 + 3xy + 4y2 = 0. Find

dy
.
dx

Here, fx = 4x + 3y, fy = 3x + 8y
dy
4x + 3y
=
.
dx
3x + 8 y
Similarly, if it is assumed that x is a function of y, the derivative

dx
will be
dy

fy
dy
dx
. The derivatives
and
are reciprocal to each other, since
fx
dx
dy
these two functions are reciprocal to each other.

equal to

The second derivative of an implicit function is defined and obtained from the
first derivative. If f(x, y) = 0 gives y as a function of x, then we have seen that
dy
fx
= .
dx
fy
Now,
d2 y
d fx
=
2
dx
dx fy
fx fx dy
= . + .
x fy x fy dx
54

But,

Partial Differentiation

fx f xx . f y f x . f yx
and
=
x fy
f 2y

f x f xy . f y f x . f yy
=
f y2
y fy

Substituting these values and the value of

dy
we get,
dx

f . f f . f
f x f xy . f y f x f yy
d2 y
xx
y
x
yx
=

dx 2
fy 2
fy
fy 2

1
( f xx f y 2 2 f xy f x f y + f yy . f x 2 ) . (i)
f y3

Example:

f(x, y) = x2 + xy + y2. Find

d2 y
.
dx 2

d2 y
2x + y
=
2
dx
x + 2y
d
d

( x + 2 y ) (2 x + y ) (2 x + y ) ( x + 2 y )

d y

dx
dx
=

2
2
dx
( x + 2 y)

6 x 2 + 6 xy + 6 y 2
( x + 2 y) 3

This can be obtained by putting the values for fx, fy, fxx, fxy, fyy in (i).

3.5

APPLICATION IN ECONOMICS

Elasticity of Substitution
Consider the production function q = f(x1, x2). The elasticity of substation
measures the ease with which substitution between the two factors can take
place.
The degree of substitutability between two factors increase with higher values
of the elasticity of substitution.
If it is zero, it will imply impossibility of substitution.
The elasticity of substitution ( ) is defined as the percentage change in the
input ratio in response to percentage change in the marginal rate of technical
substitution.

55

 x 2
d
x1
x 2

x1
f1
d
f2

Introduction to
Differential Calculus

i.e.,

f1

f2

d x2
f 1 x1 x1
.
.
=
f 2 x 2 d f1
f
2

Now, d

x2

= x1 dx2 x2 dx1
x1
x2
1

x
or, d 2 =
x1

f
x1 1 dx1 x2 dx1
f2

x12

fx + f x
= 1 1 22 2
f 2 x1

dx2
f
= 1
dx1 Q
f2

dx1

f
Again, d 1
f2

=
=

df1 . f 2 df 2 . f1
f22

(f

11

dx1 + f12 dx2 ) f 2 ( f 21 dx1 + f 22 dx1 ) f1

f22

[ df1 =

f 11 dx1 + f 12 dx 2 df 2 = f 21 dx1 + f 22 dx 2 ]

f1
f1
f11 dx1 + f12 dx1 f 2 f 21 dx1 + f 22 dx1 f1
f2
f2

2
f2

[f

11

f2

or, =

(f

11

f 2 2 f 1 f 2 f 12 + f 1 f 2 f 21 + f 22 f 1
f2

Using f12 = f21]

Thus, =
56

dx1 + f 2 f1 f 2 f12 f1 f 2 f 21 + f 22 f1 dx1

f1 x1 ( f1 x1 + f 2 x2 )dx1
.
f 2 x2
f 2 x12

f2

Partial Differentiation

dx1 f 11 f 2 2 f 1 f 2 f 12 + f 22 f 1

f1 f 2 ( f1 x1 + f 2 x 2 )
2

x1 x 2 2 f 1 f 2 f12 f 11 f 2 f 22 f 1

The convexity of iso-quant ensures (2f1f2f12 - f11f22 - f22f12)>0 and since (x1,
x2, f1, f2)>0 we have >0.
The expression of the iso-quant ensures (2f1 f2 f12 - f11 f22 - f22 f12) reflects the
change of the slope or curvature of an iso-quant. This means that is
inversely proportional to the degree of convexity of iso-quant. The lower the
degree of convexity of the iso-quant, the larger the value of and vice versa.
If the two inputs are used only in a fixed proportion, the iso-quant is L-shaped
and is zero.
In case if the two inputs are perfect substitutes of each other, the iso-quant is a
straight line whose MRTS is constant. Here is infinity. As increases from
zero to infinity, substitution between the factors becomes increasingly easier.

Some notes on
i)

varies from one combination of factors to another.

i) = (x1, x2)
ii) is a lower number

ii)

x1 x2 = x2 x1

iii)

If the production function is linear homogeneous, (see below) can be

f f
written as 1 2 . Here, is inversely proportional to the cross second
f 12 .q
order partial derivative of the production function.

3.6

HOMOGENEOUS FUNCTIONS AND THEIR

PROPERTIES

A function is said to be homogeneous if multiplication of all its arguments by

some arbitrary constant, say k, multiplies the function by k raised to some
power.
Thus, the function f(x1, x2) is said to be homogeneous of degree n if
f (kx1, kx2)=knf(x1, x2).
The power of k is called the degree of homogeneity.
For a homogeneous function, the sum of indices for each term of the function
is the same.
Thus, the function f(x1, x2) = x12+x1x2+x22 is a homogeneous function of
degree two. This is because f (kx1, kx2) = k2f(x1, x2).
Similarly, z = x3 y + x 2 y 2 + y 4 is a homogeneous function of degree four.
57

Introduction to
Differential Calculus

Property-1: The homogeneous function z = f(x, y) of degree n can be written

x
y
as z = xn or, z = yn
x
y
Proof: Try to prove from the definition by putting k =

1
1
or, k = .
x
y

Property-2: The first order partial derivative for the homogeneous function z
= f(x, y) of degree n are homogeneous function of degree (n-1).
Proof: Let z = f(x, y) be a homogeneous function of degree n. This function
y
can be written as z = xn .
x
Taking partial differential with respect to x,

z
y
y y
= n xn-1 - xn ' 2
x
x
x x
y
y
= nxn-1 - yxn-2 '
x
x
y y
y
= xn-1 [n ' ]
x x
x
y
= xn-1. '
x
Thus,

z
is a homogeneous function of degree (n-1).
x

Property-3: Let z = f(x, y) be a homogeneous function of degree n. Then we

have

xfx + yfy = nf ( x, y ) .
This result is known as Eulers theorem.
Check Your Progress 3

1)

Try to prove Eulers theorem.

58

The function q = AL K 1 , A, > 0 is known as the Cobb-Douglas

production function. q, L and K are the level of output, labor and capital
respectively.

2)

Partial Differentiation

Prove the following:

a)

Cobb-Douglas production function is homogeneous of degree one.

b)

The marginal and average productivities of the two inputs depend

on the ratio of the two inputs only.

c)

Elasticity of substitution is unity.

d)

Iso-quants are downward sloping and convex to the origin.

3.7

LET US SUM UP

We have learnt the technique for differentiation for multivariate cases. We

have also discussed some pathological cases where differentiation is not
immediate and simple. Lastly, we have applied the notion of partial
differentiation to illustrate one important class of functions, namely
homogeneous function. We have discussed properties of such functions and
considered one typical example the Cobb-Douglas production function.

3.8

KEY WORDS

Partial Derivative

Partial derivative is referred to the derivative of a multivariate function when

only one of the independent variable is allowed to change, other variables
remaining constant.
e.g., the function U = f(x1, x2),
f1 =

lim U
lim f ( x1 + x1 , x20 ) f ( x1 , x2 0 )
, and
=
x1 0 x1 x1 0
x1

f2 =

lim U
lim f ( x10 , ( x2 + x2 ) f ( x10 , x2 )
=
x2 0 x2 x2 0
x2

Cross Partial Derivatives

Consider the function f(x1, x2). The partial derivative of the function gives f1
and f2 which has been seen above .The cross partial derivatives are defined as
follows:
f 12 =

f1
f
and f 21 = 2
x 2
x1

59

Introduction to
Differential Calculus

Youngs theorem

When both the partial derivatives exist and one of them is continuous,
Youngs theorem states that f12 = f21.
More generally, for a n-variable function y = f(x1, ---,xn)
f ij = fji (for all i, j = 1, 2,-------, n).
Total Differential

Consider the function y = f(x1, x2). By its total differential, we measure the
total changing due to a change in both x1 and x2 (where x1, x2 are assumed to
be independent of each other). Thus,
dy = f1 dx1 + f2 dx2, is called the total differential of the function y = f(x1, x2).
Total Derivative

Through total derivative, we measure the rate of change of the dependent

variable owing to any change in a variable on which it depends, when none of
the variables is assumed to be constant.
Let y = f(x1, x2), such that, x1 = g (t) and x2 = h (t).
Then we can write
dy y dx1 y dx 2
=
.
+
.
dt x1 dt x 2 dt
= f1

dx1
dx
+ f2 2
dt
dt

which is the total derivative of y with respect to t.

Elasticity of Substitution

Consider the production function q = f(x1, x2). The elasticity of substation

measures the ease with which substitution between the two factors takes place.
The elasticity of substitution ( ) is defined as the percentage change in the
input ratio in response to percentage change in the marginal rate of technical
substitution.

f1 f 2 ( f1 x1 + f 2 x 2 )
2

x1 x 2 2 f1 f 2 f12 f11 f 2 f 22 f1

Homogeneous function

The function f(x1, x2) is said to be homogeneous of degree n if f (kx1, kx2) =

knf(x1, x2).
The power of k is called the degree of homogeneity.

3.9 SOME USEFUL BOOKS

Allen, R.G.D. (1938), Mathematical Analysis for Economists, St. Martins
Press, New York.
Chiang, A.C.(1974), Fundamental Methods of Mathematical Economics, 2nd
edition, McGrow-Hill Book Company, New York.
60

Henderson, James M. and and Quandt, Richard E. (1980), Microeconomic

Theory, McGrow-Hill Book Company, New York.

3.10

ANSWER OR HINTS TO CHECK YOUR

PROGRESS

Partial Differentiation

Check Your Progress 1

1)

QL=LK2, QK = L2K.

2)

fx =1= fy, Thus fxx = fyy=0

f ( x, y ) = y sin x2 + x3 cos y. Find fxx, fyy.

3)

fx = 2yx cosx2 + 3x2cosy

fy = sinx2 x3siny
fxx = 2ycosx2 4x2y sin x2 +6x cos y
fyy = -x3cosy

4)

By Young's theorem, fyx = fxy, hence, fxy = fyx = 4e2x+2y.

Check Your Progress 2

1)

dy = Cos x1 dx1 - Sin x2 dx2.

Check Your Progress 3

1)

Hint: Proceed along the lines for the proof of Property 2.

2)

The function q = AL K 1 , A, > 0 is known as the Cobb-Douglas

production function. q, L and K are the level of output, labor and capital
respectively.
Prove the following:
Hints: The equation of the iso-quant is given by q = AL K 1 . q is fixed
level of output for different possible combinations of L and K. The slope
dK
d 2K
is given by
. This is less than zero. Again
>0. Thus, the isodL2
dL
quant is convex.

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