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Economics

Can somebody please explain how is it derived?

Change in total revenue (ΔTR), the numerator of the ratio, can be written as (P)(ΔQ) + (Q)(ΔP).

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If ΔP is small and ΔQ is small, so that ΔPΔQ is really, really small and can safely be ignored,

TR + ΔTR = (P + ΔP)(Q + ΔQ) = PQ + PΔQ + QΔP + ΔPΔQ = TR + PΔQ + QΔP + ΔPΔQ

ΔTR = PΔQ + QΔP + ΔPΔQ ≈ PΔQ + QΔP

Simplify the complicated side; don't complify the simplicated side.

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