engleski

Cost Minimization: Differential Calculus Approach VS Weighted Arithmetic Mean - Geometric Mean Inequality Approach

One of the basic lessons taught in the 1st year of studying economics is minimizing economic costs. The standard way of solving this problem is to apply differential calculus. The process includes understanding, computing and applying derivatives. Here most of the 1st year students encounter calculus for the first time. Since it is unfamiliar to them, many of them are not keen on it, resulting in poor knowledge of optimization as well. In this paper we explore an alternative approach to solving optimization problems, specifically the problem of minimizing economic costs. One of the ways to solve it is the application of weighted inequality between the arithmetic and geometric mean (WAG inequality). Since WAG is transparent and intuitive, it can be taught without any formal foreknowledge. In order to determine which approach is easier for students when dealing with optimization problems in economics, we have presented both the WAG and differential calculus approach to cost minimization problems to a group of the 1st year economics students within the compulsory Mathematics course. The results show that students found the WAG method easier to understand and use when solving the above mentioned problems. Although we cannot say that WAG approach is generally better than differential calculus approach, it is quite certain that WAG is a good introductory method that can help students understand and adopt the more complex terms and procedures required by the differential calculus.

Cost Minimization ; Differential Calculus ; Weighted Arithmetic Mean - Geometric Mean Inequality

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