ABSTRACT
The integral of a function f defines a new function, which may have the interpretation of an area or as the “reverse” of differentiation. For example, the computation of consumer surplus and dead-weight loss involve the calculation of area. Given a demand function P (Q) and market price p, the consumer surplus is defined as the area under the demand curve above price and is used as a measure of the welfare generated by the existence of that market. The technique of integration provides a means of determining this area. In a second type of problem, it is useful to identify a function as the derivative of another function. For example, the rate of return on an asset – the change in the value of the asset per unit of time – may be viewed as the derivative of the value of the asset. Thus, knowing the derivative of the value of the asset with respect to time, say v′(t), it is necessary to determine the value of the asset, v(t), from this derivative – given v′(t), v(t) must be found. These problems are solved by integration.
