Tutorial reivew Chap 1-2

Tutorial reivew Chap 1-2 - McGill Faculty of Engineering...

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McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials 1 Review of Ch. 1-2
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McGill Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 1 – Essentials Supply , demand and market equilibrium : Graphically (slope, intersection point, shifts) System of equations Elasticity : Meaning Arc elasticity Exact definition (if given functions) Production and cost functions: Graphs and trends Equations 2
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Faculty of Engineering MIME 310 Engineering Economy Tutorials Chapter 1 – Example The price elasticity of demand for oil is (very) approximately 0.4. What is the slope of its demand curve at a price of $80 per barrel and a corresponding quantity of 1.67 million barrels per day demanded worldwide? Answer: E d = - (dQ/dP) / (Q/P) dQ/dP = - (E d ) x (Q/P) Hence: dQ/dP = - (0.4) x (1 670 000 / 80) = -8350 barrels/$ Note: Oil does not respect our assumptions for simple economic analysis (free and competitive market). 3
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Tutorial reivew Chap 1-2 - McGill Faculty of Engineering...

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