Wesumup resourceuseandreturns overthethreeyears known

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: d to operate in a steady­state; hence initial inventories will equal terminal inventories and may be set to optimal levels determined by the model. Conditions Conditions activity lasts for a designated number of periods resource use depends on elapsed age of the activity General Form of Problem (4 period example) (4 Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 resource use resource use resource use resource use resource use resource use 1 A1 A2 A3 A4 2 A1 A2 A3 A4 Activity Begins in Period 3 4 A1 A2 A3 A4 A1 A2 A3 5 6 A1 A2 A1 From period 4 on, we have resource use for every age category. Under an equilibrium assumption, the activity level is constant, so we can sum up the resource use across time. Known-Life Strawberry Problem Known-Life An Equilibrium Approach (3 periods) Equilibrium assumption: For each acre in strawberries now, there will be one that was started last year and one started two years ago. We sum up resource use, and returns, over the three years. Known-Life Strawberry Problem Known-Life The Equilibrium Tableau Objective Land Water Wheat 340 1 1 Strawberries 1230 3 9.8 le le 700 1200 Solution Solution 479 acres of wheat 74 3­acre units of strawberries Same Problem, Using Averages Same Objective Land Water Wheat 340 1 1 Strawberries 410 1 3.27 le le 700 1200 Here, we use the average annual return for an acre of strawberries and average annual water use. Solution: 479 acres of wheat and 221 1­acre units of berries. 221/3=74 Equilibrium with Unknown Life Equilibrium Obj Land Water Straw 1-2 Straw 2-3 Straw 3-4 W heat 340 1 1 Strawberries 1 2 3 -150 70...
View Full Document

This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

Ask a homework question - tutors are online