ECONOMICS 100A: INTERMEDIATE MACROECONOMICS
AMJAD TOUKAN
Summer Session I 2012
PROBLEM SET 2
Due (at the start of lecture) on July 10th, 2012
1. Pindyck and Rubinfeld, Chapter 4, Exercise 7, 12, 13
2. Pindyck and Rubinfeld, Chapter 6, Exercise 2, 3
3. Con
Practice Problems
Prepare journal entries for each of the following independent events.
1)
On December 31, John paid in advance to rent an office space he is using for his
new business. The rent is $5,000 per month. John paid for 12 months in advance.
Ass
Lecture2.ReviewofBasicMath,Probability,andStatistics
TheSummationOperator*
n
x
i =1
i
x1 + x2 + . + xn .
Basicsummationproperties:
n
c = nc
i =1
n
n
n
n
n
i =1
i =1
i =1
i =1
i =1
cxi = c xi ; ( xi + yi ) = xi + yi
n
n
n
(x / y ) x / y
i =1
i
i
i
Bond Issuance
5%-coupon bonds with a face value of $1,000 are issued on January 1st.
The bonds pay interest semi-annually.
What is the market value of the bonds if the market rate is 5% at the time of the
bond issuance?
The coupon rate equals the market
Principles of Accounting I
Lecture Notes 2
The Balance Sheet
The Statement of Retained Earnings
The Main Financial Statements
What is the companys
financial position at the
end of the period?
(Statement of
financial position)
How well did the
company perf
Principles of Accounting I
Lecture Notes 10
Receivables
Types of Receivables
Receivables are amounts due from companies and individuals.
One of companies most liquid assets.
Usually classified in three categories:
Accounts Receivable: Amounts customers
Principles of Accounting I
Lecture Notes 8
Merchandising Operations
Recognition of Sales Revenue
Revenues are increases in owners equity (retained earnings)
from delivering goods and/or rendering services that constitute
the companys ongoing major operati
2/3/2013
Midterm Exam, next Wednesday (Feb 6)
multiple choice, 40 questions, 50 minutes
bring a scantron F-288-PAR-L
one page of handwritten notes, two sides
no electronic devices
no cooperation!
my office hours: Tue 11-12:30 SSPA 3177
TAs (Bryan R
2/3/2013
Material for Midterm Exam (Feb 6)
(25-30%) Utility Maximization. Various Concepts of
Utility. Empirical Anomalies. Possible Explanations.
Self-Interest and Social Preferences
Standard Economic Model assumes that utility depends only on the
perso
2/3/2013
Menus and Commitment
To study commitment, consider choices over menus - sets of
consumption alternatives.
Multi-self Model of Commitment
Example:
Strotz (55), Laibson (97)
u(x) = 5
U(A) = maxx in A such that v(x) v(y)
Suppose that choices are mad
Homework 1
1. Standard economic models
(A) prescribe how rational people should make their choices;
(B) accurately describe how people make choices in experiments;
(C) assert that people should be altruistic;
(D) all of the above.
2. Behavioral economic m
Homework 2
1. Consider a person who has discounted utility
U (c0 , c1 , c2 ) = u(c0 ) + u(c1 ) + 2 u(c2 ).
Suppose that he is indierent between the two proles c0 = c1 = c2 = 10 and
c0 = 9, c1 = 10, c2 = 12.
(a) Let u(c) = c be linear. Compute the discount
Homework 3
1. Bob has a utility function U (x, y ) = log x1 + 0.8 log x2 + 0.64 log x3 over his
incomes x1 , x2 , x3 in the next three years. This function is an example of
(A) quasi-hyperbolic discounting; (B) anticipated utility; (C) exponential
discoun
2/3/2013
Discounted Utility Model (DUM)
Samuelson (1937): people maximize the discounted utility
U(c0, c1, cT) = t = 0, 1, T t u(ct)
where describes the discount factor.
One can also write = 1/(1+).
>0 is equivalent to < 1. This case is called positive di
2/3/2013
Discounted Utility Model (DUM)
Samuelson (1937): people maximize the discounted utility
U(c0, c1, cT) = t = 0, 1, T t u(ct)
where describes the discount factor.
One can also write = 1/(1+).
Implications of Discounted Utility Model
completeness,
2/3/2013
Self-Interest and Social Preferences
Self-Interest and Social Preferences
Standard Economic Model assumes that utility depends only on the
personal consumption.
What do people care about?
Behaviors that do not fit the egoistic model.
others welf
Principles of Accounting I
Lecture Notes 9
Inventory
Inventory
Inventory (or Merchandise Inventory):
Products held for resale in the ordinary course of business (or for
consumption in the production process or in rendering of services).
Current asset on