Economic Cost versus Accounting Cost
accounting cost Actual expenses plus depreciation charges for capital equipment.
economic cost Cost to a firm of utilizing economic resources in production, including opportunity cost.
opportunity cost Cost associated
Economics for Decision Making
Quiz 2 Information
_
_
Arefaine Yohannes
Summer, 2015
_
_
1.
Quiz 2 will be given on Saturday, July 11, 2015.
2.
The quiz will be based on everything we covered in class so far. It includes lectures, lecture
slides, handouts,
Economics for Decision-Making
_
_
Arefaine Yohannes
Summer, 2015
_
_
Production Function
Y = 100 K 0.5 L 0.5
where: 100 = total factor productivity
Exponent of capital
= elasticity of output with respect to capital. If capital increases by
1%, output will
Economics for Decision-Making
HW 6 (Graded)
_
_
Arefaine Yohannes
Summer, 2015
_
_
Consider the following data:
Output (Q) = 50L0.5 K0.5
where:
L = labor
K = capital
Answer the questions #1 - #3.
1.
What is the interpretation of the exponent of L?
a.
b.
c
Economics for Decision-Making
_
_
Cost Minimization / Output Maximization
Summer, 2015
_
_
A. Maximizing Output Given a Specified Cost Amount
Consider the following data:
Output (Q)
Cost (C )
= 50L0.5 K0.5
= 5L + 20 K = 400
where: L = labor K = capital
St
Economics for Decision-Making
HW 6 (Graded)
_
_
Arefaine Yohannes
Summer, 2015
_
_
Consider the following data:
Output (Q) = 50L0.5 K0.5
where:
L = labor
K = capital
Answer the questions #1 - #3.
1.
What is the interpretation of the exponent of L?
a.
b.
c
DEMAND ANALYSIS
Determinants of Demand
The Price Elasticity of Demand
Arc and point price elasticity
Elasticity and revenue relationships
Why some products are inelastic and others are
elastic
Income Elasticities
Cross Elasticities of Demand
Combi
Economics for Decision-Making
_
_
Arefaine G-Yohannes
Summer, 2015
_
_
Forecasting Methods:
1. Stationary (horizontal) Series: flat sales over time
a. simple moving average method
b. simple (or one parameter) exponential smoothing method
2. Linear Series:
Know how to solve the derivatives that have greater than one exponents. They must be solved by taking the derivative and not assuming the coefficient
p
I
Pa
9a
9b
9c
9d
Year
Sales
1
2
3
4
5
6
7
8
9
10
11 FCS
Year
Avg
20
16
22
20
18.0
19.0
21.0
(4.0)
(1.0)
Know how to solve the derivatives that have greater than one exponents. They must be solved by taking the derivative and not assuming the coefficient
p
I
Pa
9a
9b
9c
9d
5
10
4
5.05
10.1
4.04
1
22.5 -0.111111
2 inelastic bc 0-1
3 A one unit increse in Pric
Quiz one
1 Simple probability
2 z score while using a loss scenario. Set r = 0; z=(r-expR)/std dev
Probility of profit, subtract the above scenario from 1. Also another z table while incorporating -/+
3 solve for coefficient of variation
4 factual stateme
Economics for Decision-Making
Home Work 2
(not graded)
_
_
Arefaine Yohannes
Summer, 2015
_
_
1. Consider the following data:
Possible Sales
Probability
$90 million
80 million
0.4
0.6
a. What is the arithmetic average of possible sales?
b. What is the exp
Economics for Decision Making
Information for Quiz 1
_
_
Arefaine Yohannes
Summer, 2015
_
_
1.
Quiz 1 will be given on Saturday, June 13, 2015.
2.
The quiz will be based on everything we covered in Week 1 and Week 2. That includes lectures,
lecture slides
Market Model
Demand, Supply, and Equilibrium Review
Demand and Supply: Applications
Profit maximization
Present Value, Discounting & Net Present Value
Risk and Expected Value
Probability Distributions
Standard Deviation & Coefficient of Variation
Normal D
Example of Two Gambles
prob
r
0.5
0.5
prob
r
10
20
r
0.4
0.6
r
5
10
15
r
90
80
r^2
-5
5
r
36
48
84
25
25
r^2
6
-4
r^2*Prob
12.5
12.5
25 Variance
5 Std Dev
0.333333 CV
std dev / exp return
r^2*Prob
36
14.4
16
9.6
24 Variance
4.898979 Std Dev
0.058321 CV
st
Economics for Decision-Making (S)
Home Work 1
(Graded)
_
_
Arefaine G - Yohannes
Summer, 2015
_
_
1.
The demand for a product is likely to shift to the right if:
a. Household income increases
b. The number of consumers increases
c. Prices of substitutes i
Economics for Decision-Making (S)
Home Work 1
(Graded)
_
_
Arefaine G - Yohannes
Summer, 2015
_
_
1.
The demand for a product is likely to shift to the right if:
a. Household income increases
b. The number of consumers increases
c. Prices of substitutes i