* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Slides for Week 2
Survey
Document related concepts
Laffer curve wikipedia , lookup
Phillips curve wikipedia , lookup
Kuznets curve wikipedia , lookup
Yield curve wikipedia , lookup
Criticisms of the labour theory of value wikipedia , lookup
Brander–Spencer model wikipedia , lookup
Marginal utility wikipedia , lookup
Surplus value wikipedia , lookup
Cambridge capital controversy wikipedia , lookup
Macroeconomics wikipedia , lookup
Supply and demand wikipedia , lookup
Production for use wikipedia , lookup
Marginalism wikipedia , lookup
Transcript
Material for Week 2: Optimization Techniques Problem 3: 100 100 + 800 Interest rate (i) = 15% 100 900 PV 767 . 49 1 2 (1.15) (1.15) Problem 12: Current Job = $30,000 New Job = $40,000 Return From Pharmacy = $200,000 Explicit Cost = 80,000+40,000+10,000+5,000 +8,000 = 143,000 Business Profit = 200,000 – 143,000 = 57,000 Implicit Cost = 40,000 + 2,000 = 42,000 Economic Profit = Business Profit – Implicit cost = 57,000 – 42,000 = 15,000 (b) Total Revenue now is $200,000 which includes a $15,000 economic profit. So in three years when the new pharmacy will drive down the economic profit to zero, total revenue of the pharmacy will be $200,000 $15,000 = $185,000. c. Samantha shall purchase the pharmacy if the present value of the pharmacy is positive. 15,000 15,000 15,000 – 50,000 15,000 15,000 15,000 50,000 PV 1372. 57 1 2 3 3 (1 .15) (1 .15) (1 .15) (1 .15) Demand Curve: It shows the relationship between the quantity demanded of a commodity with variations in its own price while everything else is considered constant. Demand Curve: Qd = 20 - .5P P P = 40 - 2Qd 40 0 Q Supply Curve: Shows the relationship between the quantity supplied of a commodity with variations in its own price while everything else is considered to be constant. Qs= – .15 + .3P P P = .5 + (10/3) Qs 0 Q P Excess Supply 25 0 7 Q Profit = TR - TC TR = P × Q Q = 10 – .10P P = 100 – 10Q TR = (100 – 10Q)×Q = 100Q – 10Q2 AR = TR/Q = 100 - 10Q when, Q 0 dTR d (100Q 10Q 2 ) MR 100 20Q dQ dQ TR = 100Q – 10Q2 Q TR AR MR 0 0 __ __ 1 90 90 90 2 160 80 70 3 210 70 50 4 240 60 30 5 250 50 10 6 240 40 -10 TR Q1 Q2 Q Q3 Q4 Q5 Q6 MR AR AR MR Q TC TC 0 Q1 AC, Q2 MC Q AC MC 0 Q Profit Maximization: TC TR MC p Q1 Q2 MR Q Q Optimization & Marginal Analysis : Marginal Cost is defined as the change in total cost per unit change in output and is given by the slope of the TC curve. As long as the slope of the TR curve or MR exceeds the slope of the TC curve or MC, it pays for the firm to expand output and sales. The firm would be adding more to its total revenue than to its total costs and so its total profit would increase. To make it general, according to the marginal analysis as long as the marginal benefit of an activity (such as expanding output or sales) exceeds the marginal cost, it pays for the organization (firm) to increase the activity (expand output). The total net benefit (profit) is maximized when the marginal benefit equals marginal cost.