Over all a
fair submission.
, and the competencies that must be mastered in this
assessment include the the theories, models, and practices of macro and micro
economic theory and practice as they apply to corporate operations to create
value for the firm.
What this means is that simple explanations of
the formulas and statements that this is the way it is are not enough.
Consider how you would approach the problem if
you were tasked to explain the information in the assessment to your CEO or
Board of Directors.
You don’t walk in and launch into the math or
one-two sentence overviews of what is important to them for making real-world
decisions.
You introduce the topic, explain what is going
to take place/be discussed, and tell them why it is important for their
decision-making processes. Then you tell them; taking the time to explain
what is going on in terms that apply to their decision-making and operating
activities.
You don’t tell them all about the math.
That is what you need to do in these
assessments. Tell about the problems from the point of view applicable to
the decision-makers, not a mathematician or accountant.
Economic Problems Set
2
Assessment 3
Tracy A. Solomon
Capella University
September 14, 2015
[DJA1]
Assessment 3, Problem A[DJA2][DJA3]
Elasticity
of Demand Formula:
- e=
[Q2-Q1/(Q2+Q1/2)]/[P2-P1/(P2+P1/2)][DJA4] - The same process applies to
elasticity of supply. - Es= %change in quantity
supplied/%change in price
Assume
that the price of smartphones increased from $200 to $222 per unit. The
manufacturer decides to supply 12,000 units instead of 10,000. Calculate the
price elasticity of supply. Is supply elastic or inelastic?
|
Change in Quantity |
Price |
Change in Price |
Q2+Q1/2 |
P1+P2/2 |
|
|
10,000 |
200 |
||||
|
12,000 |
222 |
||||
|
[DJA5] |
Price elasticity of supply = [Q2-Q1/{(Q2+Q1)/2}]/ [P2-P1/
{(P2+P1)/2}
Given P1 = $200, P2 = 222, Q1 = 10,000, Q2 = 12,000 where P1
is initial price and Q1 is initial quantity supplied, P2 is new price and Q2 is
new quantity supplied
Es = [12,000-10,000/ [(12,000+10,000)/2]/ [222-200/ [222+200)/2]
Es = [2000/11000]/[22/211]
Es = 0.1818/0.1042
Es = 1.744
Supply is elastic.
Assessment 3, Problem B
Problem B
According to (Ahleresten, 2008, pg[DJA6]145), a public good is defined as nonrival
and nonexclusive.
M[DJA7]eaning that an individual’s
consumption of a good does not affect any other individual’s consumption of the
same good and that it is not possible to exclude anyone from consuming the
good. A private good on the other hand is both rival and exclusive. A private
good is one that must be purchased in order to be consumed. A public good would
best be described as a clean air, parks, public transportation and national defense
where the use by one individual does not diminish the availability of the good
for other individuals. On the other had a private good is any good that needs
to be purchased. An example of a private good would be bread is made for profit
and consumed by individuals. The principle characteristic of a public good is
Non-rivalry: This means that when a good is consumed, it doesn’t reduce the
amount available for others and Non-excludability: Which occurs when it is not
possible to provide a good without it being possible for others to enjoy. The
free rider problem occurs when some individual consume more than their share of
a common resource or pay for less than their fair share of that common resource.
The
local police are a public good because they are there toserve
and protect everyone in the community. The local cable TV service is both a
public and a private good as it isexcludable
since you have to pay for it. However, it is also non-rival since other cable
users will not affect another individual from using it.
Assessment 3, Problem C
Use the following to answer the questions below:
·
z is the marginal utility per dollar measured in utils, x is the
amount spent on product A, and y is the amount spent on product B.
·
Assume MUA = z = 20 – x and MUB = z = 42 – 4y.
·
Assume that the consumer has $20 to spend on A and B; that is, x
+ y = 20.
What is the marginal utility per dollar? What is best way to
allocate the expenditure of the $20?
Answer:
MUA=MUB
20-x=42-4y
4y-x=22 (equation 1)
x+y=20
x=20-y (equation 2)
Substituting equation
2 in equation 1, we get:
4y-20+y=22
5y=42
y=42/5=8.4
Substituting the value
of y in equation 2 we get,
x=20-8.4
x=11.6
The best way to
allocate the $20 would be $11.6 on
product A and $8.4 on product B.
References:
Ahleresten, K. (2008). Essentials of microeconomics. In K.
Ahleresten, Essentials of microeconomics.[DJA8]
http://bookboon.com/en/textbooks/economics/microeconomics-uk.
doi:http://bookboon.com/en/textbooks/economics/microeconomics-uk
[DJA1]All
submitted written work must include an introduction. Include all relevant
facts, dates, persons, et cetera, and a statement of what you are doing and
why. Avoid using the first person (Problem Preparation and Submission
Guidelines, para. 2).
[DJA2]DO
NOT write like a student answering questions for a course.
Write like the submission is going to the top person in
the company, board of directors, head decision-maker for his/her approval.
Introduce the topic, tell what is going to be told
about, why it is being told about, and why it should matter to the reader
Tell: Build the
information systematically (& succinctly), transition from each paragraph
to the next, and lead the reader where you want them to go through the
organized, to the point presentation of facts.
Tell what was told about. Present the conclusion (based
on provable (& cited) facts). Make a recommendation if called for (again
based on the facts and purpose of the document), and leave the reader feeling
as if he/she made the decision.
Present Tables and large figures in Appendices or
Exhibits (one table per Appendices/Exhibit, no more figures than will fit on a
single page per Appendices/Exhibit).
[DJA3]
[DJA4]Do
not type formulas, equations, and calculations or show math or equal signs.
Your client is not interested in reading formulas. (Problem Preparation and
Submission Guidelines, para. 4).
[DJA5]Table:
In APA writing this is a Table and requires a specific Table Heading (APA 6e,
p. 127-150).
[DJA6]Does
not follow APA 6th Edition for p. format in a citation.
[DJA7]Does
not follow APA 6th Edition for sentence spacing.
[DJA8]This
is not the publisher.
