For questions regarding the mathematical analysis of economic models and problems. This includes questions about the formulation or solution of models from microeconomics or macroeconomics.
Questions tagged [economics]
1602 questions
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How did (economics) Taylor rule come out mathematically?
There is Taylor rule in economics that shows how to relate nominial interest rate with inflation and GDP.
$i_t = \pi_t + r_t^* + a_\pi ( \pi_t - \pi_t^* ) + a_y ( y_t - \bar y_t )$
In this equation, $\,i_t\,$ is the target short-term nominal…
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1 answer
Annuity increasing by a fixed amount
Is there an easy way to determine the present worth (PV) of an annuity when the annuity is increasing by a fixed value, not a percentage?
Ie. A contract pays you 10 000 the first year, 13 000 the second, 16 000 the third and so on, increasing by…
Brydon Gibson
- 133
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1 answer
Manually calculating IRR formula
I am new to economics maths and I have to solve some issues.
I am trying to solve the following equation :
$$-156000 + \frac{57080}{(1+irr)^1} + \frac{81080}{(1+irr)^2} + \frac{176480}{(1+irr)^3} + \frac{213680}{(1+irr)^4} +…
prokopis
- 29
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Utility to demand function
Suppose that Sally’s preferences over baskets containing food (good x), and clothing (good y), are described by the utility function U(x,y)=√x+y
Sally’s corresponding marginal utilities are,
Ux=$1\over2√x$
and Uy=$1$
Use Px to represent the price of…
Badatit
- 11
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1 answer
Microeconomics (quasi-linear utility function)
Suppose that Sally’s preferences over baskets containing food (good x), and clothing (good y), are described by the utility function
$U(x,y)=\sqrt{x}+y$.
Sally’s corresponding marginal utilities are,
$U^\prime_x=\frac{1}{2\sqrt{x}}$ and …
AngelOfDeath
- 13
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1 answer
Profit after price increase and volume drop
What happens with profit if prices increase by 10 pct and volume decrease by 10 pct?
I guess the sales are determined as
$$
TR = P \cdot Q,
$$
so the changes results in
$$
TR' = (1.1 \cdot P) \cdot (0.9 \cdot Q) = 1.1 \cdot 0.9 \cdot TR = 0.99 \cdot…
Jamgreen
- 809
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1 answer
Average cost and the level of output
A firm's average cost function is: $$AC = x^2 - 2x + 50 , \ 0 \leq x$$
a) Find the level of output to minimalize average cost (AC) function
b) Find the level of output when average cost equals marginal cost (AC=MC)
Could you please check my…
Michael
- 33
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1 answer
Maximalize profit
Please advise on how to solve this exercise
A firm’s profit is given by the function:
$$\text{Profit} = 1200 - 6x^2 - 8x + 4xy - 10y^2 + 96y$$
where $x$ denotes output and $y$ advertising expenditure.
Find the level of output and…
Michael
- 33
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2 answers
Maximize firm's profit
Please give me any advices how to solve this. I'm good in maths, but I just don't understand these economical issues
A firm's profit is given by the function: $PROFIT(L,K) = 50 L^{0.2} K^{0.8}$, where $L$ denotes labor costs and $K$ denotes…
Michael
- 33
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1 answer
Find change in gross profit after price change
How do you solve this question?
A company has 3 products. They contribute to 30%, 30% and 40% of sales
respectively.
They have profit margins of 15%, 30%, and 50% respectively.
If the client raises prices by 10% for Product A (assuming costs
…
Jamgreen
- 809
0
votes
1 answer
Depletion Engineering Economy
An engineer sold his machine for $17,000$, after using it for 5 years. He bought a new machine worth $75,000$ with an expected life of 12 years, and a salvage value of $2,000$. The operating cost is $5,500$ per year. The old machine which he…
Mickey
- 760
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How to calculate the value added for the following question?
In $2012$ a store imported an iPad for $400$. In $2013$, the store sold the iPad for $600$. As a result of these transactions, the value added is:
$A) 400$ in $2012$ and $600$ in $2013$
$B) 0$ in $2012$ and $600$ in $2013$
$C) 0$ in $2012$ and $200$…
CoolKid
- 2,738
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2 answers
How to calculate the marginal cost of the following gasoline price?
A driver wants to buy gasoline and have her oil checked,too. The price of gasoline at the pump is 2 dollars per litre. The pricing for the oil check varies: it's 1 dollar when she buys 49 litres and 0.75 dollars when she buys 50 litres. What is the…
CoolKid
- 2,738
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votes
1 answer
Basic question about algebra for relative demand.
Suppose I have two markets, Home and Foreign. Suppose that
$$\frac{p_1}{p_2} = \frac{c_2^F}{c_1^F}$$
$$\frac{p_1}{p_2} = \frac{c_2^H}{c_1^H}$$
Supposedly I am supposed to be able to show
$$\frac{p_1}{p_2} = \frac{c_2^F + c_2^H}{c_1^F+ c_1^H}$$…
Stan Shunpike
- 4,921
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votes
1 answer
Inflation Index
The inflation index of a country $A$ in $1995$ relative to $1990$ was $5$. Meaning that the ratio of dollars spent during $1990$ for goods compared to dollars spent for same goods is $1:5$. In country $B$ the inflation index is $9$ for the same…
Avinash Dadhich
- 101