managerial economics-charles w. upton the economics of bads
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![Page 1: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/1.jpg)
Managerial Economics-Charles W. Upton
The Economics of Bads
X
B
I1
IoX*
B*
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The Economics of Bads 2
The Economics of Bads
• My wants are many but they do not include hard work.
![Page 3: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/3.jpg)
The Economics of Bads 3
The Economics of Bads
• My wants are many but they do not include hard work.
• I like to earn a high return on my investments, but I don’t like to bear risk.
![Page 4: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/4.jpg)
The Economics of Bads 4
The Economics of Bads
X
B
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The Economics of Bads 5
The Economics of Bads
X
B
I1
Io
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The Economics of Bads 6
The Economics of Bads
X
B
I1
Io
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The Economics of Bads 7
The Economics of Bads
X
B
I1
Io
X*
B*
![Page 8: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/8.jpg)
The Economics of Bads 8
The Work Leisure Choice
X
I1
Io
H*
X=10H
X*
![Page 9: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/9.jpg)
The Economics of Bads 9
The Work Leisure Choice
X
I1
Io
H*
X=10H
1680
168
X*
![Page 10: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/10.jpg)
The Economics of Bads 10
The Work Leisure Choice
X
I1
Io
H*
X=10H
Io1680
168
X*
![Page 11: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/11.jpg)
The Economics of Bads 11
The Work Leisure Choice
X
I1
Io
H*
X=10H
Io1680
168
X*
L*
![Page 12: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/12.jpg)
The Economics of Bads 12
The Work Leisure Choice
X
I1
Io
H*
X=10H
Io1680
168
X*
L*
L*+H*=168
![Page 13: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/13.jpg)
The Economics of Bads 13
A Problem
• Helen Jones works 40 hours a week for a salary of $400. She would like overtime at $10 an hour.
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The Economics of Bads 14
A Problem
• Helen Jones works 40 hours a week for a salary of $400. She would like overtime at $10 an hour.
• That is, the MB of $10 exceeds the marginal disutility of working an additional hour.
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The Economics of Bads 15
A Problem
• She is offered a position paying 4% of sales. She has the following data on current employees:
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The Economics of Bads 16
A Problem
• She is offered a position paying 4% of sales. She has the following data on current employees:
Employee Hours Sales
Wilson 40 $10000
Smith 50 $12500
Brown 30 $7500
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The Economics of Bads 17
A Problem
• These data mean that you earn about $10 an hour.
Employee Hours Sales
Wilson 40 $10000
Smith 50 $12500
Brown 30 $7500
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The Economics of Bads 18
Where She Is
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B
Io
40
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The Economics of Bads 19
Doing Better
X
B
I1 Io
400
40
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The Economics of Bads 20
Take the Job
X
B
I1 Io
400
40
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The Economics of Bads 21
A Second Problem
• Richard Jones has $100,000 to invest.
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The Economics of Bads 22
A Second Problem
• Richard Jones has $100,000 to invest.
• He could put the money into zero risk government bonds
![Page 23: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/23.jpg)
The Economics of Bads 23
A Second Problem
• Richard Jones has $100,000 to invest.
• He could put the money into zero risk government bonds
• He could put the money in the stock market
![Page 24: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/24.jpg)
The Economics of Bads 24
A Second Problem
• Richard Jones has $100,000 to invest.
• He could put the money into zero risk government bonds
• He could put the money in the stock market
• How should he make his decision?
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The Economics of Bads 25
A Second Problem
Return
“Riskiness”0
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The Economics of Bads 26
A Second Problem
Return
“Riskiness”
Io
0
![Page 27: Managerial Economics-Charles W. Upton The Economics of Bads](https://reader030.vdocuments.us/reader030/viewer/2022032704/56649d4e5503460f94a2d3e0/html5/thumbnails/27.jpg)
The Economics of Bads 27
A Second Problem
Return
“Riskiness”
Io
01
Ret*
Risk*
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The Economics of Bads 28
End
©2005 Charles W. Upton