Scribd Logo
Upload

Welcome to Scribd!

  • 100 views

    Optimization Techniques and New Management Tools

    Uploaded by

    Ali Haider
    The document discusses different methods for expressing economic relationships, including through equations, tables, and graphs. It also covers total, average, and marginal relations, explaining concepts like total revenue, marginal revenue, profit maximization, total cost, and marginal cost.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Optimization Techniques and New Management Tools

    Uploaded by

    Ali Haider
    100 views6 pages
    The document discusses different methods for expressing economic relationships, including through equations, tables, and graphs. It also covers total, average, and marginal relations, explaining concepts like total revenue, marginal revenue, profit maximization, total cost, and marginal cost.

    Original Description:

    economics

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document discusses different methods for expressing economic relationships, including through equations, tables, and graphs. It also covers total, average, and marginal relations, explaining concepts like total revenue, marginal revenue, profit maximization, total cost, and marginal cost.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    100 views6 pages

    Optimization Techniques and New Management Tools

    Uploaded by

    Ali Haider
    The document discusses different methods for expressing economic relationships, including through equations, tables, and graphs. It also covers total, average, and marginal relations, explaining concepts like total revenue, marginal revenue, profit maximization, total cost, and marginal cost.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 6

    Optimization Techniques and New management Tools

    Methods of Expressing Economic Relationships


    Economic relationships can be expressed in the form of Equations, tables or
    graphs. When the relationship is simple, a table or graph may be sufficient.
    When the relationship is complex, however, expressing the relationship in
    equational form may be necessary. Expressing an economic relationship in
    equational form is also useful because it allows us to use the powerful
    techniques of differential calculus in determining the optimal solution of the
    problem (i.e. the most efficient way for the firm or other organization to
    achieve its objectives or reach its goal).
    For example, suppose that the relationship between the Total revenue (TR) of
    a firm and the quantity (Q) of the good or service that the firm sells over a
    given period of time, say, one year, its given by
    TR=100Q 10Q2
    By substituting into Equation 2-1 various values for the quantity sold, we
    generate the total revenue schedule of the firm, shown in Table.
    The Total Revenue Schedule of the Firm
    Q
    0
    1
    2
    3
    4
    5
    6

    100 -10Q2
    100( 0) -10(0)2
    100( 1) -10(1)2
    100( 2) -10(2)2
    100( 3) -10(3)2
    100( 4) -10(4)2
    100( 5) -10(5)2
    100( 6) -10(6)2

    TR
    $0
    90
    160
    210
    240
    250
    240

    TR
    300
    250
    200
    150
    100
    50
    0
    0

    7
    Q

    The TR curve rises up to Q=5 and declines thereafter. Thus we see that the
    relationship between the total revenue of the firm and its sales volume can
    be expressed in equational, tabular, or graphical form.
    TOTAL, AVERAGE, AND MARGINAL RELATIONS
    Total, average, and marginal relations are very useful in optimization analysis
    A marginal relation is the change in the dependent variable caused by a oneunit change in an
    independent variable. For example, marginal revenue is the change in total
    revenue associated
    with a one-unit change in output; marginal cost is the change in total cost
    following a one-unit
    change in output; and marginal profit is the change in total profit due to a
    one-unit change in
    output.
    REVENUE RELATIONS

    Total Revenue = Price Quantity

    Marginal Revenue
    Change in total revenue associated with a one-unit change in output.
    Revenue Maximization

    TR

    AR

    MR

    90

    90

    90

    160

    80

    70

    210

    70

    50

    240

    60

    30

    250

    50

    10

    240

    40

    -10

    Profit Maximization

    TR

    TC

    Profit

    20

    -20

    90

    140

    -50

    160

    160

    210

    180

    30

    240

    240

    250

    480

    -230

    Total Cost
    Total Cost = Fixed Cost + Variable Cost.
    Marginal and average cost.
    Marginal cost is the change in total cost associated with a one unit change in
    output. Average Cost = Total Cost/Quantity

    You might also like