We can now replace the rate of return (r) with the expected rate of return based on CAPM from equation (5.
The equilibrium model of group development (equilibrium model) is a sociological theory on how people behave in groups. The model theorizes that group members will work to maintain a balance, or equilibrium, between task-oriented (instrumental) and socio-emotional (expressive) needs.
There are three types of equilibrium: stable, unstable, and neutral. Figures throughout this module illustrate various examples. Figure 1 presents a balanced system, such as the toy doll on the man's hand, which has its center of gravity (cg) directly over the pivot, so that the torque of the total weight is zero.
The most ambitious general equilibrium model was developed by the French economist Uon Walras (1834-1910). In his Elements of Pure Economics1 Walras argued that all prices and quantities in all markets are determined simultaneously through their interaction with one another.
The general equilibrium analysis further helps in predicting the consequences of an autonomous economic event. Suppose the demand for commodity A rises which may lead to a rise in its price. This, in turn, reduces the prices of its substitutes and raises the prices of complements.
Article shared by : ADVERTISEMENTS: The General Equilibrium of Exchange and Consumption: Distribution of Goods between Individual! That is, we consider the case when two goods are provided to the individuals in the economy from outside the system. ...
A general equilibrium analysis takes feedback effects into account, where a price or quantity adjustment in one market can cause a price or quantity adjustment in related markets. Ignoring these feedback effects can lead to inaccurate forecasts of the full effect of changes in one market.
In microeconomics, the contract curve is the set of points representing final allocations of two goods between two people that could occur as a result of mutually beneficial trading between those people given their initial allocations of the goods.
The marginal rate of transformation (MRT) is the number of units or amount of a good that must be forgone to create or attain one unit of another good. It is the number of units of good Y that will be foregone to produce an extra unit of good X while keeping the factors of production and technology constant.
MRT shows that as more of Good X (represented on x-axis) is produced, the loss from Good Y( represented on y-axis) tends to increases on EVERY addition of Good X. MRT basically shows the loss occurred when resources are shifted from Good Y to Good X. This loss increases because resources are USE SPECIFIC.
The MRT is calculated by summing the total time in the body and dividing by the number of molecules, which is turns out to be 85.
MRT is slope of PPF or PPF . therefore ,when MRT is constant , PPF will be downward sloping straight line .
The Production Possibilities Curve (PPC) is a model that captures scarcity and the opportunity costs of choices when faced with the possibility of producing two goods or services. ... The bowed out shape of the PPC in Figure 1 indicates that there are increasing opportunity costs of production.
The PPF is also referred to as the production possibility curve or the transformation curve.
Constant opportunity cost occurs when the opportunity cost stays the same as you increase your production of one good. This indicates that the resources are easily adaptable from the production of one good to the production of another good.
An economic system is any system of allocating scarce resources. Economic systems answer three basic questions: what will be produced, how will it be produced, and how will the output society produces be distributed?
The first is the fact that the budget constraint is a straight line. This is because its slope is given by the relative prices of the two goods. In contrast, the PPF has a curved shape because of the law of the diminishing returns. The second is the absence of specific numbers on the axes of the PPF.
Here the economy foregoes the same amount of one good when producing more of the other. Concave: Decreasing Cost (Click the [Concave] button): This is a concave production possibilities curve with decreasing opportunity cost. In this case, opportunity cost actually decreases with greater production.
When the PPC is a straight line, opportunity costs are the same no matter how far you move along the curve. When the PPC is concave (bowed out), opportunity costs increase as you move along the curve. When the PPC is convex (bowed in), opportunity costs are decreasing.
The law of increasing opportunity cost states that each time the same decision is made in resource allocation, the opportunity cost will increase.
What is opportunity cost and why does it vary with circumstances? Opportunity cost is the highest-valued alternative that must be given up to engage in an activity. It varies because it depends on your alternatives. Your opportunity cost is the value of the best alternative you gave up.
Examples of Opportunity Cost. Someone gives up going to see a movie to study for a test in order to get a good grade. The opportunity cost is the cost of the movie and the enjoyment of seeing it. At the ice cream parlor, you have to choose between rocky road and strawberry.
When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource. If, for example, you spend time and money going to a movie, you cannot spend that time at home reading a book, and you can't spend the money on something else.
Opportunity Cost helps a manufacturer to determine whether to produce or not. He can assess the economic benefit of going for a production activity by comparing it with the option of not producing at all. He may invest the same amount of money, time, and resources in another business or Opportunity.