BY DR LOIZOS CHRISTOU OPTIMIZATION. Optimization Techniques.
Ch. 2-optimization-techniques
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 1
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Microeconomics-Salvatore
Transcript of Ch. 2-optimization-techniques
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 1
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 2
Optimization Techniques
• Methods for maximizing or minimizing an objective function
• Examples– Consumers maximize utility by purchasing
an optimal combination of goods– Firms maximize profit by producing and
selling an optimal quantity of goods– Firms minimize their cost of production by
using an optimal combination of inputs
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 3
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TR
Expressing Economic Relationships
Equations: TR = 100Q - 10Q2
Tables:
Graphs:
Q 0 1 2 3 4 5 6TR 0 90 160 210 240 250 240
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 4
Total, Average, and Marginal Revenue
TR = PQ
AR = TR/Q
MR = TR/Q
Q TR AR MR0 0 - -1 90 90 902 160 80 703 210 70 504 240 60 305 250 50 106 240 40 -10
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 6
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 7
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Total Revenue
Average andMarginal Revenue
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 8
Total, Average, andMarginal Cost
Q TC AC MC0 20 - -1 140 140 1202 160 80 203 180 60 204 240 60 605 480 96 240
AC = TC/Q
MC = TC/Q
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 9
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 10
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 11
Geometric Relationships
• The slope of a tangent to a total curve at a point is equal to the marginal value at that point
• The slope of a ray from the origin to a point on a total curve is equal to the average value at that point
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Geometric Relationships
• A marginal value is positive, zero, and negative, respectively, when a total curve slopes upward, is horizontal, and slopes downward
• A marginal value is above, equal to, and below an average value, respectively, when the slope of the average curve is positive, zero, and negative
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 13
Profit Maximization
Q TR TC Profit0 0 20 -201 90 140 -502 160 160 03 210 180 304 240 240 05 250 480 -230
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 15
Steps in Optimization
• Define an objective mathematically as a function of one or more choice variables
• Define one or more constraints on the values of the objective function and/or the choice variables
• Determine the values of the choice variables that maximize or minimize the objective function while satisfying all of the constraints
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 16
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 17
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 18
New Management Tools
• Benchmarking
• Total Quality Management
• Reengineering
• The Learning Organization
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 19
Other Management Tools
• Broadbanding
• Direct Business Model
• Networking
• Performance Management
PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 20
Other Management Tools
• Pricing Power
• Process Management
• Small-World Model
• Strategic Development
• Virtual Integration
• Virtual Management
