on 17-Jan-2017 (Tue)

Smith has $60 to spend on bread and wine per month, the price of a slice of bread is $0.50, and the price of an ounce of wine is $0.75.

She could buy 120 slices of bread with all her income or up to 80 ounces of wine.

She can spend half her income on each good (60 slices of bread and 40 ounces of wine)

An affordable bundle represented by point b.

Consumer is able to purchase it because it lies on her budget constraint.

However, the MRS_BW at that point is greater than the price ratio.

This means he is willing to give up wine to obtain bread at a rate greater than she must.

She will be better off moving downward along the budget constraint until she reaches the tangent point at a.

In effect, she is willing to pay a higher price than she must for each additional unit of bread until she reaches B_a.

For all of the units up to B_a, the consumer is receiving consumer surplus,

She would not purchase slices of bread beyond B_a at these prices because at a point like c, the marginal rate of substitution is less than the price ratio—meaning that the price for that additional unit is above her willingness to pay.

Even though she could afford bundle c, it would not be the best use of her income.

1st Part

In evaluating financial reports, analysts typically have a specific economic decision in mind.

Examples of these decisions include the following:

• Evaluating an equity investment for inclusion in a portfolio.

• Evaluating a merger or acquisition candidate.

• Evaluating a subsidiary or operating division of a parent company.

• Deciding whether to make a venture capital or other private equity investment.

• Determining the creditworthiness of a company in order to decide whether to extend a loan to the company and if so, what terms to offer.

Total revenue increases with a greater quantity, but the rate of increase in TR (as measured by marginal revenue) declines as quantity increases.

Average revenue and marginal revenue decrease when output increases, with MR falling faster than price and AR. Average revenue is equal to price at each quantity level.

Total revenue increases with a greater quantity, but the rate of increase in TR (as measured by marginal revenue) declines as quantity increases.

Average revenue and marginal revenue decrease when output increases, with MR falling faster than price and AR.

Average revenue is equal to price at each quantity level.

This shows the relationships among the revenue variables.

Here at a price of 100, P₁ = MR₁ = AR₁ = Demand₁.

Marginal revenue, average revenue, and the firm’s price remain constant until market demand and supply factors cause a change in price.

If price increases to 200 because of an increase in market demand, the firm’s demand curve shifts from Demand₁ to Demand₂ with corresponding increases in MR and AR as well.

Irrational animals have the external and internal senses, which are sometimes keener than those of humans.

But because they lack the rational powers (intellect, intellectual memory, and free will), they are incapable of progress or of culture.

Human intellectual powers need material to work upon.

♦ First, adopt the body language of someone who’s utterly depressed. Let your shoulders slump, your head hang, your face sag. Now, without moving a muscle, try to feel really, truly excited. Go ahead, try to see if you can create any excitement without moving. It’s nearly impossible. ♦ Now do the opposite. Physically spring into excitement. Jump up and down as if you’ve won the lottery, smile the biggest smile you can, wave your arms in the air, and while doing all this, try to feel depressed. Again, it’s nearly impossible. Here are a few more physiological changes to play with: ♦ For confidence, assertiveness, and to be able to emanate gravitas, imagine playing the role of a military general—take a wide stance, puff up your chest, broaden your shoulders, stand straight, and confidently put your arms behind your back. Feel the effect of this posture internally. ♦ For a boost in both energy and warmth, stand up, stretch your hands as high up as possible, inhale as much as you can—imagine your rib cage expanding, doubling in size—make the biggest smile you can and look upward, hold for a second, and then relax everything.

When warming up for an important event, follow this checklist to prepare your internal state and maximize your charisma. ♦ Go over your schedule for the hours leading up to the event. Think about how the activities and meetings you have planned will affect you. ♦ If you can, avoid any difficult encounters and aim for confidence- or warmth-boosting experiences instead. ♦ Create your own music playlist for the internal state you’d like to have. You could make one for energy and confidence, one that makes you feel warm and empathetic, and another that makes you feel calm and serene. This exercise is a lot of fun in itself, and you can add new songs as often as you’d like.

four distinct kinds of charisma: focus, visionary, kindness, and authority.

Focus charisma requires, of course, the ability to focus and be truly present. Good listening skills are nonnegotiable, as is a certain degree of patience. To develop focus charisma, cultivate your ability to be present

two main risks. The first is that if you display too little power you could come across as too eager, and consequently low-status or even subservient. You’ll learn in chapter 9 how to increase the amount of confidence you broadcast. A less common risk is exhibiting too little warmth, which leads to attention that is too intense.

Focus charisma is appropriate for almost all business situations. It’s particularly useful when you need people to open up and share information.

The message matters for visionary charisma. This means knowing how to craft a bold vision and knowing how to deliver the message charismatically

One of the keys to communicating your visionary charisma is getting yourself into a state of complete conviction, shedding any doubt. You can use the tools you gained in chapters 3 and 4, such as rewriting reality, to strengthen your belief, or the responsibility transfer, to free yourself from the effect of uncertainty.

If you’re naturally uncomfortable in large social gatherings, the next time you’re at a party, don’t force yourself to be sociable right away or to be “on” for the whole evening. Instead, try these easy tweaks. Give yourself five minutes after you arrive to hang back and observe. Then give yourself little “introversion breaks” during the party: five-minute pockets of solitude. I know one highly charismatic introvert who often does exactly that during both social and business events. When she reemerges to mingle, people frequently comment on how radiant she is.

1. First things first: make sure your right hand is free. Shift anything it may be holding to your left hand well in advance. You don’t want to have to fumble at the last moment. 2. Avoid holding a drink in your right hand, especially if it’s a cold drink, as the condensation will make your hand feel cold and clammy. 3. Before shaking someone’s hand, whether you are a man or a woman, rise if you’re seated. And keep your hands out of your pockets: visible hands make you look more open and honest. 4. Make sure to use plenty of eye contact, and smile warmly but briefly: too much smiling could make you appear overeager. 5. Keep your head straight, without tilting it in any way, and face the person fully. 6. Keep your hand perfectly perpendicular, neither dominant (palm down) nor submissive (palm up). If you’re in doubt, angle your thumb straight to the ceiling. 7. Open wide the space between your thumb and index finger to make sure you get optimal thumb-web contact. 8. Ensure contact between the palms of your hands by keeping your palm flat—not cupped— and by draping your hand across your partner’s diagonally. 9. Try to wrap your fingers around your partner’s hand, scaling them one by one, as if you were giving a hug with your hand. You will almost have your index finger on their pulse —almost, but not quite. 10. Once full contact is made, lock your thumb down and squeeze firmly, about as much as your partner does. Shake from the elbow (not the wrist), linger for a moment if you want to convey particular warmth, and step back

Quantity (Q)	Price (P)	Total Revenue (TR)	Average Revenue (AR)	Marginal Revenue (MR)
0	100	0	—	—
1	99	99	99	99
2	98	196	98	97
3	97	291	97	95
4	96	384	96	93
5	95	475	95	91
6	94	564	94	89
7	93	651	93	87
8	92	736	92	85
9	91	819	91	83
10	90	900	90	81

Describe how total revenue, average revenue, and marginal revenue change as quantity sold increases from 0 to 10 units.

Solution:

Total revenue increases with a greater quantity, but the rate of increase in TR (as measured by marginal revenue) declines as quantity increases. Average revenue and marginal revenue decrease when output increases, with MR falling faster than price and AR. Average revenue is equal to price at each quantity level. Exhibit 8 shows the relationships among the revenue variables presented in Exhibit 7.

Exhibit 10 shows the graphical relationships among total costs, total fixed cost, and total variable cost. The curve for total costs is a parallel shift of the total variable cost curve and always lies above the total variable cost curve by the amount of total fixed cost. At zero production, total costs are equal to total fixed cost because total variable cost at this output level is zero

This shows the cost curve relationships among ATC, AVC, and AFC in the short run.

The difference between ATC and AVC at any output quantity is exactly equal to the amount of AFC.

Both ATC and AVC take on a bowl-shaped pattern in which each curve initially declines, reaches a minimum-cost output level, and then increases.

Point S, which corresponds to Q_AVC, is the minimum point on the AVC .

Point T, which corresponds to Q_ATC, is the minimum point on ATC.

When output increases, average fixed cost declines as AFC approaches the horizontal quantity axis.

This displays the cost curve relationships for ATC, AVC, and MC in the short run.

The marginal cost curve intersects both the ATC and AVC at their respective minimum points. This occurs at points S and T, which correspond to Q_AVC and Q_ATC, respectively.

Mathematically, when marginal cost is less than average variable cost, AVC will be decreasing. The opposite occurs when MC is greater than AVC. The same relationship holds true for MC and ATC.

ATC declines when MC is less than ATC. ATC increases as MC exceeds ATC.

Initially, the marginal cost curve declines, but at some point it begins to increase in reflection of an increasing rate of change in total costs as the firm produces more output.

Point R, which corresponds to Q_MC, is the minimum point on the marginal cost curve.

An easy way to start interactions in a way that both communicates warmth and sends the conversation down the right path is to offer a compliment about something the person is wearing.

Continue with an open-ended question, such as “What’s the story behind it?” The word story has a very strong emotional effect on most people—it sends them straight into storytelling mode, which instantly changes the rapport between the two of you

Another good question to break the ice with is “Where are you from?” No matter what the answer, it will encourage further dialogue. Whether they answer “New York” or “New Delhi,” if you’re not from that area, you can follow up with “What was it like growing up there?” The smaller the town of origin, the more delighted they will be that you have expressed interest

To keep people talking, simply ask open-ended questions, such as “What brought you here tonight?” or “How are you connected to this event?

Aim to keep your questions focused on positive subjects because people will associate you with whatever feelings your conversation generates

If they start asking about you and you want to refocus the conversation on them, use the bounce back technique. Answer the question with a fact, add a personal note, and redirect the question to them, as follows

one word that should pop up most often in your conversation is not I but you. Instead of saying “I read a great article on that subject in the New York Times,” try “You might enjoy the recent New York Times article on the subject.” Or simply insert “You know…” before any sentence to make them instantly perk up and pay attention

To make yourself even more relatable, adjust your choice of words, your breadth and depth of vocabulary, and your expressions to suit your audience

The easiest way to exit is, of course, to have an official reason for doing so. That’s one of the many reasons to be a volunteer or acquire some official duty at parties.

Another way to exit a conversation with grace is to offer something of value: Information: an article, book, or Web site you think might be of use to them A connection: someone they ought to meet whom you know and can introduce them to Visibility: an organization you belong to, where you could invite them to speak Recognition: an award you think they should be nominated for

What if you’re the one breaking up a group? Perhaps you’re rescuing someone from a conversation they’ve indicated they wanted to leave, or you need to introduce them to someone else, or one of the group is needed for another duty. In this case, focus all your attention, with particularly warm eye contact (see chapter 9 for this), not on the person you’re taking with you but on the person who is being left behind.

How is the concept of economic rent useful in financial analysis?

Commodities or resources that command economic rent have the potential to reward equity investors more than what is required to attract their capital to that activity, resulting in greater shareholders’ wealth.

Evidence of economic rent attracts additional capital funds to the economic endeavor.

Any commodity, resource, or good that is fixed or nearly fixed in supply has the potential to yield economic rent. From an analytical perspective, one can obtain industry supply data to calculate the elasticity of supply , which measures the sensitivity of quantity supplied to a change in price. If quantity supplied is relatively unresponsive ( inelastic ) to price changes, then a potential condition exists in the market for economic rent. A reliable forecast of changes in demand can indicate the degree of any economic rent that is forthcoming from the market in the future. When one is analyzing fixed or nearly fixed supply markets (e.g., gold), a fundamental comprehension of demand determinants is necessary to make rational financial decisions based on potential economic rent.

Under any form of imperfect competition, the individual seller confronts a negatively sloped demand curve, where price and the quantity demanded by consumers are inversely related.

Under any form of imperfect competition, price to the firm declines when a greater quantity is offered to the market; price to the firm increases when a lower quantity is offered to the market.

2nd part

In evaluating financial reports, analysts typically have a specific economic decision in mind.

Examples of these decisions include the following:

• Extending credit to a customer.

• Examining compliance with debt covenants or other contractual arrangements.

• Assigning a debt rating to a company or bond issue.

• Valuing a security for making an investment recommendation to others.

• Forecasting future net income and cash flow.

three keys to communicating presence: attentive listening, refraining from interrupting, and deliberate pausing.

If zoning out is the issue, bring yourself back to the moment by focusing on physical sensations, like the feeling in your toes or your breath flowing in and out of your body. If impatience is the issue, handle it by delving into the minute physical sensations you’re feeling. Then get back to the person

Good listeners know never, ever to interrupt—not even if the impulse to do so comes from excitement about something the other person just said.

If zoning out is the issue, bring yourself back to the moment by focusing on physical sensations, like the feeling in your toes or your breath flowing in and out of your body. If impatience is the issue, handle it by delving into the minute physical sensations you’re feeling. Then get back to the person. Once you have the right mindset, how do you ensure the right behaviors? Effective listening means behaving in a way that makes whomever you’re speaking with feel truly understood. Good listeners know never, ever to interrupt—not even if the impulse to do so comes from excitement about something the other person just said. No matter how congratulatory and warm your input, it will always result in their feeling at least a twinge of resentment or frustration at not having been allowed to complete their sentence. One of my clients told me: “This one practice alone is worth its weight gold. To stop interrupting others could be the single most important skill I’ve learned from working with you.” Great listeners know to let others interrupt them. When someone interrupts you, let them! Were they right to interrupt you? Of course not. But even if they were wrong, it’s not worth making them feel wrong; your job instead is to make them feel right.

Master listeners know one extra trick, one simple but extraordinarily effective habit that will make people feel truly listened to and understood: they pause before they answer.

When someone has spoken, see if you can let your facial expression react first, showing that you’re absorbing what they’ve just said and giving their brilliant statement the consideration it deserves. Only then, after about two seconds, do you answer. The sequence goes like this: They finish their sentence Your face absorbs Your face reacts Then, and only then, you answer

A sequence is an ordered collection of values

Sequences are not instances of a particular built-in type or abstract data representation, but instead a collection of behaviors that are shared among several different types of data.

there are many kinds of sequences, but they all share common behavior. In particular,

Length. A sequence has a finite length. An empty sequence has length 0.

Element selection. A sequence has an element corresponding to any non-negative integer index less than its length, starting at 0 for the first element.

A list value is a sequence that can have arbitrary length.

which evaluates to a list instance, as well as an element selection expression that evaluates to a value in the list.

lists can be added together and multiplied by integers. For sequences, addition and multiplication do not add or multiply elements, but instead combine and replicate the sequences themselves. That is, the add function in the operator module (and the + operator) yields a list that is the concatenation of the added arguments. The mul function in operator (and the * operator) can take a list and an integer k to return the list that consists of k repetitions of the original list.

A for statement is executed by the following procedure:

1. Evaluate the header <expression> , which must yield an iterable value.
2. For each element value in that iterable value, in order:
   1. Bind <name> to that value in the current frame.
   2. Execute the <suite> .

This execution procedure refers to iterable values. Lists are a type of sequence, and sequences are iterable values. Their elements are considered in their sequential order.

An important consequence of this evaluation procedure is that <name> will be bound to the last element of the sequence after the for statement is executed. The for loop introduces yet another way in which the environment can be updated by a statement.

A common pattern in programs is to have a sequence of elements that are themselves sequences, but all of a fixed length. A for statement may include multiple names in its header to "unpack" each element sequence into its respective elements.

This pattern of binding multiple names to multiple values in a fixed-length sequence is called sequence unpacking; it is the same pattern that we see in assignment statements that bind multiple names to multiple values.

A range is another built-in type of sequence in Python, which represents a range of integers.

Calling the list constructor on a range evaluates to a list with the same elements as the range, so that the elements can be easily inspected.

If only one argument is given, it is interpreted as one beyond the last value for a range that starts at 0.

 >>> list ( range ( 4 )) [0, 1, 2, 3] 

Ranges commonly appear as the expression in a for header to specify the number of times that the suite should be executed: A common convention is to use a single underscore character for the name in the for header if the name is unused in the suite:

Images are necessary books for the uneducated and good books for the learned, too.

Modular components that have sequences as both inputs and outputs can be mixed and matched to perform data processing. Complex components can be defined by chaining together a pipeline of sequence processing operations, each of which is simple and focused.

Many sequence processing operations can be expressed by evaluating a fixed expression for each element in a sequence and collecting the resulting values in a result sequence. In Python, a list comprehension is an expression that performs such a computation.

Another common sequence processing operation is to select a subset of values that satisfy some condition. List comprehensions can also express this pattern, for instance selecting all elements of odds that evenly divide 25 .

 >>> [ x for x in odds if 25 % x == 0 ] [1, 5] 

The general form of a list comprehension is:

[<map expression> for <name> in <sequence expression> if <filter expression>]

To evaluate a list comprehension, Python evaluates the <sequence expression> , which must return an iterable value. Then, for each element in order, the element value is bound to <name> , the filter expression is evaluated, and if it yields a true value, the map expression is evaluated. The values of the map expression are collected into a list.

A third common pattern in sequence processing is to aggregate all values in a sequence into a single value. The built-in functions sum , min , and max are all examples of aggregation functions.

Once upon a time there was a mama pig who had three little pigs. She loved them very much, but there was not enough food for all of them, so she sent them out into the world to seek their fortune.

In the computer science community, the more common name for apply_to_all is map and the more common name for keep_if is filter . In Python, the built-in map and filter are generalizations of these functions that do not return lists