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Flashcard 1430749056268

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#cfa #cfa-level-1 #economics #microeconomics #reading-14-demand-and-supply-analysis-consumer-demand #section-2-consumer-theory-from-preferences-to-demand-function #study-session-4-microeconomics-analysis

Question

Consumption is governed not only by preferences but also by the consumer’s [...]

Answer

budget constraint

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Once we model the consumer’s preferences, we then recognize that consumption is governed not only by preferences but also by the consumer’s budget constraint (the ability to purchase various combinations of goods and services, given his or her income).

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2. CONSUMER THEORY: FROM PREFERENCES TO DEMAND FUNCTIONS
t economists are not attempting to predict the behavior of any single consumer in any given circumstance. Instead, they are attempting to build a consistent model of aggregate market behavior in the form of a market demand curve. Once we model the consumer’s preferences, we then recognize that consumption is governed not only by preferences but also by the consumer’s budget constraint (the ability to purchase various combinations of goods and services, given his or her income). Putting preference theory together with the budget constraint gives us the demand curve we are seeking. In the following sections, we explore these topics in turn. <

Flashcard 1446847057164

Tags

#3-1-profit-maximization #cfa-level-1 #economics #microeconomics #reading-15-demand-and-supply-analysis-the-firm #section-3-analysis-of-revenue-costs-and-profit #study-session-4

Question

There are three approaches to calculate the point of profit maximization.

First, given that [...], maximum profit occurs at the output level where this difference is the greatest.

Answer

profit is the difference between total revenue and total costs

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There are three approaches to calculate the point of profit maximization. First, given that profit is the difference between total revenue and total costs, maximum profit occurs at the output level where this difference is the greatest.

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3. ANALYSIS OF REVENUE, COSTS, AND PROFITS
Total variable cost divided by quantity; (TVC ÷ Q) Average total cost (ATC) Total cost divided by quantity; (TC ÷ Q) or (AFC + AVC) Marginal cost (MC) Change in total cost divided by change in quantity; (∆TC ÷ ∆Q) 3.1. Profit Maximization In free markets—and even in regulated market economies—profit maximization tends to promote economic welfare and a higher standard of living, and creates wealth for investors. Profit motivates businesses to use resources efficiently and to concentrate on activities in which they have a competitive advantage. Most economists believe that profit maximization promotes allocational efficiency—that resources flow into their highest valued uses. Overall, the functions of profit are as follows: Rewards entrepreneurs for risk taking when pursuing business ventures to satisfy consumer demand. Allocates resources to their most-efficient use; input factors flow from sectors with economic losses to sectors with economic profit, where profit reflects goods most desired by society. Spurs innovation and the development of new technology. Stimulates business investment and economic growth. There are three approaches to calculate the point of profit maximization. First, given that profit is the difference between total revenue and total costs, maximum profit occurs at the output level where this difference is the greatest. Second, maximum profit can also be calculated by comparing revenue and cost for each individual unit of output that is produced and sold. A business increases profit through greater sales as long as per-unit revenue exceeds per-unit cost on the next unit of output sold. Profit maximization takes place at the point where the last individual output unit breaks even. Beyond this point, total profit decreases because the per-unit cost is higher than the per-unit revenue from successive output units. A third approach compares the revenue generated by each resource unit with the cost of that unit. Profit contribution occurs when the revenue from an input unit exceeds its cost. The point of profit maximization is reached when resource units no longer contribute to profit. All three approaches yield the same profit-maximizing quantity of output. (These approaches will be explained in greater detail later.) Because profit is the difference between revenue and cost, an understanding of profit maximization requires that we examine both of those components. Revenue comes from the demand for the firm’s products, and cost comes from the acquisition and utilization of the firm’s inputs in the production of those products. 3.1.1. Total, Average, and Marginal Revenue This section briefly examines demand and revenue in preparation for addressing cost. Unless the firm is a pu

Flashcard 1447801523468

Tags

#sister-miriam-joseph #trivium

Question

Various characteristics of words affect the [...] of language.

Answer

psychological dimension

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Various characteristics of words affect the psychological dimension of language. The mere sound of a word may produce a pleasing effect which another word of the same meaning lacks. In “Silver” by Walter de la Mare, the poet’s substitution of words like

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Flashcard 1477066755340

Question

If an expense is a capital expenditure, it needs to be [...].

Answer

capitalized

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If an expense is a capital expenditure, it needs to be capitalized. This requires the company to spread the cost of the expenditure (the fixed cost) over the useful life of the asset.

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Capital Expenditure (CAPEX) Definition | Investopedia
companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building, to purchasing a piece of equipment, or building a brand new factory. BREAKING DOWN 'Capital Expenditure (CAPEX)' In terms of accounting, an expense is considered to be a capital expenditure when the asset is a newly purchased capital asset or an investment that improves the useful life of an existing capital asset. If an expense is a capital expenditure, it needs to be capitalized. This requires the company to spread the cost of the expenditure (the fixed cost) over the useful life of the asset. If, however, the expense is one that maintains the asset at its current condition, the cost is deducted fully in the year of the expense. The amount of capital expenditures a company is likely to have depends on the industry it occupies. Some of the most capital intensive industries have the highest levels of capital ex

Flashcard 1635083226380

Tags

#statistical-concepts-and-market-returns

Question

dispersion analyzes [...]

Answer

how far returns are dispersed from their center

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where the returns are centered (central tendency); how far returns are dispersed from their center (dispersion); whether the distribution of returns is symmetrically shaped or lopsided (skewness); and whether extreme outcomes are likely (kurtosis). </s

Flashcard 1644417125644

Tags

#reading-8-statistical-concepts-and-market-returns

Question

A formula for semivariance approximating the unbiased estimator is:

\(\sum (X_i-\bar {X}) \over n-1\)

for all [...]

Answer

Xi ≤ ¯X

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Flashcard 1644814011660

Tags

#reading-8-statistical-concepts-and-market-returns

Question

Excess Kurtosis formula

\(K_e =\) [...] \( \displaystyle\sum_{i=1}^n(Xi-\bar{X})^4\over {s^4} \)\(- {3(n-1)^2\over (n-2)(n-3)}\)

Answer

\(Ke = {n(n+1) \over (n-1)(n-2)(n-3)}\)

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Flashcard 1645253102860

Tags

#edx-probability

Question

A set of outcomes in an experiment is denoted by [...]

Answer

\(\Omega\)

Capital omega

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Lesson 1. Sample space
ng a list of the possible outcomes-- or, a better word, instead of the word "list", is to use the word "set", which has a more formal mathematical meaning. So we create a set that we usually denote by capital omega. That set is called the sample space and is the set of all possible outcomes of our experiment. The elements of that set should have certa

Flashcard 1646927678732

Tags

#math-is-fun

Question

A [...] refers to a set of two numbers, which when multiplied result in a definite number

Answer

factor pair

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factor+pairs - Buscar con Google
:"","st":"Splash Math","th":160,"tu":"https://encrypted-tbn0.gstatic.com/images?q\u003dtbn:ANd9GcRHjBhlW5F0Cb7E8s3_cbzCOwjzEfIhJIdDWFcIRiA-zHAssrk5kxuE1UAu6A","tw":160} A factor pair refers to a set of two numbers, which when multiplied result in a definite number. Factor Pairs - Definition, Examples & Fun Math Worksheets https://www.splashmath.com/math-vocabulary/fractions/factor-pairs Feedback About this result People also a

Flashcard 1648818261260

Question

[...] an expense requires the company to spread the cost of the expenditure over the useful life of the asset.

Answer

capitalizing

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If an expense is a capital expenditure, it needs to be capitalized. This requires the company to spread the cost of the expenditure (the fixed cost) over the useful life of the asset.

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Flashcard 1648835562764

Tags

#reading-8-statistical-concepts-and-market-returns

Question

Tractable (meaning " [...] ")

Answer

easily managed

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Article 1648851553548

Subject 8. Portfolio Expected Return and Variance
#has-images #reading-9-probability-concepts

The expected return on a portfolio of assets is the market-weighted average of the expected returns on the individual assets in the portfolio. The variance of a portfolio's return consists of two components: the weighted average of the variance for individual assets and the weighted covariance between pairs of individual assets. σ 2 (R p ) = w 1 2 σ 2 (R 1 ) + w 2 2 σ 2 (R 2 ) + 2w 1 w 2 Cov(R 1 , R 2 ) You have a portfolio of two mutual funds, A and B, with 75% invested in A. E(R A ) = 20%; E(R B ) = 12%. Covariance Matrix: The values on the main diagonal are the variances and the other values are the covariances. The expected return on the portfolio is: E(R p ) = w A E(R A ) + (1 - w A ) E(R B ) = 0.75 x 20% + 0.25 x 12% = 18% The correlation matrix: σ(R A ) = (625) 1/2 = 25, σ (R B ) = (196) 1/2 = 14 ρ(R A , R B ) = Cov(R A , R B ) / [σ(R A ) x σ(R B )] = 120 / (25 x 14) = 0.342857, or 0.34 The variance of the portfolio is: σ 2 (R P ) = w A 2 σ 2

Flashcard 1648858631436

Tags

#reading-9-probability-concepts

Question

The expected return on a portfolio of assets is the [...] of the [...] on the [...]

Answer

market-weighted average

expected returns

individual assets in the portfolio.

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Subject 8. Portfolio Expected Return and Variance
The expected return on a portfolio of assets is the market-weighted average of the expected returns on the individual assets in the portfolio. The variance of a portfolio's return consists of two components: the weighted average of the variance for individual assets and the weighted covariance between pairs of individual asset

Flashcard 1648872787212

Tags

#reading-9-probability-concepts

Question

Waht are the boundaries of covariance?

Answer

none. \((-\infty) to (+\infty)\)

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Flashcard 1648875146508

Tags

#reading-9-probability-concepts

Question

If you are measuring the height of people in cm and calculate the covariance of two observations, what would be the units of the covariance?

Answer

Percentual centimeters (%cm)

Which is weird as fuck

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Annotation 1648896904460

Bayes formula

#reading-9-probability-concepts

When we make decisions involving investments, we often start with viewpoints based on our experience and knowledge. These viewpoints may be changed or confirmed by new knowledge and observations. Bayes’ formula is a rational method for adjusting our viewpoints as we confront new information

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Annotation 1648898739468

Bayes formula

#reading-9-probability-concepts

Bayes’ formula makes use of the total probability rule. To review, that rule expressed the probability of an event as a weighted average of the probabilities of the event, given a set of scenarios. Bayes’ formula works in reverse; more precisely, it reverses the “given that” information. Bayes’ formula uses the occurrence of the event to infer the probability of the scenario generating it. For that reason, Bayes’ formula is sometimes called an inverse probability. In many applications, including the one illustrating its use in this section, an individual is updating his beliefs concerning the causes that may have produced a new observation.

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Flashcard 1648900574476

Tags

#reading-9-probability-concepts

Question

Probabilities reflecting beliefs prior to the arrival of new information.

Answer

Prior probabilities

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Flashcard 1648902409484

Tags

#reading-9-probability-concepts

Question

How do you short the term Prior Probabilities?

Answer

Priors

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Annotation 1648904244492

Bayes formula

#reading-9-probability-concepts

Prior probabilities are “prior” in the sense that they reflect only what you know now, before the arrival of any new information.

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Flashcard 1648906341644

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#reading-9-probability-concepts

Question

The probability of an observation, given a particular set of conditions.

Answer

Likelihood

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Flashcard 1648908176652

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#reading-9-probability-concepts

Question

An updated probability that reflects or comes after new information.

Answer

Posterior probability

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Flashcard 1648910273804

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#reading-9-probability-concepts

Question

The assumption of equal prior probabilities.

Answer

Diffuse prior

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Edited, memorised or added to reading queue

on 05-Aug-2017 (Sat)

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