Managerial Economics-Charles W. Upton The Economics of Bads

2 My wants are many but they do not include hard work.

The Economics of Bads 3 My wants are many but they do not include hard work. I like to earn a high return on my investments, but I don’t like to bear risk.

The Economics of Bads 4 X B

5 X B I1I1 IoIo

6 X B I1I1 IoIo

7 X B I1I1 IoIo X* B*

The Economics of Bads 8 The Work Leisure Choice X I1I1 IoIo H* X=10H X*

The Economics of Bads 9 The Work Leisure Choice X I1I1 IoIo H* X=10H X*

The Economics of Bads 10 The Work Leisure Choice X I1I1 IoIo H* X=10H IoIo X*

The Economics of Bads 11 The Work Leisure Choice X I1I1 IoIo H* X=10H IoIo X* L*

The Economics of Bads 12 The Work Leisure Choice X I1I1 IoIo H* X=10H IoIo X* L* L*+H*=168

The Economics of Bads 13 A Problem Helen Jones works 40 hours a week for a salary of $400. She would like overtime at $10 an hour.

The Economics of Bads 14 A Problem Helen Jones works 40 hours a week for a salary of $400. She would like overtime at $10 an hour. That is, the MB of $10 exceeds the marginal disutility of working an additional hour.

The Economics of Bads 15 A Problem She is offered a position paying 4% of sales. She has the following data on current employees:

The Economics of Bads 16 A Problem She is offered a position paying 4% of sales. She has the following data on current employees: EmployeeHoursSales Wilson40 $10000 Smith50 $12500 Brown30 $7500

The Economics of Bads 17 A Problem These data mean that you earn about $10 an hour. EmployeeHoursSales Wilson40 $10000 Smith50 $12500 Brown30 $7500

The Economics of Bads 18 Where She Is X B IoIo 40

The Economics of Bads 19 Doing Better X B I1I1 IoIo

The Economics of Bads 20 Take the Job X B I1I1 IoIo

The Economics of Bads 21 A Second Problem Richard Jones has $100,000 to invest.

The Economics of Bads 22 A Second Problem Richard Jones has $100,000 to invest. He could put the money into zero risk government bonds

The Economics of Bads 23 A Second Problem Richard Jones has $100,000 to invest. He could put the money into zero risk government bonds He could put the money in the stock market

The Economics of Bads 24 A Second Problem Richard Jones has $100,000 to invest. He could put the money into zero risk government bonds He could put the money in the stock market How should he make his decision?

The Economics of Bads 25 A Second Problem Return “ Riskiness” 0

The Economics of Bads 26 A Second Problem Return “ Riskiness” IoIo 0

The Economics of Bads 27 A Second Problem Return “ Riskiness” IoIo 0 1 Ret* Risk*

The Economics of Bads 28 End ©2005 Charles W. Upton