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Assignment 01
Eco404 (Managerial Economics)
Marks: 20
Objectives of the study:
The objectives of this assignment are to familiarize students with the:
 Types of costs like explicit and implicit costs
 Types of profits like business and economic profit
 Regression function and its components
 Elasticity calculation methods
The Case:
Pak Elektron Limited (PEL) as the pioneer manufacturer of electrical goods in Pakistan
was established in 1956 in technical collaboration with M/s AEG of Germany. Later on,
it was taken over by Saigol Group of Companies in October 1978. Since its inception, the
company has always been contributing towards the advancement and development of the
engineering sector in Pakistan by introducing a range of quality electrical equipments and
home appliances. Appliances division of PEL consists of appliances manufacturing like
Air Conditioners, Refrigerators, Deep Freezers etc. Power division of PEL is one of the
major electrical equipment suppliers to Water and Power Development Authority
(WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest
power utilities in Pakistan. A hypothetical study was conducted on PEL in year 2012
which revealed that annually, on average, the company receives Rs.59,35,680 from
selling its products while spends, Rs.12,55,000 in wages of its employees and on
producing hundreds of engineers, skilled workers and technicians through its
apprenticeship schemes and training programmes, Rs.6,45,000 in payments of rented
buildings, and Rs.5,62,000 in interest payments on bank loans taken for production
process. The study also found the fact that if PEL’s manager would work for some other
renowned, emerging local and multinational electronics company, he could earn at most
Rs.22,18,000 per year.
Requirement:
Part A
Read the case very carefully and from the given information, calculate the following for
PEL Company:
a) Total explicit cost
b) Total implicit cost
c) Business profit
d) Economic profit
Part B
In that hypothetical study, the following regression function was estimated for PEL
Refrigerators:
QR = 690 - 0.2PR + 0.7N + 0.4Y + 0.8PW
Where,
QR = Sales of PEL Refrigerators
PR = Price of PEL Refrigerators
N = Number of consumers in the market
Y = Consumers’ income
PW = Price of Waves Refrigerators (a substitute product)
Suppose in year 2012, PR = Rs.53,000, N = 250, Y = Rs.45,000, PW = Rs.51,000 then
calculate:
a) Total sales of PEL Refrigerators
b) Price elasticity of demand for PEL Refrigerators
c) Income elasticity of demand for PEL Refrigerators
d) Cross price elasticity of demand for PEL Refrigerators with respect to Waves
Refrigerators
Outcomes of the study:
After solving this assignment, student will be able to:
 Distinguish between explicit and implicit costs and how to calculate these costs
 Distinguish between business and economic profits and how to calculate these
profits
 Know what the regression function is and how to estimate different types of
elasticities from the given regression function
Marking Scheme: (Part A: 2+2+2+2), (Part B: 3+3+3+3)
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understanding or visit
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Please Discuss here about this assignment.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

Tariq bhai koi idea solution day dain?

any luck with the solution yet??? 

yar koi idea dain Explicit and Implicit cost ka hand outs main to kujh v nha hy

Explicit objectives:

  1. We are going to made new investments to enhance the business in both domestic and international levels.
  2. New Partners will be introduced for the financial purpose.
  3. External Auditor shall be appointed for transparency auditing.
  4. Online website will be lunched to enhance the business.
  5. Friendly atmosphere will be provided in office between staff.
  6. Staff will have abilities of Strong trouble shooting and problem-solving skills in computer.

                                                          

 

Implicit objectives:

 

  1. Cost control management system will introduce for making sales more rapid about minimum 20% per year.
  2. Bonus will be given to the hardworking employees to make accommodate their abilities
  3. Yearly increments 10% to 20% to in salary will be given
  4. New appointments will made with the growth of business to provide rapid solutions of costumers. 

Typically, the costs of using resources in production involve both out-of-pocket costs, or explicit
costs, and other non-cash costs, called implicit costs. Wages, utility expenses, payment for raw
materials, interest paid to the holders of the firm’s bonds, and rent on a building is all examples
of explicit expenses. The implicit costs associated with any decision are much more difficult to
compute. These costs do not involve cash expenditures and are therefore often overlooked in
decision analysis.

Explicit Cost = 2,462,000

Implicit Cost = 1,255,680

A/C Profit = 5,935,680 - 2,462,000 = 3,473,680

Economic Profit = 5,935,680 - 3,717,680 = 2,218,000

Thank you brother,

Typically, the costs of using resources in production involve both out-of-pocket costs, or explicit
costs, and other non-cash costs, called implicit costs. Wages, utility expenses, payment for raw
materials, interest paid to the holders of the firm’s bonds, and rent on a building is all examples
of explicit expenses. The implicit costs associated with any decision are much more difficult to
compute. These costs do not involve cash expenditures and are therefore often overlooked in
decision analysis.

Explicit cost = wages+building+rent=24,62,000

any reference how to calculate the implicit costs ? need your  comments please.

Explicit cost = Monetary transaction take place... (like = wages+building+rent=24,62,000)

Implicit cost = Monetary transaction are not involve / does't take place.......

Suppse: Mr. A bemaar hai... ak traf wo medican pa amount pay kr raha hai.... 2ndly us ko salry mil nahi rahi kun k wo job pa nai.... So medican explict and salry na milna implicit loss or cost.

Ager plan A per kam kare to 3,473,680 rs (A/C Profit = 5,935,680 - 2,462,000 = 3,473,680) aur ager plan B to 2,218,000 (Given). So dono ka difference = 1255680... wo jb shift kr raha hai to us ka loss bear krna par raha hai.... 

Thats my point.... 

QR = 690 - 0.2PR + 0.7N + 0.4Y + 0.8PW

QR = 690 - 0.2(53000) + 0.7(250) + 0.4(45000) + 0.8(51000)

QR = 690 - 10600 + 175 + 18000 + 40800

QR = 49065

es sy agy bhai elasticity calculation???

Poch rahe ho ya bata rahe ho??? 

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