The Road Not Taken By Robert Frost - 1100 Words

Robert Frost reflects that poetry â€Å"begins in delight and ends in wisdom†¦.It runs a course of lucky events , and ends in a clarification of life—not necessarily a great clarification, such as sects and cults are found on, but in a momentary stay against confusion† (931). His poem â€Å"The Road Not Taken† is a clarification of life. This paper will analyze and evaluate the formal elements of â€Å"The Road Not Taken† and consider how these elements work together to fit the author’s purpose and clarification about life. The form of â€Å"The Road Not Taken† is developed to the carry the reader along a series of thoughts. It is a narrative poem with only four stanzas. Each stanza is a quintain. Each verse in the first stanza is nine syllables in†¦show more content†¦They were contemplating which choice to proceed with. The outcome appears to be in the final verse. Finally, the form, of this poem is developed in a way where reflection occur in the first three stanzas, and the sigh comes in at the last stanza inferring regret. It is as if we are wandering through past memories. Emphasis should be made to the title of the poem. It speaks to the roads â€Å"not† taken. This diction, or specific word choices, diverts the reader in discovering a deeper meaning to the poem. It is not simply that the speaker took the road â€Å"less† traveled, but speaks of the road â€Å"not† traveled. This thoughtfully diverts the reader from thinking it is merely inspiring, into noticing the regret of the narrator. â€Å"The Road Not Taken† overall an iamb, tetrameter rhythm, and an ABAAB rhyming pattern. This rhythm conveys a feeling on contemplation, or altering of thought. We feel a zig zag pattern in decisions and outcomes. The rhythm of the iamb suggests movement forward, as if walking along. Each stanza ends with a decision being made. This association of forward movement implies the aging process. As we become older, further reflection is needed recall how we had gotten to the position we have arrived at. The rhyme used is end rhyme of the first, third and fourth verse. Additionally, the second and fifth verse used an end rhyme. These end rhymes are masculine as the â€Å"final syllables are stressed and, afterShow MoreRelatedThe Road Not Taken By Robert Frost983 Words   |  4 PagesThe poem â€Å"The Road Not Taken was written by Robert Frost, a four-time Pulitzer Prize winner in poetry, and also a special guest at President John F. Kennedy’s inauguration (Robert Frost Biography). Frost was born on March 26, 1874 in San Francisco, California and he died of complications from prostate surgery on January 29, 1963. Much of Robert’s popularity was gained throughout Europe (An Analysis of Robert Frost’s Poem: The Road Not Taken). Frost became a poetic force, and the unofficial poetRead MoreThe Road Not Taken by Robert Frost764 Words   |  3 PagesWritten by Robert Frost, â€Å"The Road Not Taken† deals with about making choices in life and how those cho ices affect your whole life. The meter of this poem is iambic tetrameter, for the most part. In most lines, the meter follows the rule with four iambs, which means that there is one unstressed syllable followed by a stressed syllable. But the meter is not normal since, in some lines, an anapest, which means there are two unstressed syllables followed by one stressed syllable, is substituted forRead MoreThe Road Not Taken By Robert Frost1173 Words   |  5 PagesRobert Frost, one of America’s well-known poets is highly regarded for his realistic illustrations of rural life and poetry which is still relevant in today’s society. After being honoured on numerous occasions, he became one of America’s most popular public figures. Frosts’ poems reflect his greatness and his life in a variety of ways after he was confronted with such despair and grief after the passing of his father due to tuberculosis at just eleven years of age and his mother who passed away Read MoreThe Road Not Taken By Robert Frost995 Words   |  4 Pagesthey can only move forward hoping for the best. â€Å"The Road Not Taken†, Robert Frost, 1916. In â€Å"The Road Not Taken† a traveler is strolling through the woods and comes across two different roads he could take, and unable to travel both the poet eventually chooses which path to take. The theme conveyed is about making choices. Frost does this through the use of diction, the use of figure of speech, and the use of imagery. To start with, Frost displays the main idea of decision making by the wordsRead MoreThe Road Not Taken By Robert Frost1055 Words   |  5 Pagesago. Either way, if you admit it now or in the wee hours of the night, like most people, you will come across this question at least once in your life. Robert Frost was able to grasp this raw, vulnerable life changing moment in the palm of his hand. Then he beautifully laid it out in the form of words in the narrative poem â€Å"The Road Not Taken†. Frost is able to take you back to a time when you have been faced with a life-changing decision. Then, causing you to ask yourself â€Å"Did I make the right choiceRead MoreThe Road Not Taken By Robert Frost940 Words   |  4 Pagesâ€Å"The Road Not Taken† was written by Robert Frost in 1916, and it was the first poem in the collection Mountain Interval (Shmoop). Even though it was written many years ago, people of all ages still study this enticing poem. Frost wrote about coming to a fork in the woods and examining which path he should take and whether he might ever come back; the speaker believes each path is fine to take, but he takes the less used path (line 6). He wrote about this decision in clear, standard English. â€Å"TheRead MoreThe Road Not Taken By Robert Frost863 Words   |  4 PagesThe Poem, â€Å"The Road Not Taken†, by Robert Frost is a detailed poem about a conflict in a person’s life, dealing with having to take the right path throughout life. The Narrator of this poem is faced with a predicament when he comes across two paths. The choices that he makes in his life, can alter the future for better or worse. This poem describes his attitude and emotion towards his choices as well as, shows examples of themes, mood, and different literary devices. The title of this poem canRead MoreThe Road Not Taken, By Robert Frost968 Words   |  4 PagesPersonal Response 3 Title: The Road Not Taken Text Type: Poem Author: Robert Frost The poem, ‘The Road Not Taken’ by Robert Frost is about the â€Å"roads† and different paths we take in our lives. Frost wrote about a traveler who had to chose between two roads. He had to decide if he wanted to go down the well used or less used path. In the end, he went down the less used path. The theme of decision making and choices is shown in this poem. I think that this is a way of describing the choices we makeRead MoreRoad Not Taken, Robert Frost942 Words   |  4 PagesEnglish 101 Burstrem October 7, 2009 The Road Not Taken Life is full of choices and decisions that could ultimately change the outcome of our lives. In the poem, â€Å"The Road Not Taken† by Robert Frost, a traveler is destined to make that decision. This traveler man has to decide which road to take, one that is frequently traveled, and the one that is not. After contemplating which road to follow, he comes to the decision to take the road less traveled because he doesn’t want to follow inRead MoreThe Road Not Taken By Robert Frost1297 Words   |  6 Pagesthe poet at the time. The poem I’ll be unveiling is â€Å"The Road Not Taken† by Robert Frost, one of the most well-known poets of the modern literature movement. He lived most of his life in America but moved to the UK a few years before World War 1. (Schmoop, 2008). Frost is known for pioneering the idea that poetry deserves to be spoken out loud, using rhythm and meter, giving his work a traditional ambiance. The title ‘The Road Not Taken’ suggests there is no â€Å"right† path, only the chosen path and

Economic Problem Free Essays

Along with the development of the earth is a series of social events need to be addressed, such as population growth, food shortages and water shortages in many parts of the world. Specifically, people in Australia are facing with the threat of water shortage in the future. This problem has created an economic problem and urged the Australian government to find the solutions for this problem. We will write a custom essay sample on Economic Problem or any similar topic only for you Order Now This essay will explain the economic problem and answer the question how do markets attempt to solve the problem of water scarcity in Australia, focusing on the economic problem, water scarcity in Australia, the role of markets and water market in Australia. The economic problem can be known as the competition between unlimited wants and scarce resources. Unlimited wants are goods and services that people want to have are unlimited. But, scarce resources, things to make products, are limited. Because people’s want cannot be satisfied while resources needed to satisfy these wants is scarce, limited. Bized (n. d) points out that because our money is limited, we cannot get everything we ‘want’. Moreover, the scarcity of water is an economic problem. Water is a very significant part in our life, because everyone and everything in this world cannot live without water. However, population growth, intensive agricultural development, urbanization, industrial growth and environment requirements are all increasing demand for water. Not only that, the percentage of fresh water in the world is 3%, while 97% is salty water and it also cannot be reused or renewable. Water is the main source of living things, so the earth will become dry as a planet in space if it has no water. So that this economic problem needs to be solve. In addition, the increase in demand of water use and reduce water availability is a problem in Australia. Between 1983 and 1997, 9400 GL water use is increasing every year (NLWRA 2001 cited in Australian Government). According to the Wentworth Group of Concerned Scientists (1965), excessive use of water makes the water become scarce in the future. In a word, water is in scarcity. In order to solve the economic problem, we must choose how to use our scarce resources efficiently. If the choices are made, sources can be used efficiently. For instance, the Australian Governments is restoring the Balance in the Murray-Darling Basin to keep the water in this basin and protect the environment. They are making decision since the water is scarce. Australian Governments (2010) showed that water which available in Murray-Darling Basin declines, so this basin is likely to become worse. The problem is water in Australia is not unlimited. We therefore have to make choices. The choice can be known as opportunity cost. Since we never have enough resources at our disposal, we have to give up something in order to get another thing we want. For example, Morton and Shippen have to make the decision between selling water to the government or keeping the water for their using and their agriculture. If they decide to keep the water, the money from selling water is forgone and vice-versa. So, scarcity forces making choice. The role of market can help solving the economic problem. A market can be known as an actual place where buyers and sellers interact to trade goods, services for money. They interact in the market to determine the price. The diagram shows the way market finds the price for water. At point E, quantity demanded equals quantity supplied and the price of goods that customers are willing and able to buy equals the price of goods that sellers are willing and able to sell. The market price helps to solve the economic problem because people who want to get the goods or services have to be willing and able to pay the price. This means price addresses the 4 production decisions: â€Å"What to produce? † â€Å"How to produce? †, â€Å"How much to produce? † and â€Å"To whom distribute? . For example, if the price of water increases, people and farmers will use water more efficiently. Price can control the demand of goods and services, because going with the increasing of price is the decline of demand. Customers always look at the price before deciding to buy a good and when the price is high, customer’s want is less. In this diag ram below, the Production Possibility Frontier curve has shifted to the right because of the decreasing in water and increasing in demand. When the price is Pe, demand is greater than supply. This means there is a shortage of water in the market. Then market increased the price to Pe1, demand now declines with the point Qe1. In addition, the supply also can be controlled by the price. If the price increases, supply will be affected by demand and it also decreases. Because demand decreases, fewer goods are produced to correspond to demand, sellers will sell less and make supply decreases. So, the economic problem can be solved by the role of markets and market prices. In this Production Possibility Frontier, supply curve has shifted to the left. Price has increased from Pe to Pe1 and the quantity of water was decreased in order to establish a new equilibrium. [pic] Water in Australia is declining day by day by many. But these factors are the key element of the development in a country. So, Australian Government plans to create the water market to buy- back the water from irrigators looking to sell. In this market, water is a commodity that can be bought and sold between customers and sellers. Specifically, Australian Government’s plan is restoring the balance in Murray-Darling Basin. The purpose of this program is using the water purchase from irrigators restores the environment (Australian Government- 2010). The water buy-back also will be used in the future to protect future living standards. Another way to solve water scarcity in Australia is limited the amount of water use by increasing the water price. In this situation, price of water will be increased to reduce people’s demand, so that they may use water more efficiently. However, price of water also reduce the supply of water because of the limitation in water use. The problem of water scarcity in Australia has forced the Government making choice, the choice between using money to buy-back water for the plan â€Å"water for the Future† and using money for develop the country. But, at the end, the government realized that water is our future. In conclusion, economic problem is our want for goods and services to consume is greater than our ability to produce those goods and services, because of unlimited want and scarce resources. Moreover, the economic problem in Australia is water scarcity. It happened as people need and cannot live without water, while water is scarce and cannot be reused or renewable. This problem is not only about the scarce of water, but also about the existence of human’s life and environment. Therefore, the role of water market was found to solve this problem. In water market, price control the demand and supply of water, so it can be used more efficiently. How to cite Economic Problem, Papers Economic Problem Free Essays CHAPTER 4 INDIVIDUAL AND MARKET DEMAND EXERCISES 1. An individual sets aside a certain amount of his income per month to spend on his two hobbies, collecting wine and collecting books. Given the information below, illustrate both the price-consumption curve associated with changes in the price of wine and the demand curve for wine. We will write a custom essay sample on Economic Problem or any similar topic only for you Order Now Price |Price |Quantity |Quantity |Budget | |Wine |Book |Wine |Book | | |$10 |$10 |7 |8 |$150 | |$12 |$10 |5 |9 |$150 | |$15 |$10 |4 |9 |$150 | |$20 |$10 |2 |11 |$150 | The price-consumption curve connects each of the four optimal bundles given in the table, while the demand curve plots the optimal quantity of wine against the price of wine in each of the four cases. See the diagrams below. 2. An individual consumes two goods, clothing and food. Given the information below, illustrate both the income-consumption curve and the Engel curve for clothing and food. Price |Price |Quantity |Quantity |Income | |Clothing |Food |Clothing |Food | | |$10 |$2 |6 |20 |$100 | |$10 |$2 |8 |35 |$150 | |$10 |$2 |11 |45 |$200 | |$10 |$2 |15 |50 |$250 | The income-consumption curve (see diagram at right) connects each of the four optimal bundles given in the table above. As the individual’s income increases, the budget line shifts out and the optimal bundles change. The Engel curve for each good illustrates the relationship between the quantity consumed and income (on the vertical axis). Both Engel curves (see diagrams below) are upward sloping, so both goods are normal. 3. Jane always gets twice as much utility from an extra ballet ticket as she does from an extra basketball ticket, regardless of how many tickets of either type she has. Draw Jane’s income-consumption curve and her Engel curve for ballet tickets. Ballet tickets and basketball tickets are perfect substitutes for Jane. Therefore, she will consume either all ballet tickets or all basketball tickets, depending on the two prices. As long as ballet tickets are less than twice the price of basketball tickets, she will choose all ballet. If ballet tickets are more than twice the price of basketball tickets, she will choose all basketball. This can be determined by comparing the marginal utility per dollar for each type of ticket, where her marginal utility from another ballet ticket is 2 times her marginal utility from another basketball ticket regardless of the number of tickets she has. Her income-consumption curve will then lie along the axis of the good that she chooses. As income increases and the budget line shifts out, she will buy more of the chosen good and none of the other good. Her Engel curve for the good chosen is an upward-sloping straight line, with the number of tickets equal to her income divided by the price of the ticket. For the good not chosen, her Engel curve lies on the vertical (income) axis because she will never purchase any of those tickets regardless of how large her income becomes. 4. a. Orange juice and apple juice are known to be perfect substitutes. Draw the appropriate price-consumption curve (for a variable price of orange juice) and income-consumption curve. We know that indifference curves for perfect substitutes are straight lines like the line EF in the price-consumption curve diagram below. In this case, the consumer always purchases the cheaper of the two goods (assuming a one-for-one tradeoff). If the price of orange juice is less than the price of apple juice, the consumer will purchase only orange juice and the price-consumption curve will lie along the orange juice axis of the graph (from point F to the right). pic] If apple juice is cheaper, the consumer will purchase only apple juice and the price-consumption curve will be on the apple juice axis (above point E). If the two goods have the same price, the consumer will be indifferent between the two; the price-consumption curve will coincide with the indifference curve (between E and F). Assuming that the price of orange juice is less than the price of apple juice, the consumer will maximize her utility by consuming only orange juice. As income varies, only the amount of orange juice varies. Thus, the income-consumption curve will be the orange juice axis in the figure below. If apple juice were cheaper, the income-consumption curve would lie on the apple juice axis. [pic] 4. b. Left shoes and right shoes are perfect complements. Draw the appropriate price-consumption and income-consumption curves. For perfect complements, such as right shoes and left shoes, the indifference curves are L-shaped. The point of utility maximization occurs when the budget constraints, L1 and L2 touch the kink of U1 and U2. See the following figure. [pic] In the case of perfect complements, the income consumption curve is also a line through the corners of the L-shaped indifference curves. See the figure below. [pic] 5. Each week, Bill, Mary, and Jane select the quantity of two goods, X1 and X2, that they will consume in order to maximize their respective utilities. They each spend their entire weekly income on these two goods. a. Suppose you are given the following information about the choices that Bill makes over a three-week period: |[pic] |[pic] |[pic] |[pic] |I | |Week 1 |10 |20 |2 |1 |40 | |Week 2 |7 |19 |3 |1 |40 | |Week 3 |8 |31 |3 |1 |55 | Did Bill’s utility increase or decrease between week 1 and week 2? Between week 1 and week 3? Explain using a graph to support your answer. Bill’s utility fell between weeks 1 and 2 because he consumed less of both goods in week 2. Between weeks 1 and 2 the price of good 1 rose and his income remained constant. The budget line pivoted inward and he moved from U1 to a lower indifference curve, U2, as shown in the diagram. Between week 1 and week 3 his utility rose. The increase in income more than compensated him for the rise in the price of good 1. Since the price of good 1 rose by $1, he would need an extra $10 to afford the same bundle of goods he chose in week 1. This can be found by multiplying week 1 quantities times week 2 prices. However, his income went up by $15, so his budget line shifted out beyond his week 1 bundle. Therefore, his original bundle lies within his new budget set as shown in the diagram, and his new week 3 bundle is on the higher indifference curve U3. b. Now consider the following information about the choices that Mary makes: | |[pic] |[pic] |[pic] |[pic] |I | |Week 1 |10 |20 |2 |1 |40 | |Week 2 |6 |14 |2 |2 |40 | |Week 3 |20 |10 |2 |2 |60 | Did Mary’s utility increase or decrease between week 1 and week 3? Does Mary consider both goods to be normal goods? Explain. Mary’s utility went up. To afford the week 1 bundle at the new prices, she would need an extra $20, which is exactly what happened to her income. However, since she could have chosen the original bundle at the new prices and income but did not, she must have found a bundle that left her slightly better off. In the graph to the right, the week 1 bundle is at the point where the week 1 budget line is tangent to indifference curve U1, which is also the intersection of the week 1 and week 3 budget lines. The week 3 bundle is somewhere on the week 3 budget line that lies above the week 1 indifference curve. This bundle will be on a higher indifference curve, U3 in the graph, and hence Mary’s utility increased. A good is normal if more is chosen when income increases. Good 1 is normal because Mary consumed more of it when her income increased (and prices remained constant) between weeks 2 and 3. Good 2 is not normal, however, because when Mary’s income increased from week 2 to week 3 (holding prices the same), she consumed less of good 2. Thus good 2 in an inferior good for Mary. c. Finally, examine the following information about Jane’s choices: | |[pic] |[pic] |[pic] |[pic] |I | |Week 1 |12 |24 |2 |1 |48 | |Week 2 |16 |32 |1 |1 |48 | |Week 3 |12 |24 |1 |1 |36 | Draw a budget line-indifference curve graph that illustrates Jane’s three chosen bundles. What can you say about Jane’s preferences in this case? Identify the income and substitution effects that result from a change in the price of good X1. In week 2, the price of good 1 drops, Jane’s budget line pivots outward and she consumes more of both goods. In week 3 the prices remain at the new levels, but Jane’s income is reduced. This leads to a parallel leftward shift of her budget line and causes Jane to consume less of both goods. Notice that Jane always consumes the two goods in a fixed 1:2 ratio. This means that Jane views the two goods as perfect complements, and her indifference curves are L-shaped. Intuitively if the two goods are complements, there is no reason to substitute one for the other during a price change, because they have to be consumed in a set ratio. Thus the substitution effect is zero. When the price ratio changes and utility is kept at the same level (as happens between weeks 1 and 3), Jane chooses the same bundle (12, 24), so the substitution effect is zero. The income effect can be deduced from the changes between weeks 1 and 2 and also between weeks 2 and 3. Between weeks 2 and 3 the only change is the $12 drop in income. This causes Jane to buy 4 fewer units of good 1 and 8 less units of good 2. Because prices did not change, this is purely an income effect. Between weeks 1 and 2, the price of good 1 decreased by $1 and income remained the same. Since Jane bought 12 units of good 1 in week 1, the drop in price increased her purchasing power by ($1)(12) = $12. As a result of this $12 increase in real income, Jane bought 4 more units of good 1 and 8 more of good 2. We know there is no substitution effect, so these changes are due solely to the income effect, which is the same (but in the opposite direction) as we observed between weeks 1 and 2. . Two individuals, Sam and Barb, derive utility from the hours of leisure (L) they consume and from the amount of goods (G) they consume. In order to maximize utility, they need to allocate the 24 hours in the day between leisure hours and work hours. Assume that all hours not spent working are leisure hours. The price of a good is equal to $1 and the price of leisure is equal to the hourly wage. We observe the following information abo ut the choices that the two individuals make: | |Sam |Barb |Sam |Barb | |Price of G |Price of L |L (hours) |L (hours) |G ($) |G ($) | |1 |8 |16 |14 |64 |80 | |1 |9 |15 |14 |81 |90 | |1 |10 |14 |15 |100 |90 | |1 |11 |14 |16 |110 |88 | Graphically illustrate Sam’s leisure demand curve and Barb’s leisure demand curve. Place price on the vertical axis and leisure on the horizontal axis. Given that they both maximize utility, how can you explain the difference in their leisure demand curves? It is important to remember that less leisure implies more hours spent working. Sam’s leisure demand curve is downward sloping. As the price of leisure (the wage) rises, he chooses to consume less leisure and thus spend more time working at a higher wage to buy more goods. Barb’s leisure demand curve is upward sloping. As the price of leisure rises, she chooses to consume more leisure (and work less) since her working hours are generating more income per hour. See the leisure demand curves below. This difference in demand can be explained by examining the income and substitution effects for the two individuals. The substitution effect measures the effect of a change in the price of leisure, keeping utility constant (the budget line rotates along the current indifference curve). Since the substitution effect is always negative, a rise in the price of leisure will cause both individuals to consume less leisure. The income effect measures the effect of the change in purchasing power brought about by the change in the price of leisure. Here, when the price of leisure (the wage) rises, there is an increase in purchasing power (the new budget line shifts outward). Assuming both individuals consider leisure to be a normal good, the increase in purchasing power will increase demand for leisure. For Sam, the reduction in leisure demand caused by the substitution effect outweighs the increase in demand for leisure caused by the income effect, so his leisure demand curve slopes downward. For Barb, her income effect is larger than her substitution effect, so her leisure demand curve slopes upwards. 7. The director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand for tickets. The firm has classified people who go the theater into two groups, and has come up with two demand functions. The demand curves for the general public ([pic]) and students ([pic]) are given below: [pic] a. Graph the two demand curves on one graph, with P on the vertical axis and Q on the horizontal axis. If the current price of tickets is $35, identify the quantity demanded by each group. Both demand curves are downward sloping and linear. For the general public, Dgp, the vertical intercept is 100 and the horizontal intercept is 500. For the students, Ds, the vertical intercept is 50 and the horizontal intercept is 200. When the price is $35, the general public demands [pic] tickets and students demand [pic] tickets. b. Find the price elasticity of demand for each group at the current price and quantity. The elasticity for the general public is [pic] and the elasticity for students is [pic]. If the price of tickets increases by ten percent then the general public will demand 5. 4% fewer tickets and students will demand 23. 3% fewer tickets. c. Is the director maximizing the revenue he collects from ticket sales by charging $35 for each ticket? Explain. No he is not maximizing revenue because neither of the calculated elasticities is equal to –1. The general public’s demand is inelastic at the current price. Thus the director could increase the price for the general public, and the quantity demanded would fall by a smaller percentage, causing revenue to increase. Since the students’ demand is elastic at the current price, the director could decrease the price students pay, and their quantity demanded would increase by a larger amount in percentage terms, causing revenue to increase. d. What price should he charge each group if he wants to maximize revenue collected from ticket sales? To figure this out, use the formula for elasticity, set it equal to –1, and solve for price and quantity. For the general public: [pic] For the students: [pic] These prices generate a larger total revenue than the $35 price. When price is $35, revenue is (35)(Qgp + Qs) = (35)(325 + 60) = $13,475. With the separate prices, revenue is PgpQgp + PsQs = (50)(250) + (25)(100) = $15,000, which is an increase of $1525, or 11. 3%. 8. Judy has decided to allocate exactly $500 to college textbooks every year, even though she knows that the prices are likely to increase by 5 to 10 percent per year and that she will be getting a substantial monetary gift from her grandparents next year. What is Judy’s price elasticity of demand for textbooks? Income elasticity? Judy will spend the same amount ($500) on textbooks even when prices increase. We know that total revenue (i. e. total spending on a good) remains constant when price changes only if demand is unit elastic. Therefore Judy’s price elasticity of demand for textbooks is –1. Her income elasticity must be zero because she does not plan to purchase more books even though she expect s a large monetary gift (i. e. , an increase in income). 9. The ACME Corporation determines that at current prices the demand for its computer chips has a price elasticity of –2 in the short run, while the price elasticity for its disk drives is –1. a. If the corporation decides to raise the price of both products by 10 percent, what will happen to its sales? To its sales revenue? Note: The answer at the end of the book (first printing) for the percent change in disk drive sales revenue is incorrect. The correct answer is given below. We know the formula for the elasticity of demand is EP = %? Q/%? P. For computer chips, EP = –2, so –2 = %? Q/10, and therefore %? Q = –20. Thus a 10 percent increase in price will reduce the quantity sold by 20 percent. For disk drives, EP = –1, so a 10 percent increase in price will reduce sales by 10 percent. Sales revenue will decrease for computer chips because demand is elastic and price has increased. We can estimate the change in revenue as follows. Revenue is equal to price times quantity sold. Let TR1 = P1Q1 be revenue before the price change and TR2 = P2Q2 be revenue after the price change. Therefore (TR = P2Q2 – P1Q1, and thus (TR = (1. 1P1 )(0. 8Q1 ) – P1Q1 = –0. 12P1Q1, or a 12 percent decline. Sales revenue for disk drives will remain unchanged because demand elasticity is –1. b. Can you tell from the available information which product will generate the most revenue? If yes, why? If not, what additional information do you need? No. Although we know the elasticities of demand, we do not know the prices or quantities sold, so we cannot calculate the revenue for either product. We need to know the prices of chips and disk drives and how many of each ACME sells. 10. By observing an individual’s behavior in the situations outlined below, determine the relevant income elasticities of demand for each good (i. e. , whether the good is normal or inferior). If you cannot determine the income elasticity, what additional information do you need? a. Bill spends all his income on books and coffee. He finds $20 while rummaging through a used paperback bin at the bookstore. He immediately buys a new hardcover book of poetry. Books are a normal good since his consumption of books increases with income. Coffee is a neutral good since consumption of coffee stayed the same when income increased. b. Bill loses $10 he was going to use to buy a double espresso. He decides to sell his new book at a discount to a friend and use the money to buy coffee. When Bill’s income decreased by $10 he decided to own fewer books, so books are a normal good. Coffee appears to be a neutral good because Bill’s purchase of the double espresso did not change as his income changed. c. Being bohemian becomes the latest teen fad. As a result, coffee and book prices rise by 25 percent. Bill lowers his consumption of both goods by the same percentage. Books and coffee are both normal goods because Bill’s response to a decline in real income is to decrease consumption of both goods. In addition, the income elasticities for both goods are the same because Bill reduces consumption of both by the same percentage. d. Bill drops out of art school and gets an M. B. A. instead. He stops reading books and drinking coffee. Now he reads The Wall Street Journal and drinks bottled mineral water. His tastes have changed completely, and we do not know how he would respond to price and income changes. We need to observe how his consumption of the WSJ and bottled water changes as his income changes. 11. Suppose the income elasticity of demand for food is 0. 5 and the price elasticity of demand is –1. 0. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $25,000. a. If a sales tax on food caused the price of food to increase to $2. 0, what would happen to her consumption of food? (Hint: Since a large price change is involved, you should assume that the price elasticity measures an arc elasticity, rather than a point elasticity. ) The arc elasticity formula is: [pic]. We know that EP = –1, P1 = 2, P2 = 2. 50 (so (P = 0. 50), and Q1 = 5000 unit s (because Felicia spends $10,000 and each unit of food costs $2). We also know that Q2, the new quantity, is Q2 = Q1 + ? Q. Thus, if there is no change in income, we may solve for (Q: [pic]. By cross-multiplying and rearranging terms, we find that (Q = –1000. This means that she decreases her consumption of food from 5000 to 4000 units. As a check, recall that total spending should remain the same because the price elasticity is –1. After the price change, Felicia spends ($2. 50)(4000) = $10,000, which is the same as she spent before the price change. b. Suppose that Felicia gets a tax rebate of $2500 to ease the effect of the sales tax. What would her consumption of food be now? A tax rebate of $2500 is an income increase of $2500. To calculate the response of demand to the tax rebate, use the definition of the arc elasticity of income. [pic]. We know that EI = 0. 5, I1 = 25,000, ? I = 2500 (so I2 = 27,500), and Q1 = 4000 (from the answer to 11a). Assuming no change in price, we solve for (Q. [pic]. By cross-multiplying and rearranging terms, we find that (Q = 195 (approximately). This means that she increases her consumption of food from 4000 to 4195 units. c. Is she better or worse off when given a rebate equal to the sales tax payments? Draw a graph and explain. Note: The answer at the end of the book (first printing) used incorrect quantities and prices. The correct answer is given below. Felicia is better off after the rebate. The amount of the rebate is enough to allow her to purchase her original bundle of food and other goods. Recall that originally she consumed 5000 units of food. When the price went up by fifty cents per unit, she needed an extra (5000)($0. 0) = $2500 to afford the same quantity of food without reducing the quantity of the other goods consumed. This is the exact amount of the rebate. However, she did not choose to return to her original bundle. We can therefore infer that she found a better bundle that gave her a higher level of utility. In the graph below, when the price of food increases, the budget line pivots inward. When the rebate is given, this new budget line shifts out to the right in a parallel fashion. The bundle after the rebate is on that part of the new budget line that was previously unaffordable, and that lies above the original indifference curve. It is on a higher indifference curve, so Felicia is better off after the rebate. [pic] 12. You run a small business and would like to predict what will happen to the quantity demanded for your product if you raise your price. While you do not know the exact demand curve for your product, you do know that in the first year you charged $45 and sold 1200 units and that in the second year you charged $30 and sold 1800 units. a. If you plan to raise your price by 10 percent, what would be a reasonable estimate of what will happen to quantity demanded in percentage terms? We must first find the price elasticity of demand. Because the price and quantity changes are large in percentage terms, it is best to use the arc elasticity measure. EP = (? Q/? P)(average P/average Q) = (600/–15)(37. 50/1500) = –1. With an elasticity of –1, a 10 percent increase in price will lead to a 10 percent decrease in quantity. b. If you raise your price by 10 percent, will revenue increase or decrease? When elasticity is –1, revenue will remain constant if price is increased. 13. Suppose you are in charge of a toll bridge that costs essentially nothing to operate. The demand for bridge crossings Q is given by [pic]. a. Draw the demand curve for bridge crossings. The demand curve is linear and downward sloping. The vertical intercept is 15 and the horizontal intercept is 30. b. How many people would cross the bridge if there were no toll? At a price of zero, 0 = 15 – (1/2)Q, so Q = 30. The quantity demanded would be 30. c. What is the loss of consumer surplus associated with a bridge toll of $5? If the toll is $5 then the quantity demanded is 20. The lost consumer surplus is the difference between the consumer surplus when price is zero and the consumer surplus when price is $5. When the toll is zero, consumer surplus is the entire area under the demand curve, which is (1/2)(30)(15) = 225. When P = 5, consumer surplus is area A + B + C in the graph above. The base of this triangle is 20 and the height is 10, so consumer surplus = (1/2)(20)(10) = 100. The loss of consumer surplus is therefore 225 – 100 = $125. d. The toll-bridge operator is considering an increase in the toll to $7. At this higher price, how many people would cross the bridge? Would the toll-bridge revenue increase or decrease? What does your answer tell you about the elasticity of demand? At a toll of $7, the quantity demanded would be 16. The initial toll revenue was $5(20) = $100. The new toll revenue is $7(16) = $112. Since the revenue went up when the toll was increased, demand is inelastic (the 40% increase in price outweighed the 20% decline in quantity demanded). e. Find the lost consumer surplus associated with the increase in the price of the toll from $5 to $7. The lost consumer surplus is area B + C in the graph above. Thus, the loss in consumer surplus is (16)(7 – 5) + (1/2)(20 – 16)(7 – 5) = $36. 14. Vera has decided to upgrade the operating system on her new PC. She hears that the new Linux operating system is technologically superior to Windows and substantially lower in price. However, when she asks her friends, it turns out they all use PCs with Windows. They agree that Linux is more appealing but add that they see relatively few copies of Linux on sale at local stores. Vera chooses Windows. Can you explain her decision? Vera is influenced by a positive network externality (not a bandwagon effect). When she hears that there are limited software choices that are compatible with Linux and that none of her friends use Linux, she decides to go with Windows. If she had not been interested in acquiring much software and did not think she would need to get advice from her friends, she might have purchased Linux. 15. Suppose that you are the consultant to an agricultural cooperative that is deciding whether members should cut their production of cotton in half next year. The cooperative wants your advice as to whether this action will increase members’ revenues. Knowing that cotton (C) and watermelons (W) both compete for agricultural land in the South, you estimate the demand for cotton to be C = 3. 5 – 1. 0PC + 0. 25PW + 0. 50I, where PC is the price of cotton, PW the price of watermelon, and I income. Should you support or oppose the plan? Is there any additional information that would help you to provide a definitive answer? If production of cotton is cut in half, then the price of cotton will increase, given that we see from the equation above that demand is downward sloping. With price increasing and quantity demanded decreasing, revenue could go either way. It depends on whether demand is elastic or inelastic. If demand is elastic, a decrease in production and an increase in price would decrease revenue. If demand is inelastic, a decrease in production and an increase in price would increase revenue. You need a lot of information before you can give a definitive answer. First, you must know the current prices for cotton and watermelon plus the level of income; then you can calculate the quantity of cotton demanded, C. Next, you have to cut C in half and determine the effect that will have on the price of cotton, assuming that income and the price of watermelons are not affected (which is a big assumption). Then you can calculate the original revenue and the new revenue to see whether this action increases members’ revenues or not. CHAPTER 5 UNCERTAINTY AND CONSUMER BEHAVIOR EXERCISES 1. Consider a lottery with three possible outcomes: †¢ $125 will be received with probability . 2 †¢ $100 will be received with probability . 3 †¢ $50 will be received with probability . 5 a. What is the expected value of the lottery? The expected value, EV, of the lottery is equal to the sum of the returns weighted by their probabilities: EV = (0. 2)($125) + (0. 3)($100) + (0. 5)($50) = $80. b. What is the variance of the outcomes? The variance, (2, is the sum of the squared deviations from the mean, $80, weighted by their probabilities: (2 = (0. 2)(125 – 80)2 + (0. 3)(100 – 80)2 + (0. 5)(50 – 80)2 = $975. c. What would a risk-neutral person pay to play the lottery? A risk-neutral person would pay the expected value of the lottery: $80. 2. Suppose you have invested in a new computer company whose profitability depends on two factors: (1) whether the U. S. Congress passes a tariff raising the cost of Japanese computers and (2) whether the U. S. economy grows slowly or quickly. What are the four mutually exclusive states of the world that you should be concerned about? The four mutually exclusive states may be represented as: |Congress passes tariff |Congress does not pass tariff | |Slow growth rate |State 1: |State 2: | | |Slow growth with tariff |Slow growth without tariff | |Fast growth rate |State 3: |State 4: | | |Fast growth with tariff |Fast growth without tariff | 3. Richard is decidi ng whether to buy a state lottery ticket. Each ticket costs $1, and the probability of winning payoffs is given as follows: |Probability |Return | |0. 50 |$0. 00 | |0. 25 |$1. 00 | |0. 20 |$2. 00 | |0. 05 |$7. 50 | a. What is the expected value of Richard’s payoff if he buys a lottery ticket? What is the variance? The expected value of the lottery is equal to the sum of the returns weighted by their probabilities: EV = (0. 5)($0) + (0. 25)($1. 00) + (0. 2)($2. 00) + (0. 05)($7. 50) = $1. 025 The variance is the sum of the squared deviations from the mean, $1. 025, weighted by their probabilities: (2 = (0. 5)(0 – 1. 025)2 + (0. 25)(1 – 1. 025)2 + (0. 2)(2 – 1. 025)2 + (0. 05)(7. 5 – 1. 025)2, or (2 = 2. 812. b. Richard’s nickname is â€Å"No-Risk Rick† because he is an extremely risk-averse individual. Would he buy the ticket? An extremely risk-averse individual would probably not buy the ticket. Even though the expected value is higher than the price of the ticket, $1. 025 $1. 00, the difference is not enough to compensate Rick for the risk. For example, if his wealth is $10 and he buys a $1. 00 ticket, he would have $9. 00, $10. 00, $11. 00, and $16. 50, respectively, under the four possible outcomes. If his utility function is U = W0. 5, where W is his wealth, then his expected utility is: [pic] This is less than 3. 162, which is his utility if he does not buy the ticket (U(10) = 100. 5 = 3. 162). Therefore, he would not buy the ticket. c. Richard has been given 1000 lottery tickets. Discuss how you would determine the smallest amount for which he would be willing to sell all 1000 tickets. With 1000 tickets, Richard’s expected payoff is $1025. He does not pay for the tickets, so he cannot lose money, but there is a wide range of possible payoffs he might receive ranging from $0 (in the extremely unlikely case that all 1000 tickets pay nothing) to $7500 (in the even more unlikely case that all 1000 tickets pay the top prize of $7. 50), and everything in between. Given this variability and Richard’s high degree of risk aversion, we know that Richard would be willing to sell all the tickets for less (and perhaps considerably less) than the expected payoff of $1025. More precisely, he would sell the tickets for $1025 minus his risk premium. To find his selling price, we would first have to calculate his expected utility for the lottery winnings. This would be like point F in Figure 5. 4, except that in Richard’s case there are thousands of possible payoffs, not just two as in the figure. Using his expected utility value, we then would find the certain amount that gives him the same level of utility. This is like the $16,000 income at point C in Figure 5. 4. That certain amount is the smallest amount for which he would be willing to sell all 1000 lottery tickets. d. In the long run, given the price of the lottery tickets and the probability/return table, what do you think the state would do about the lottery? Given the price of the tickets, the sizes of the payoffs and the probabilities, the lottery is a money loser. The state loses $1. 025 – 1. 00 = $0. 025 (two and a half cents) on every ticket it sells. The state must raise the price of a ticket, reduce some of the payoffs, raise the probability of winning nothing, lower the probabilities of the positive payoffs, or some combination of the above. 4. Suppose an investor is concerned about a business choice in which there are three prospects – the probability and returns are given below: |Probability |Return | |0. 4 |$100 | |0. 3 | 30 | |0. | –30 | What is the expected value of the uncertain investment? What is the variance? The expected value of the return on this investment is EV = (0. 4)(100) + (0. 3)(30) + (0. 3)(–30) = $40. The variance is (2 = (0. 4)(100 – 40)2 + (0. 3)(30 – 40)2 + (0. 3)(–30 – 40)2 = 2940. 5. You are an insurance agent who must write a policy for a new client named Sam. His company, Society for Creative Alternatives to Mayonnaise (SCAM), is working on a low-fat, low-cholesterol mayonnaise substitute for the sandwich-condiment industry. The sandwich industry will pay top dollar to the first inventor to patent such a mayonnaise substitute. Sam’s SCAM seems like a very risky proposition to you. You have calculated his possible returns table as follows: |Probability |Return |Outcome | |. 999 | –$1,000,000 |(he fails) | |. 001 |$1,000,000,000 |(he succeeds and sells his formula) | a. What is the expected return of Sam’s project? What is the variance? The expected return, ER, of Sam’s investment is ER = (0. 999)(–1,000,000) + (0. 001)(1,000,000,000) = $1000. The variance is 2 = (0. 999)(–1,000,000 – 1000)2 + (0. 001)(1,000,000,000 – 1000)2 , or (2 = 1,000,998,999,000,000. b. What is the most that Sam is willing to pay for insurance? Assume Sam is risk neutral. Suppose the insurance guarantees that Sam will receive the expected return of $1000 with certainty regardless of the outcome of his SCAM project. Because Sam is risk neutral and because his expected return is the same as the guaranteed return with insurance, the insurance has no value to Sam. He is just as happ y with the uncertain SCAM profits as with the certain outcome guaranteed by the insurance policy. So Sam will not pay anything for the insurance. c. Suppose you found out that the Japanese are on the verge of introducing their own mayonnaise substitute next month. Sam does not know this and has just turned down your final offer of $1000 for the insurance. Assume that Sam tells you SCAM is only six months away from perfecting its mayonnaise substitute and that you know what you know about the Japanese. Would you raise or lower your policy premium on any subsequent proposal to Sam? Based on his information, would Sam accept? The entry of the Japanese lowers Sam’s probability of a high payoff. For example, assume that the probability of the billion-dollar payoff is lowered to zero. Then the expected outcome is: ER = (1. 0)(–$1,000,000) + (0. 0)(($1,000,000,000) = –$1,000,000. Therefore, you should raise the policy premium substantially. But Sam, not knowing about the Japanese entry, will continue to refuse your offers to insure his losses. 6. Suppose that Natasha’s utility function is given by [pic], where I represents annual income in thousands of dollars. a. Is Natasha risk loving, risk neutral, or risk averse? Explain. Natasha is risk averse. To show this, assume that she has $10,000 and is offered a gamble of a $1000 gain with 50 percent probability and a $1000 loss with 50 percent probability. Her utility of $10,000 is u(10) = [pic] = 10. Her expected utility with the gamble is: EU = (0. 5)[pic] + (0. 5)[pic] = 9. 87 10. She would avoid the gamble. If she were risk neutral, she would be indifferent between the $10,000 and the gamble, and if she were risk loving, she would prefer the gamble. You can also see that she is risk averse by noting that the square root function increases at a decreasing rate (the second derivative is negative), imply ing diminishing marginal utility. b. Suppose that Natasha is currently earning an income of $40,000 (I = 40) and can earn that income next year with certainty. She is offered a chance to take a new job that offers a . 6 probability of earning $44,000 and a . 4 probability of earning $33,000. Should she take the new job? The utility of her current salary is [pic]= 20. The expected utility of the new job’s salary is EU = (0. 6)[pic] + (0. 4)[pic] = 19. 85, which is less than 20. Therefore, she should not take the job. You can also determine that Natasha should reject the job by noting that the expected value of the new job is only $39,600, which is less than her current salary. Since she is risk averse, she should never accept a risky salary with a lower expected value than her current certain salary. c. In (b), would Natasha be willing to buy insurance to protect against the variable income associated with the new job? If so, how much would she be willing to pay for that insurance? Hint: What is the risk premium? ) This question assumes that Natasha takes the new job (for some unexplained reason). Her expected salary is 0. 6(44,000) + 0. 4(33,000) = $39,600. The risk premium is the amount Natasha would be willing to pay so that she receives the expected salary for certain rather than the risky salary in her new job. In part (b) we determined that her new job has an expected utility of 19. 85. We need to find the certain salary that gives Natasha the same utility of 19. 85, so we want to find I such that u(I) = 19. 85. Using her utility function, we want to solve the following equation: [pic]. Squaring both sides, 10I =394. 02, and I = 39. 402. So Natasha would be equally happy with a certain salary of $39,402 or the uncertain salary with an expected value of $39,600. Her risk premium is $39,600 – 39,402 = $198. Natasha would be willing to pay $198 to guarantee her income would be $39,600 for certain and eliminate the risk associated with her new job. 7. Suppose that two investments have the same three payoffs, but the probability associated with each payoff differs, as illustrated in the table below: | |Probability |Probability | |Payoff |(Investment A) |(Investment B) | |$300 |0. 10 |0. 0 | |$250 |0. 80 |0. 40 | |$200 |0. 10 |0. 30 | a. Find the expected return and standard deviation of each investment. The expected value of the return on investment A is EV = (0. 1)(300) + (0. 8)(250) + (0. 1)(200) = $250. The variance on investment A is (2 = (0. 1)(300 – 250)2 + (0. 8)(250 – 250)2 + (0. 1)(200 – 250)2 = $500, and the standard deviation on investment A is ? = [pic] = $22. 36. The expected value of the return on investment B is EV = (0. 3)(300) + (0. 4)(250) + (0. 3)(200) = $250. The variance on investment B is (2 = (0. 3)(300 – 250)2 + (0. 4)(250 – 250)2 + (0. 3)(200 – 250)2 = $1500, and the standard deviation on investment B is ? = [pic] = $38. 73. b. Jill has the utility function [pic], where I denotes the payoff. Which investment will she choose? Jill’s expected utility from investment A is EU= (0. 1)[5(300)] + (0. 8)[5(250)] + (0. 1)[5(200)] = 1250. Jill’s expected utility from investment B is EU=(0. 3)[5(300)] + (0. 4)[5(250)] + (0. 3)[5(200)] = 1250. Since both investments give Jill the same expected utility she will be indifferent between the two. Note that Jill is risk neutral, so she cares only about expected values. Since investments A and B have the same expected values, she is indifferent between them. c. Ken has the utility function [pic]. Which investment will he choose? Ken’s expected utility from investment A is EU = (0. 1)(5[pic]) + (0. 8)(5[pic]) + (0. 1)(5[pic]) = 78. 98. Ken’s expected utility from investment B is EU=(0. 3)(5[pic]) + (0. 4)(5[pic]) + (0. 3)(5[pic]) = 78. 82. Ken will choose investment A because it has a slightly higher expected utility. Notice that Ken is risk averse, so he prefers the investment with less variability. d. Laura has the utility function [pic]. Which investment will she choose? Laura’s expected utility from investment A is EU=(0. 1)[5(3002)] + (0. 8)[5(2502)] + (0. )[5(2002)] = 315,000. Laura’s expected utility from investment B is EU=(0. 3)[5(3002)] + (0. 4)[5(2502)] + (0. 3)[5(2002)] = 320,000. Laura will choose investment B since it has a higher expected utility. Notice that Laura is a risk lover, so she prefers the investm ent with greater variability. 8. As the owner of a family farm whose wealth is $250,000, you must choose between sitting this season out and investing last year’s earnings ($200,000) in a safe money market fund paying 5. 0 percent or planting summer corn. Planting costs $200,000, with a six-month time to harvest. If there is rain, planting summer corn will yield $500,000 in revenues at harvest. If there is a drought, planting will yield $50,000 in revenues. As a third choice, you can purchase AgriCorp drought-resistant summer corn at a cost of $250,000 that will yield $500,000 in revenues at harvest if there is rain, and $350,000 in revenues if there is a drought. You are risk averse, and your preference for family wealth (W) is specified by the relationship [pic]. The probability of a summer drought is 0. 30, while the probability of summer rain is 0. 70. Which of the three options should you choose? Explain. Calculate the expected utility of wealth under the three options. Wealth is equal to the initial $250,000 plus whatever is earned growing corn or investing in the safe financial asset. Expected utility under the safe option, allowing for the fact that your initial wealth is $250,000, is: E(U) = (250,000 + 200,000(1 + . 05)). 5 = 678. 23. Expected utility with regular corn, again including your initial wealth, is: E(U) = . 7(250,000 + (500,000 – 200,000)). 5 + . 3(250,000 + (50,000 – 200,000)). 5 = 519. 13 + 94. 87 = 614. Expected utility with drought-resistant corn is: E(U) = . 7(250,000 + (500,000 – 250,000)). 5 + . 3(250,000 + (350,000 – 250,000)). 5 = 494. 975 + 177. 482 = 672. 46. You should choose the option with the highest expected utility, which is the safe option of not planting corn. Note: There is a subtle time issue in this problem. The returns from planting corn occur in 6 months while the money market fund pays 5%, which is presumably a yearly interest rate. To put everything on equal footing, we should compare the returns of all three alternatives over a 6-month period. In this case, the money market fund would earn about 2. 5%, so its expected utility is: E(U) = (250,000 + 200,000(1 + . 025)). 5 = 674. 54. This is still the best of the three options, but by a smaller margin than before. 9. Draw a utility function over income u(I) that describes a man who is a risk lover when his income is low but risk averse when his income is high. Can you explain why such a utility function might reasonably describe a person’s preferences? The utility function will be S-shaped as illustrated below. Preferences might be like this for an individual who needs a certain level of income, I*, in order to stay alive. An increase in income above I* will have diminishing marginal utility. Below I*, the individual will be a risk lover and will take unfavorable gambles in an effort to make large gains in income. Above I*, the individual will purchase insurance against losses and below I* will gamble. 10. A city is considering how much to spend to hire people to monitor its parking meters. The following information is available to the city manager: †¢ Hiring each meter monitor costs $10,000 per year. †¢ With one monitoring person hired, the probability of a driver getting a ticket each time he or she parks illegally is equal to . 25. With two monitors, the probability of getting a ticket is . 5; with three monitors, the probability is . 75; and with four, it’s equal to 1. †¢ With two monitors hired, the current fine for overtime parking is $20. a. Assume first that al l drivers are risk neutral. What parking fine would you levy, and how many meter monitors would you hire (1, 2, 3, or 4) to achieve the current level of deterrence against illegal parking at the minimum cost? If drivers are risk neutral, their behavior is influenced only by their expected fine. With two meter monitors, the probability of detection is 0. 5 and the fine is $20. So, the expected fine is (0. 5)($20) + (0. 5)(0) = $10. To maintain this expected fine, the city can hire one meter monitor and increase the fine to $40, or hire three meter monitors and decrease the fine to $13. 33, or hire four meter monitors and decrease the fine to $10. If the only cost to be minimized is the cost of hiring meter monitors at $10,000 per year you, as the city manager, should minimize the number of meter monitors. Hire only one monitor and increase the fine to $40 to maintain the current level of deterrence. b. Now assume that drivers are highly risk averse. How would your answer to (a) change? If drivers are risk averse, they would want to avoid the possibility of paying parking fines even more than would risk neutral drivers. Therefore, a fine of less than $40 with one meter monitor should maintain the current level of deterrence. c. (For discussion) What if drivers could insure themselves against the risk of parking fines? Would it make good public policy to permit such insurance? Drivers engage in many forms of behavior to insure themselves against the risk of parking fines, such as checking the time often to be sure they have not parked overtime, parking blocks away from their destination in non-metered spots or taking public transportation. If a private insurance firm offered insurance that paid the fine when a ticket was received, drivers would not worry about getting tickets. They would not seek out unmetered spots or take public transportation; they would park in metered spaces for as long as they wanted at zero personal cost. Having the insurance would lead drivers to get many more parking tickets. This is referred to as moral hazard and may cause the insurance market to collapse, but that’s another story (see Section 17. 3 in Chapter 17). It probably would not make good public policy to permit such insurance. Parking is usually metered to encourage efficient use of scarce parking space. People with insurance would have no incentive to use public transportation, seek out-of-the-way parking locations or economize on their use of metered spaces. This imposes a cost on others who are not able to find a place to park. If the parking fines are set to efficiently allocate the scarce amount of parking space available, then the availability of insurance will lead to an inefficient use of the parking space. In this case, it would not be good public policy to permit the insurance. 11. A moderately risk-averse investor has 50 percent of her portfolio invested in stocks and 50 percent in risk-free Treasury bills. Show how each of the following events will affect the investor’s budget line and the proportion of stocks in her portfolio: a. The standard deviation of the return on the stock market increases, but the expected return on the stock market remains the same. From section 5. 4, the equation for the budget line is [pic], here Rp is the expected return on the portfolio, Rm is the expected return from investing in the stock market, Rf is the risk-free return on Treasury bills, ? m is the standard deviation of the return from investing in the stock market, and ? p is the standard deviation of the return on the portfolio. The budget line is linear and shows the positive relationship between the return on the portfolio, Rp, and the standard deviation of the return on the portfolio, ? p, as shown in Figure 5. 6. In this case ? m, the standard deviation of the return on the stock market, increases. The slope of the budget line therefore decreases, and the budget line becomes flatter. The budget line’s intercept stays the same because Rf does not change. Thus, at any given level of portfolio return, the portfolio now has a higher standard deviation. Since stocks have become riskier without a compensating increase in expected return, the proportion of stocks in the investor’s portfolio will fall. b. b. The expected return on the stock market increases, but the standard deviation of the stock market remains the same. In this case, Rm, the expected return on the stock market, increases, so the slope of the budget line becomes steeper. At any given level of portfolio standard deviation, ? p, there is now a higher expected return, Rp. Stocks have become relatively more attractive because investors now get greater expected returns with no increase in risk, and the proportion of stocks in the investor’s portfolio will rise as a consequence. c. The return on risk-free Treasury bills increases. In this case there is an increase in Rf, which affects both the intercept and slope of the budget line. The budget line shifts up and become flatter as a result. The proportion of stocks in the portfolio could go either way. On the one hand, Treasury bills now have a higher return and so are more attractive. On the other hand, the investor can now earn a higher return from each Treasury bill and so could hold fewer Treasury bills and still maintain the same level of risk-free return. In this second case, the investor may be willing to place more of her money in the stock market. It will depend on the particular preferences of the investor as well as the magnitude of the returns to the two asset classes. An analogy would be to consider what happens to savings when the interest rate increases. On the one hand, savings tend to increase because the return is higher, but on the other hand, spending may increase and savings decrease because a person can save less each period and still wind up with the same accumulation of savings at some future date. CHAPTER 6 PRODUCTION EXERCISES 1. The menu at Joe’s coffee shop consists of a variety of coffee drinks, pastries, and sandwiches. The marginal product of an additional worker can be defined as the number of customers that can be served by that worker in a given time period. Joe has been employing one worker, but is considering hiring a second and a third. Explain why the marginal product of the second and third workers might be higher than the first. Why might you expect the marginal product of additional workers to diminish eventually? The marginal product could well increase for the second and third workers because each would be able to specialize in a different task. If there is only one worker, that person has to take orders and prepare all the food. With 2 or 3, however, one could take orders and the others could do most of the coffee and food preparation. Eventually, however, as more workers are employed, the marginal product would diminish because there would be a large number of people behind the counter and in the kitchen trying to serve more and more customers with a limited amount of equipment and a fixed building size. 2. Suppose a chair manufacturer is producing in the short run (with its existing plant and equipment). The manufacturer has observed the following levels of production corresponding to different numbers of workers: Number of chairsNumber of workers 110 218 324 428 530 628 7. 25 a. Calculate the marginal and average product of labor for this production function. The average product of labor, APL, is equal to [pic]. The marginal product of labor, MPL, is equal to [pic], the change in output divided by the change in labor input. For this production process we have: |L |q |APL |MPL | |0 |0 |__ |__ | |1 |10 |10 |10 | |2 |18 |9 |8 | |3 |24 |8 |6 | |4 |28 |7 |4 | |5 |30 |6 |2 | |6 |28 |4. 7 |–2 | |7 |25 |3. 6 |–3 | b. Does this production function exhibit diminishing returns to labor? Explain. Yes, this production process exhibits diminishing returns to labor. The marginal product of labor, the extra output produced by each additional worker, diminishes as workers are added, and this starts to occur with the second unit of labor. c. Explain intuitively what might cause the marginal product of labor to become negative. Labor’s negative marginal product for L 5 may arise from congestion in the chair manufacturer’s factory. Since more laborers are using the same fixed amount of capital, it is possible that they could get in each other’s way, decreasing efficiency and the amount of output. Firms also have to control the quality of their output, and the high congestion of labor may produce products that are not of a high enough quality to be offered for sale, which can contribute to a negative marginal product. 3. Fill in the gaps in the table below. Quantity of |Total |Marginal Product |Average Product | |Variable Input |Output |of Variable Input |of Variable Input | |0 | 0 |– |– | |1 |225 | | | |2 | | |300 | |3 | |300 | | |4 |1140 | | | |5 | |225 | | |6 | | |225 | | | | | | | | | | | Quantity of |Total |Marginal Product |Average Product | |Variable Input |Output |of Variable Input |of Variable Input | |0 | 0 |___ |___ | |1 |225 |225 |225 | |2 |600 |375 |300 | |3 |900 |300 |300 | |4 |1140 |240 |285 | |5 |1365 |225 |273 | |6 |1350 |–15 |225 | ———————– [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] [pic] How to cite Economic Problem, Essay examples

FAITH - The Foundation for Growth free essay sample

Faith, Courage, Betrayal, Comfort, Support, Murder, Desire, Deprived, Outrage, Memories, Humiliated, Offended, Divinity, Hatred, Indifferent, Acceptance, Hope, Loyalty, Truth, Worship, Bravery, Courage, Self-Confidence, and Reliance. These are all words that could easily be used to describe the book, Night, written by Elie Wiesel. When I think of this life changing book, faith is the first impression that comes to mind. This book is a record of Wiesel’s faith and his reliance on the Lord and it personifies the individual trials of the soul when persecution and humanity turn against one another. His faith also changes over time as he passes through the trials and tribulations one might expect during a time of war. In the beginning Wiesel’s faith was unquestioned as he held fast to the truths and intestinal fortitude that created his character. In fact, there was never a moment when Wiesel ever doubted his faith. By the end of 1942 and through the perils of war, his faith was tested on a daily basis. He was a survivor among the millions of murders of innocent lives of the many prisoners during the Holocaust. There are many people in our country today who have their faith tested as well, but this was a time in history where the worst kind of atrocities were exhibited and directed to the extermination of a race of people unlike we have ever seen in modern history. Elie Wiesel suffered through these trials and over time, through the wisdom that comes with age, turned them into opportunities for personal growth. There are different individual challenges and trails that we must over come everyday if we are to grow and prosper in this mortal probation, whether we believe in a God or not. Elie Wiesel explains: â€Å"In The Beginning there was faith – which is childish; trust – which is vain; and illusion – which is dangerous. We believed in God, trusted in man, and lived with the illusion that every one of us has been entrusted with a sacred spark from the Shekhi nah’s flame; that every one of us carries in his eyes and in his soul a reflection of God’s image. That was the source if not the cause of all our ordeals.† Now Wiesel wrote this after the year of 1945. Had he lost all of his faith in God? Wiesel’s faith had dramatic changes during his stay at the various concentration camps from 1941 to 1945. He transitions from â€Å"blaming God† for his suffering, to eventually overcoming his tragedies and being grateful to God for his fortuitous survival. His tone changes throughout his experiences as he later comes to realize: â€Å"Never shall he forget those flames which consumed my faith forever, and yet he also states, I have faith, faith in the God Abraham, Isaac, and Jacob and even his creation.† Faith is the confident belief in the truth, value, or trustworthiness of a person, idea, or thing. An example of this faith is when he fell ill one winter with a severe foot disorder that rendered him una ble to walk. Wiesel was apprehensive at the prospects of the surgery the Jewish doctor was recommending, but he put his faith in the doctor and went ahead with it anyway. It almost cost him his life as he lost large amounts of blood due to complications from the surgery. His faith was tried at the young age of 15 trying to survive the harsh winter’s at the most feared and evil concentration camp in the history of the world, Auschwitz. I am fourteen years old and I could relate in some small way to what a young child might feel having to go through such a surgical procedure at such a young age. I had to have surgery on my back and my particular ailment had the potential to be dangerous to my health. They had to put me out on anesthetics and I can promise you that this was a huge trial of my faith. To be put asleep and completely trust my future health to a doctor that I didn’t even know was terrifying. Many thoughts rushed through the corners of my mind before the proc edure: What if the doctor had complications during the surgical procedures? Could this procedure handicap me for my lifetime if I don’t heal properly? I could relate and somewhat understand the terror Wiesel must have gone through before entering the operating room. I must admit that the experiences that I went through resulting from my surgery increased my faith. To blindly put your life in the hands of another human being is somewhat unnerving. Children had to grow up fast through the horrors of the Holocaust as they were exposed to the worst types of behavior that mankind has ever had to offer. The loss of innocence at such a young age goes beyond the comprehension of any experience we might face today living in the United States. Isn’t it interesting how with age and experience our perceptions can change so dramatically? Isn’t that the point of life as we gain wisdom and lose our innocence? Some refer to this as the progression of the soul. Progression aff ects every aspect of our character, especially maturity levels and our belief systems. These beliefs affect our entire life, and our life can affect the lives of others for the better. The ability to read about the life and trials of Elie Wiesel has affected many lives, including my own. I enjoyed reading the book, Night, and would recommend it to anyone. Wiesel has not only encouraged me, but strengthened my faith in God, humanity, and the survival of the human soul. Even though we may hold many different beliefs, I have grown from his testimony of the power of faith through his experiences during the Holocaust.

The Big Mall Information Kiosks

Project Background The Big Mall is one of the biggest shopping malls in Canberra and its operations have been very successful in the recent past. The management has always endeavored to offer maximum satisfaction at all the times. However, there is a massive competition in this industry within this region and The Big Mall must find a way of retaining its top position in this market.Advertising We will write a custom proposal sample on The Big Mall Information Kiosks specifically for you for only $16.05 $11/page Learn More This means that the management has to find a way of offering continuous satisfaction to the customers through improved service delivery. To achieve this, the management must make an effort to ensure that the firm adopts emerging technologies, which can help improve its service delivery and customer experience. One of the ways of ensuring that customers remain constantly satisfied is by ensuring that they are constantly informed over iss ues they consider relevant in their purchasing process and post purchase activities. Installing Information Kiosks around the mall can help in ensuring that this firm offers its customers relevant information at any time when they need it. The focus of this project is to provide new Information Kiosks for the Big Mall in Canberra to help it meet the needs of its customers. To do this successfully, there is need to have the required technical resources, including human resource, which will help in ensuring that this project is a success. The Big Mall is the client in this project and the chief financier in this project. This firm will also be responsible for provision of information on how they desire the system to look like, and the kind of information that should be available to the customers at the Kiosks on demand. Info Systems Limited, a local IT support company in Canberra, will undertake the projec t. Employees of Info Systems Limited who will be assigned the task of undertaki ng various duties in this project will work directly under the chief executive officer and the manager of The Big Mall as a way of ensuring that the finally developed firm will be able to meet all the requirements of the firm. The project deliverables and all the project-planning activities are clearly articulated in this report in order to enhance understanding of what is to be achieved upon completion of this project (Wysocki 2012, p. 78).Advertising Looking for proposal on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Justification of the project According to Muriwani (2012, P. 74), the world of business has become so competitive that it forces relevant stakeholders to find ways of remaining competitive in their respective industries. This scholar further says that this competition has made it necessary for firms to come up with ways through which they can attract customers in order to remain sustainable in the marke t. The Big Mall is currently one of the biggest shopping malls in Canberra. However, this may not remain so if the management fails to take measures that would help in propelling the firm to higher heights. The management of this firm must find ways through which it can continue offering maximum satisfaction to its customers. The research and marketing team have come to realize that customers need to access information about the products they purchase or those that they intend to purchase at any time of the day. The current structure of this firm does not allow it to provide this information at the rate at which customers would have desired. This may make it lose its customers to firms that will be able to respond to this new customer needs. For this reason, the management has considered this project justifiable as a way of retaining its customers. It is true that this firm will have to spend in this project. However, the expenditure is worth making because the project will help ens ure that there is a constant flow of customers into this firm. Undertaking this project will help improve profitability of The Big Mall. Scope of the project As Marchewka (2009, p. 57) advises, it is always important to define project scope before the onset of the actual project. When conducting a project, various stakeholders will have varying expectations of the project. There are those who will be optimistic of the project, while others may not understand what to expect from the particular project. The aim of every project team members of to meet the expectations of the relevant stakeholders upon completion of the project. It may not be easy to satisfy every stakeholder because of the varying expectations. For this reason, it is important to define the scope of a project before it is officiated.Advertising We will write a custom proposal sample on The Big Mall Information Kiosks specifically for you for only $16.05 $11/page Learn More This will help in ensuring that all the stakeholders will understand what to expect of the project, and what is beyond the scope of the project. In this project, the focus is to develop Information Kiosks for The Big Mall at eight different locations within Canberra. The Information Kiosks will be exclusively for provision of information to the customers from the database of this firm as desired by the management. The management of The Big Mall will determine the kind of information that will reach customers. This project is limited to this, and any other task that stakeholders may have besides offering relevant information to customers is beyond the scope of this project. Objectives of the project The project members, having understood the needs of the management of The Big Mall, came up with a number of objectives that this firm wishes to achieve when this project is completed. It is important to understand that these objectives are user-specific, meaning that they be meant to suit the client, w hich in this case is The Big Mall. The following are some of these objectives To complete this project for The Big Mall successfully and within the preset constrains of costs, scope, quality and time To work hand in hand with the client in managing this project in a skillful and professional manner To fulfill all the expectations of the stakeholders relevant in this project To provide a system which is accurate and efficient To demonstrate high levels of skills and capacity in this area of project management To maintain client’s high levels of satisfaction in the entire process of the project To be able to plan for mitigation measures for any unforeseen risks which may affect success of the project To demonstrate high level of various project management skills Project Schedule Schedule of the project In every project, it is important to have a clear schedule that should be followed to ensure that it achieves its objectives. This project should be completed within two months . The system should be up and running within the four months from the day it is officially set operational. The Gantt chart below specifies the activities that will be carried out in this project Gantt chart The above Gantt chart demonstrates all the activities that should be accomplished within a specified duration. The activities should be accomplished within a time span of two months. The activities will start from October 1 2013, to November 31 2014.Advertising Looking for proposal on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Project resources As Levine (2002, p. 29) says, every project can only succeed if the needed resources are availed at the right time for the project members. In this project, the resources that are needed for successful development of eight information kiosks for The Big Mall are identified in the table below. Resources necessary for the project People Staff from Info System Limited The Big Mall staff Database administrator Desktop Engineer (Hardware engineer) Network Engineer (Software engineer) Technology Computers Directory’s (Kiosk) Facilities On site office Mall facilities Finance Any financial support the team may need to complete the project successfully Other resources to be provided Internet Connection Internal Software used by employees The above table is a summary of all the resources that this project will need. It is important to note that both the staff of The Big Mall and the contracted specialists from Info System Company will carry out this proj ect. It is in the knowledge of the planners of this project that employees of The Big Mall do not have the technical capacity to undertake this project. Inclusion of a number of their employees in this project will help in confirming the costs of the project. They will also understand the system so that they can be involved in its maintenance once it is up and running. Info System Company will provide the software and the hardware resources including internal software that will be used by employees. The Big Mall will only provide its employees, onsite office, and physical location of the eight Information Kiosks. Basic assumptions of the project Kerzner (2009, p. 69) says that it may be important to develop some assumption when developing a project proposal. The main assumption that was used in this project is that by completion of this project, the current need for Information Kiosks will still be relevant. It is also assumed that this project offers this firm the best strategy thr ough which it can meet the needs of the market in providing it with all the relevant information it needs. The project also assumed that the induction that will be done by employees of Info System on the employees of The Big Mall would be enough to offer them proper guidance on how to run this system when it is finally put into use. These assumptions explain why various activities have been planned as given in this project proposal. Project members and their roles It is important to ensure that all the stakeholders within the project know their roles clearly. According to As Levine (2002, p. 78), defining project stakeholders is important to ensure that all members understand their role. This scholar further states that defining the stakeholders avoids cases of wrangling during project implementation stage. Every member of the organization will know what he or she is expected of during the implementation stage. The following chart shows the proposed stakeholders that should be invol ved in this project, and how they should relate. Project Stakeholders Role Name Contact Manager (PM) (Kindly insert your name) (include contacts) Sponsor The Big Mall (include contacts) Client (Owner) The Big Mall (include contacts) Other Info Service LTD (The contracted firm) (include contacts) Ownership It is necessary to clarify ownership of various items within this project. According to Kerzner (2009, p. 74), defining ownership in a project where one firm contracts another firm always helps in avoiding possible litigation cases in future. In this project, the planners were keen on identifying the ownership of various items used in this project. Info Service limited is the owner of the intellectual knowledge that has been employed to develop this project. The Big Mall has not bought this intellectual knowledge from Info Service. It has only bought the service. This means that the intellectual property rights will remain with Info Service even after the project is c ompleted. The individual employees of Info Service may not claim ownership of this intellectual property unless they registered it under their name. On the other hand, the system that will be completed by the employees of Info Service will remain an exclusive property of The Big Mall once the project is completed. This company has duly paid for this service and its outcome remains under its ownership. The management of the Big Mall has express authority to point out a number of issues in the project in cases they are not completed as per the original plan. This final product must meet the expectations of the Big Mall. It is important to understand how stakeholders are related in this project. It is important to note that the project is under the management of the project manager who is an employee of Info Service. Most of the members who will participate in this project are also employees of Info Service limited. Employees of The Big Mall will be present during project implementatio n process just to understand the system so that they may know how it is operated once its installation is complete. The chief executive of The Big Mall will act as the chief advisor in this project. The chart above demonstrates that in this project, the project manager will be responsible for every activity that will be taking place within the firm. He or she will be responsible for managing all the project members and ensuring that they undertake activities that are expected of them. Under project manager will be various managers in charge of various sections of the project. They are technocrats who will be involved in coming up with the appropriate system prototype that will be appropriate for this Information Kiosk. These officers will be working hand in hand with project manager to ensure that the project runs according to the plan. Then the finance representative, who will be an employee of The Big Mall, will be there to represent the interests of the project in the finance de partment. Within the project, this officer will ensure that the finances of the project are spent wisely. Within the finance department of the firm, the officer will ensure that sufficient funds are allocated to the firm. Although a group of software and hardware engineers will do the project, commerce specialists will do its management (Phillips 2004, p. 47). The project manager will be at the helm of all the activities talking place in this project. The system developers will have a special niche in this project where they will be allowed to give their views on this project, while directly taking part in the activities of the project. All the project members selected for this project should have basic knowledge about issues regarding the Information system development. This way, they will be in a position to act as members of monitoring and evaluation team. This will also allow them easier time when they get to various other tasks within the project. They will be in a position to explain to other stakeholders the importance of the new system in meeting their objectives. This will help ensure that the outcome of the project is easily understood and appreciated by all the relevant stakeholders in this project. Communications Plan Communication is one of the most important ingredients towards successful completion of a project. It is important to spell out the communication channel within the project in order to allow all the responsible stakeholders understand the project’s progress. In this project, there are senior officers from Info Service and The Big Mall who will need to have clear knowledge of the activities of the project, but may not participate in the project directly. According to Marchewka (2009, p. 97), involving all stakeholders in the process of rolling out a project is important because it helps in avoiding cases where a project is rejected upon its completion for failure to comply with the needs of the client. It is important to maintai n a constant information flow so that other stakeholders who are not taking part in the project directly can put in their inputs and enhance quality of the project. The top management of Info Service will receive regular updates of the progress of the project. The project manager will do this on a weekly basis. When necessary, the management of Info Service can receive the updates on a daily basis. The project manager will always update the chief executive of The Big Mall on the project’s progress after every two days. The quality assurance team from the Big Mall will also issue updates to the stakeholders of the Big Mall on a weekly basis on the project’s progress. The project’s information officer will be releasing weekly reviews of the progress of the project to all other stakeholders who may not have express authority to access information of this project. This officer will also receive any comments from the stakeholders and communicate it to the project man ager who will then act upon it. Project Challenges According to Fioravanti (2006, p. 71), it is always important to identify any possible challenges that a project may face during its implementation process. Identifying the anticipated problems helps in creating measures that can be used to mitigate them. In this project, the main problem that is anticipated is the ability of the employees of The Big Mall to manage this new system once it is installed. This system can only be useful if the employees of Big Mall can run it as expected. The project management will try to train these employees on how to manage this system in order to eliminate this challenge. The project management team will also help these employees understand how to maintain the system as would be appropriate when the system is officially handed over to the Big Mall. Project Costs This very ambitious project will help The Big Mall to not only satisfy customers’ need for knowledge, but also improve efficiency o f its workforce by eliminating the need for the employees to explain various issues to customers when they visit. However, this project must be undertaken at a given cost that must be met by relevant authorities within this firm. This project lays down some of the expected costs that would be needed in order to make this project a reality within the specified time. The tables below specify these costs in their relevant categories. The Big Mall Information Kiosk Project Costs One-off costs 8 Kiosks (UAD) Circle Soft (UAD) ESSN Co. (UAD) Software $6,000 $5,000 $5,500 Hardware $9,000 $7,500 $10,500 Network components $600 $750 Cables $25 $25 $25 Training $350 $300 $300 Testing $70/hr $1,200 $60/hr $1,000 $65/hr $1,100 Other $1,500 $1,800 $1,000 Totals $18,675 $16,375 $18,425 The above table shows some of the one-off costs that will be incurred in this project. The recurring costs, especially the cost of maintenance are specified in the table below. Repeating C osts 8 Kiosks (UAD) Circle Soft (UAD) ESSN Co. (UAD) Maintenance contracts for software Year 1 $400 $650 $0 Year 2 $550 $650 $600 Year 3 $700 $650 $600 Maintenance contract for hardware Year 1 $0 $0 $0 Year 2 $550 $450 $0 Year 3 $600 $580 $700 Repairs Year 1 $250 $0 $0 Year 2 $500 $600 $550 Year 3 $800 $810 $950 Consumables (Paper, ink, etc) $800 $750 $800 Totals per month Year 1 $75 $54.20 $0 Year 2 $46.20 $145.90 $81.70 Year 3 $158.40 $165.80 $171.80 Total $ 5429.6 $ 5505.6 $ 4453.5 Grand Total $24,104.6 $ 21,880.6 $ 22878.5 Total one-off maintenance costs $ 68863.7 Miscellaneous costs (the unexpected occurrences) $ 31136.3 Total amount available for the project $ 100,000 Above tables shows a detailed costing of this project from the time of implementation to the time of maintenance follow-ups to the third year. Info System Limited offers The Big Mall three-year maintenance upon the completion of this project. The tec hnicians of Info System Limited will do this. The budget has also set aside an amount that would cover Info System during project implementation process. The two firms may not control such occurrences as inflation. To avoid cases where Info System is forced to ask for more funding from The Big Mall due to such eventualities, this amount is set aside to carter for such additional costs. This will ensure that the project remains viable in the entire process of its implementation. Quality management plan Principles guiding the project The project manager and all the stakeholders involved in undertaking this project are concerned with quality of the outcome of this project. For this reason, care was taken by these stakeholders to develop principles that would guide the entire research process to ensure that quality is delivered when the project is finally delivered. One of the principles that would be used in this project is based on Total Quality Management principles. This means that quality of this project will be a priority to all the involved stakeholders at every stage of their involvement in this project (Schwalbe 2010, p. 86). The project manager will be directly responsible for value chain management in the entire process of project implementation. Quality will be assessed from the planning stage. This means that before the project can be initiated, the entire plan will be assessed to determine its viability and desirability. The process of analyzing the plan before its implementation will take place in the office of the chief executive of The Big Mall. The chief executive and the Manager will be expected to give their input into the plan by either proposing any possible amendments into the project or just giving a nod when the presented plan is within their quality demands. Another important principle that will guide this project is that of separation of powers. In order to achieve the desired results at the expected rates and within the given deadlines, it will be necessary to define the role of every stakeholder in this project. This will avoid cases of duplication of assignments or other assignments missing participants. These principles will help guide every step taken to make the entire process a reality. Quality metrics When developing a project, one of the main important factors that a client would always be interested in is its quality. According to Fioravanti (2006, p. 38), the client would want the outcome of a project to be something of high value. This is because such projects are always very costly, and the only way of ensuring that clients find it worth spending in such projects is to offer them quality. In this project, project manager and other project members were very concerned of how to ensure that final products that will be delivered in this project is of very high quality. The following quality metrics was developing to help define the expected quality in this project. Quality Metrics ITEM QUALITY REQUIREME NT QUALITY METRICS DESCRIPTION PROCESS It will be necessary for the client to provide all the deliverables based on the agreed criteria to make the project a success. 1. All the activities and the deliverables must match with dates provided 2. It is important to ensure that the deliverables are complete. 3. Check-list should be used to track the progress of activities. 4. All the deliverables must meet the acceptance criteria. 1. The deliverables and activities must be aligned to stated dates in the Gantt chart. 2. The client and the contractor must provide all the needed variables. 3. It is necessary to follow project process using checklist. 4. Proposed criteria must be met. PRODUCT It should improve efficiency, accurate data retrieval and offer maximum customer satisfaction. 1. The production should be done with high efficiency 2. The product should be at least 98% efficient. 3. The product should wastage and improve saving. 4. The product should be customer-friendly 1. Incre ase productivity while reducing labor 1. Improve data accuracy and speed of data retrieval. 3. Help in cost cutting such as reduction of staff. 4. customer should find the product efficient and able to meet their demands PROJECT Control of the progress of the project 1. Identification and elimination of high risks 2. Any issue identified should be resolved as soon as possible 3. Project must be accomplished as per the budget 4. Project progress must be submitted on a weekly basis 1. All risks that may have massive impact on the project be mitigated 2. Any issues raised must not take 2 days before they are resolved 3. All the costs of the project must be within the assigned budget 4. A report of the project’s status must be delivered regularly Verification and validation activities According to Porter-Roth (2002, p. 89), it is always important to ensure that there is a follow-up of a project to determine the extent to which it is within the original expectations as stated in the plan. This does not mean that some failures are obvious and are expected making it necessary to have follow-ups. Verification and validation activities are always carried out to help in the accountability of the project (Thomsett 2002, p. 71). The analysis will help determine if the project was conducted within the initial costs as specified during the planning stage. The verification also helps in determining if the project has succeeded in achieving the set objectives. In this project, the internal auditors of The Big Mall, which is the client in this project, and auditors from Info Service limited will conduct the verification and validation activities. The two groups of auditors will then share their findings in order to determine if the project has achieved the intended objectives at the pre-set cost. This should be done in a clear manner. The two firms must clearly state the names of the auditors who will be responsible for the task of auditing. The date, time of audit and the time the audit results will be given should also be stated. Risk control plan The process of installing this new system is generally safe and the project management team does not expect any serious risks associated with safety of the individuals who will be taking part in this project. However, measures have been put in place to ensure that any possible eventuality that may pose any risk to the participants is well taken care of in the entire project implementation process. Minor injuries that may be caused by the instruments used in this project will be treated the first aiders. First aid kit will be part of the items needed in this project because some of the instruments to be used are sharp and can cause harm. The quality assurance team will address the risks associated with the quality of the system under construction. This has been defined in the sections above. The project manager will play a pivotal role in identifying and these risks and addressing them with the rel evant departments. Quality metrics defined above will be helpful in identifying and addressing possible risks within the project itself. The risk of possible inflation during project implementation has been addressed in the budget. The budgeting team has set aside some funds for miscellaneous expenses that may arise during the process of implementing the project. According to Marchewka (2009, p. 98), some projects have failed during the process of their implementation because the planned budget did not consider possible risk of inflation. They realize that the project is not viable under new economic environment and therefore, abandon the project a lot the way. This project took measures that would mitigate such eventualities. Project Summary The purpose of this project is to come up with an Information Kiosk that will enable customers of The Big Mall access information they need with a lot of ease. The Big Mall is one of the largest shopping malls in Canberra. However, this prestig ious position cannot be retained forever if measures are not taken to ensure that their customers are fully satisfied with their work. This firm has come to realize that its employees are in need of information on various issues about the products they purchase and about the firm. However, these customers are unable to get this information as needed because of the limited number of employees who can respond to their question. The only way they can satisfy this information need without having to higher more employees is to set up the Information Kiosks. This project will develop eight Information Kiosks within Canberra where customers can walk in any time and access any information they need. To make this possible, the client must fund this project appropriately. The project members must also have the competence needed to undertake various activities that will be assigned to them. The process of monitoring this project will be done by officers from The Big Mall, which is the client, and Info Service, which is the contracted firm. List of References Fioravanti, F 2006, Skills for managing rapidly changing IT projects, IRM, Hershey. Kerzner, H 2009, Project management – A systems approach to planning,  scheduling and controlling, Wiley, Hoboken. Levine, H 2002, Practical project management: Tips tactics and tools. Cengage, New York. Marchewka, J 2009, Information technology project management, Wiley and Sons, Hoboken. Muriwani, J 2012, IT project management: Providing measurable organizational value, John Wiley Sons, Hoboken. Phillips, J 2004, IT project management: On track from start to finish, McGraw Hill, Sydney. Porter-Roth, B 2002, Request for proposal: A guide to effective RFP development, Addison-Wesley, Boston. Schwalbe, K 2010, Information technology Project Management, Cengage Learning, Boston. Thomsett, R 2002, Radical project management, Prentice Hall, Upper Saddle River. Wysocki, R 2012, Effective project management: Traditional, agile, ex tremeis, Wiley, Indianapolis. This proposal on The Big Mall Information Kiosks was written and submitted by user Matthias Hansen to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.