The Purpose of This Exercise Is to Acquaint You with Some

question 194

Essay

The purpose of this exercise is to acquaint you with some simple mathematical relationships and how they translate into graphs. Economic models can come under the form of equations such as Y=F(L), where Y is sometimes called the "dependent variable" and L is the "independent variable." F, called "function," tells us what the precise relationship between Y and L is. Theoretical relationships (models) are those that can be described by an equation like this. When equations are sufficiently simple, they can be put under the form of a curve in a graph. Consider the equation Y=2×L, where Y is the number of apple pies that Jonathan can cook in L hours. This equation describes the process of producing apple pies.
a. How many pies does Jonathan cook in 2, 3, 4, and 5 hours?
b. Draw a vertical axis and label it Y; draw a horizontal axis and label it L. Show on this graph the four pairs (L, Y) you determined in parta.
c. Draw a line connecting your four points and extend it to the left until it reaches the vertical axis.
d. Identify a few assumptions that underlie your apple pie production model.
e. Are your assumptions realistic?
f. Can you identify a few limitations of your model?
g. What could you use this model for?

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Definitions:

Units Produced

The total number of units of a product that have been manufactured during a specific period.

Manufacturing Overhead Costs

The indirect costs associated with manufacturing, including costs related to running the factory floor that are not directly traceable to specific units of products.

March

The third month of the year in the Gregorian calendar, known for marking the transition from winter to spring in the Northern Hemisphere.

Fixed Manufacturing Cost

Expenses that do not vary with the level of production output, including salaries of managers, lease payments, and maintenance.