Variability, Microeconomics

Variability

- The extent to which the possible outcomes of uncertain event may vary

* Variability: A Scenario

- Assume that you are choosing between two part time sales jobs which have the same expected income ($1,500)

- The 1st job is based entirely on commission.

- The 2nd is a salaried position.

- There are 2 equally likely outcomes in the 1st job--$2,000 for a good sales job and $1,000 for a modestly successful.

- The 2nd pays $1,510 most of the time (that is .99 probability), but you will earn $510 if company goes out of business (that is .01 probability).

Job 2 Expected Income

* While the expected values are same, variability is not same.

* Greater variability from the expected values signals greater risk. 

Posted Date: 10/10/2012 8:21:03 AM | Location : United States







Related Discussions:- Variability, Assignment Help, Ask Question on Variability, Get Answer, Expert's Help, Variability Discussions

Write discussion on Variability
Your posts are moderated
Related Questions
Consider an economy, in which technological capabilities become obsolete. Use the Solow-Swan model and the knowledge spillover model to explain how its productivity growth rate dep

Yao''s weekly demand for basketballs is given by Qd = 3-P^2 where P is the price of basketballs. At the current price, Yao''s demand for basketballs is unit elastic. What is the cu


Q. Define Regressive Tax? Regressive Tax: A tax in that lower-income individuals or households bear a proportionately greater burden of the tax. Sales taxes aretypically consid

CURRENCY UNIONS AND OPTIMUM: This Section explains the working of monetary unions and common currency areas. The Section also examines the case for and against optimum currenc

Sources of Divergence The principal cause of extraordinary variation in output per worker between countries today are differences in their corresponding steady-state capital-ou

The recent flooding in the upper Midwest destroyed a important proportion of the corn crop.  Though, it has been discovered that corn oil is far better in keeping cholesterol withi

identify any four other law of demand and give examples

Why some country saving less and consumption more?

Q. What is Corporation? A corporation is a form of business established as an independent legal entity, separate from individuals who own it. A main benefit, for owners, of thi