Variability, Microeconomics


- 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
why society has chosen the mixed economy

Qustions: You are the sales manager at SoftSystem, a dominant firm that produces operating system. The new operating system, Doors XR, has been newly developed. Its demand is e

Define the term Entrepreneurship Entrepreneurship :   An entrepreneur is an individual who takes risks and organises the factors of production to make a product and therefore

Determine the Returns to Scale Use the following production function and budget constraint to answer the questions below. Q = L + K                            1000 = 2L +

Definition of oxidation number... Oxidation number is a charge of central atom appears to keep if all of the ligands are removed along with the electron pairs which are shared wit

what is the theory of second best?prove the theorm with the help of diagram?

1. Calculate the required reserve ratio. 2. Assume that Pam wants to borrow money to pay for a new car from Sharpeland Bank. a. What is the maximum amount that Sharpeland Ban

a more simple explanation of the group equilibrium in the short and long run

Why short run average cost curve is ‘U’ shaped