profit maximization and level curves: applying excel data tables, conditional formatting, and the...
TRANSCRIPT
![Page 1: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/1.jpg)
Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional
Formatting, and the Solver
by J. M. Pogodzinski
Department of EconomicsSan Jose State University
![Page 2: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/2.jpg)
Three Tools
• Excel Built-in Solver
• Data Tables
• Conditional Formatting
(Illustrated using profit maximization)
![Page 3: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/3.jpg)
Profit Maximization Framework
• Production Technology Q=F(X1,X2,…,Xn)
• Prices – Assumptions about market structure
• Total Revenue (TR), Total Cost (TC), and Profit (π)
![Page 4: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/4.jpg)
Closed-Form Solution of the One-Input Profit-Maximization Problem
• Assume one input (labor) in production - Q=A∙L
• Profit maximization – maxL π(L) = P∙A∙L - w∙L
• First- and second-order conditions yield optimal labor inputL* = (w/PA)(1/(-1))
![Page 5: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/5.jpg)
Profit Maximization Illustrated
Total Revenue & Total Cost
0
10
20
30
40
50
60
0 10 20 30 40 50
Labor Input (L)
Ou
tpu
t (Q
)
Total Revenue(Reference)
Total Cost(Reference)
Total Revenue
Total Cost
Optimal Input Level
![Page 6: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/6.jpg)
Changes in the Optimal Solution
Total Revenue & Total Cost
0
10
20
30
40
50
60
0 10 20 30 40 50
Labor Input (L)
Ou
tpu
t (Q
)
Total Revenue(Reference)
Total Cost(Reference)
Total Revenue
Total Cost
Optimal Input Level
![Page 7: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/7.jpg)
Using the Built-In Excel Solver – Set Up
![Page 8: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/8.jpg)
Using the Built-In Excel Solver - Launching
![Page 9: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/9.jpg)
Using the Built-In Excel Solver – Implementation
![Page 10: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/10.jpg)
Using the Built-In Excel Solver – Convergence
![Page 11: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/11.jpg)
Data Tables – Set Up
![Page 12: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/12.jpg)
Data Tables – Launching
![Page 13: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/13.jpg)
Data Tables - Implementation
![Page 14: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/14.jpg)
Data Table Completed
![Page 15: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/15.jpg)
Conditional Formatting - Launching
![Page 16: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/16.jpg)
Conditional Formatting – Setting Parameter Values 1
![Page 17: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/17.jpg)
Conditional Formatting – Setting Parameter Values 2
![Page 18: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/18.jpg)
Conditional Formatting Completed
![Page 19: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/19.jpg)
Conditional Formatting & Level Curves – the Levels
![Page 20: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/20.jpg)
Conditional Formatting & Level Curves - Details
![Page 21: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/21.jpg)
Conditional Formatting & Level Curves - Illustrated
![Page 22: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/22.jpg)
Excel Books
Pogodzinski, J. M., Using Microsoft® Excel in Introductory Macroeconomics, Pearson Prentice-Hall, 2005 (accompanying Excel files can be downloaded from: http://www.prenhall.com/pogodzinski/)
Pogodzinski, J. M., Using Microsoft® Excel in Introductory Microeconomics, Pearson Prentice-Hall, 2005 (accompanying Excel files can be downloaded from: http://www.prenhall.com/pogodzinski/)
![Page 23: Profit Maximization and Level Curves: Applying Excel Data Tables, Conditional Formatting, and the Solver by J. M. Pogodzinski Department of Economics San](https://reader036.vdocuments.mx/reader036/viewer/2022062802/56649e8b5503460f94b90b9b/html5/thumbnails/23.jpg)
Comments or Questions
J. M. Pogodzinski
Department of Economics (0114)
San Jose State University
1 Washington Square
San Jose, CA 95192-0114
USA
paper and related materials available at http://www.pogodzinski.net/MAA_AMS/maa_amsindex.html
(www.pogodzinski.net & click on “MAA-AMS”)