Promoting Diversity

What is Diversity

–     What it means to us

–     We have multiple identities

–     The subjective nature of “diversity” classifications

–     “diversity” is often confused with another term “equality”

–     “Diversity” literally means difference

–     valuing “diversity”

 

Why adopt diversity?

–     Legislative requirement

–     Research suggests that “diversity”:

•   increases staff retention and productivity

•   Improves relations with local community,

•   Increases organization's ability to cope with change

•   expands the creativity of the organization

–     Forward-thinking leaders,

•   “diversity” as part talent management practices

•   connect “diversity” with corporate performance.

 

How is Diversity achieved?

–     “institutionalizing”  the corporate mindset

–     sustainable “organizational culture”

–     strategies to maximize the value of a diverse workforce

•   recognize people's individual abilities, aspirations and preferences, and

•   provide appropriate opportunities for them to be realized

–     focus of organizational strategies should be on the benefits that come from having a diverse workforce; not on how to deal with the legislative compliance issues.

Assignment on Cost Equations

Given the following TC function:  TC = 1,500 + 300Q - 24Q²  + 1.5Q³, answer the following questions.

-         Marginal Cost (MC) = TC´ = 300 – 48Q +4.5Q²

-         Total Fixed Cost (FC or TFC) = 1500

-         Total Variable Costs (TVC) = TC – TFC = 300Q - 24Q²  + 1.5Q³

-         Average Fixed Costs (AFC) =  FC/Q = 1500/Q

-         Average Total Cost (ATC) = TC/Q = 1500/Q + 300 - 24Q + 1.5Q²

-         Average Variable Cost (AVC) = TVC/Q = 300 – 24Q  + 1.5Q²

-         Profits = Total Revenue (TR) – Total Costs (TC)

-         TR = P*Q

-         AC = (TFC + TVC)/Q = AFC + AVC

-         TC = TVC + TFC

1.     How much is the TFC.

ASNWER:

TFC = 1500

2.     Write the TVC equation.

ASNWER:

TVC = TC – TFC = 300Q - 24Q²  + 1.5Q³

3.     Write the AVC equation.

ASNWER:

AVC = TVC/Q = 300 – 24Q  + 1.5Q²

4.     At which level of output starts stage II of production (Hint: as the AP_L reaches its maximum, AVC reaches its minimum).

ASNWER:

AVC´ = -24 + 3Q

When AVC reaches its minimum → AVC´ = 0

-24+3Q = 0 → Q = 8

5.     Write the MC equation.

ASNWER:

MC = TC´ = 300 – 48Q + 4.5Q²

6.     At which level of output diminishing returns starts, (Hint: as MP_L reaches its maximum, MC reaches its minimum).

ASNWER:

MC´ = -48 + 9Q

When MC reaches its minimum → MC´ = 0

-48 + 9Q = 0 → Q = 48/9

7.     When the price of a variable input rises in the short-run, which of the following curves would shift up: AFC, AVC, MC, ATC.

ASNWER:

AVC, MC, ATC

8.     When the rent of the factory building rises, which of the following curves would shift up: AFC, AVC, MC, ATC.

ASNWER:

AFC,ATC

The financial system (banks)

• Banks are financial intermediaries which link between lenders and borrowers (where the supply of funds is matched to the demand of funds).
• They provide the following services:
• Expert advice: advise customers on financial matters (e.g. the best way of investing their money or obtaining finance).
• Expertise in channelling funds: They channel funds to those areas that yield the highest return so customers get high interest rates.
• Maturity transformation: They lend for longer periods of time than they borrow.
• Risk transformation: They can absorb the loss (if some customers didn’t pay) because of the interest they earn on all other loans.
• Transmitting payments: money can be transferred from one person or institution to another without having to rely on cash (e.g. credit cards, cheques, .. etc).
• There are 2 main types of banks:
• Retail banking: they operate bank accounts for individuals and businesses, attracting deposits and granting loans at published rates of interest.
• Wholesale banking: they deal in large-scale deposits and loans, mainly with companies and other banks and financial institutions. Interest rates and charges may be negotiable.

Liabilities:

• Customers’ deposits in banks are liabilities. This means that the customers have the claim on these deposits and the banks are liable to meet the claims.
• There are 4 major types of deposits:
• Sight deposits: any deposits that can be withdrawn on demand by the depositor without penalty. The most familiar form of them are current accounts (issued with cheques or debit cards).
• Time deposits: They require notice of withdrawal or where a penalty is charged for withdrawals on demand. They pay higher interest rate than sight accounts. The most familiar forms of them are the deposit and savings accounts.
• Sale and repurchase agreements (repos): An agreement between two financial institutions whereby one in effect borrows from another by selling it assets, agreeing to buy them back (repurchase them) at a fixed price and on a fixed date.
• Certificates of deposit (CDs): They are issued by banks to customers (usually firms) for large deposits of a fixed term (e.g. 100,000 SR for 18 months). They can be sold by one customer to another, so they are liquid to the depositor but illiquid to the bank.

Assets:

• Banks’ assets are its claims held on others.
• There are 3 major categories of assets:
• Cash and reserve balances: Banks hold a certain amount of their assets as cash to meet the day-to-day demands of customers.
• Short-term loans:  There are 3 form of them:
• Market loans: made to other banks or financial institutions.
• Bills of exchange: made either to companies or to the government.
• Reverse repos:
• Longer-term loans: made to customers both personal customers and businesses. They are of four main types:
• Fixed term: repayable in instalments over a set number of years, typically 6 months to 5 years.
• Overdrafts: often for an unspecified term.
• Outstanding balances on credit-card accounts.
• Mortgages: typically for 25 years.

Problem on Multiple non-linear Regressions

Multiple non-linear Regressions:

            Suppose you found out from the scatter diagram that the relation between the number of apartments demanded and the independent variables is a non-linear relationship, in the power functional form:

You can still use the LS method to run the regression, and estimate the demand function in the following log-linear form:

            log Q = log B₀ + B₁ log P + B₂ log AD + B₃ log Dist

In the log-linear form, the coefficients of logP and LogAD and logDIS measure the elasticity with respect to each of the three independent variables.

[(∆logQ/∆logP) = B₁= (%∆Q/%∆P) = E_P].

To run this regression, copy the data of the example solved in the last lecture in a new excel file and call it Example 2, then convert the data into logarithm. To do that, click in an empty cell where you want your fist cell of the logarithmic data to appear, type the formula for the logarithm [for example if the first data value fall in a2 cell, just choose an empty cell where you want your logarithmic values to appear and write  in [ =log10(a2)] and hit enter. The log of the first entry in Q column will show in the chosen cell, copy the content of that cell down to get the log of all values in Q, and horizontally to get the logarithmic values for the rest of the variables. Now, proceed in the same steps you have learned in the last lecture to get regression estimates. Make sure you have a printout similar to that presented on next page. Now, using the information in the output print answer the following questions:

1.      Write the demand equation.

2.      Check the signs of the three variables, which signs do not conform to the theory of demand?

3.      What is the value of the price elasticity of demand, what does it mean?

4.      What other elasticities can you find in the results?

5.      Explain the meaning of the R square.

6.      Comment on the significance of the effect of the explanatory variables.

7.      What does the significance level of F statistic tells you?

8.      The firm owning this apartment complex suffered for years from low profit rates, as a result of an average vacancy rate of nearly 40%. In light of the estimates obtained, what is your advice to the firm. Should the firm move its apartments closer to the university? I’m sure you have better ideas.

9.      What other variables do you think should be added to this model and which variables should be omitted?

Q	P	AD	Dis	log Q	log P	log AD	log Dis
28	250	11	12	1.44715803	2.39794	1.041393	1.079181
69	400	24	6	1.83884909	2.60205	1.380211	0.778151
43	450	15	5	1.63346846	2.65321	1.176091	0.69897
32	550	31	7	1.50514998	2.74036	1.491362	0.845098
42	575	34	4	1.62324929	2.75966	1.531479	0.60206
72	375	22	2	1.8573325	2.57403	1.342423	0.30103
66	375	12	5	1.81954394	2.57403	1.079181	0.69897
49	450	24	7	1.69019608	2.65321	1.380211	0.845098
70	400	22	4	1.84509804	2.60205	1.342423	0.60206
60	375	10	5	1.77815125	2.57403	1	0.69897
SUMMARY OUTPUT
Regression Statistics
Multiple R	0.727198
R Square	0.528817
Adjusted R Square	0.293226
Standard Error	0.124585
Observations	10
ANOVA
	df	SS	MS	F	Significance F
Regression	3	0.104519	0.03484	2.24463564	0.183571
Residual	6	0.093128	0.015521
Total	9	0.197647
	Coefficients	Standard Error	t Stat	P-value
Intercept	2.828655	1.411635	2.003815	0.09193898
log P	-0.2344	0.631537	-0.37116	0.72327068
log AD	-0.08786	0.333757	-0.26324	0.80117571
log Dis	-0.55973	0.215898	-2.59255	0.04107075

The answer:

1 . The demand equation :

Log Q = 2.83 – 0.23 log P  -0.088 log AD – 0.56Log Dis

2 .  AD was found to be the only variable that has a wrong sign. Advertising  is expected to have a positive effect on Q. In other words, AD should have a positive sign.

3 .   The value of the price elasticity  of demand 0.23

          It means that a 1% increase in P will decrease Q by 0.23%.

4 .   The AD elasticity of demand 0.9  and the Dis elasticity of demand 0.56

5.  The R² of 52% indicate that, % 52 of the variation in the number of demanded apartment is explained by variations in P , AD and Dis ,while 48% of these variation are due to other variables not included in the model .

6 .  From the results, P- value is greater than 5% for P and AD, which means that both variables have no significant effect on Q, therefore, the researcher may not reject the null hypothesis for these two vsriables. DIS has a P-value of 4%, less than the acceptable probability of error in the estimation. Therefore, we conclude that DIS has a significant negative effect on Q. So, the researcher may reject the null hypothesis (H₀: B₃ = 0) and accept the alternative hypothesis

(H₁: B₃ < 0)

7 .  F significance of 0.1836 (18%) is greater than 5%, the acceptable probability of error in the estimated coefficients. We conclude that ( P ,  AD , and Dis ) together have no significant effect on Q. The null hypothesis (H₀: B₁ = B₂= B₃ 0)should not be rejected.

8 .   We might increase the profits by two ways either by increasing the ( P ) since Ep<1   or  by providing other services .

9 .  We should add ( Income & Complement ) and we should omit the non significant variable ( AD ) .