Each of these should be reviewed before doing the next Excel homework, which assumes that such a review has been performed. They should be familiar already, based on what you've been exposed to in Econ 202 and 203. There may be some new stuff on risk preference. I'd be curious to learn what is old hat and what is new for you. Note that there is a bit of overlap between each of these. Nonetheless, I strongly encourage you to review them all, so you have a firm understanding of the fundamentals. The second one emphasizes an algebraic approach. The third, a graphical approach. You should be familiar with both.
Notes on the Math and Philosophy of Probability (This is a pdf file.) There is a slight error in this - a line I attributed to Keynes actually comes from Mark Twain. Otherwise, it is pretty basic stuff.
Increasing Risk and Risk Aversion (This is a video in YouTube. You can find a link to the PowerPoint file on which it is based in the description of the video.)
Expected Utility and Jensen's Inequality (This a video in YouTube. You can find a link to the PowerPoint file on which it is based in the description of the video.)
You should be able to get through all of this in under 45 minutes. Of course, the less familiar it is to you, the longer it will take to get a good understanding.
The last bit on expected utility is based on the book by John von Neumann and Oskar Morgenstern called Theory of Games. Maximizing expected utility is what economists think of when they refer to economic rationality.
For the third equation I am using=(C20*C22)+(C21*C22). I am not sure why this is incorrect.
ReplyDeleteNote that prob{x = x2} = 1 - p, where p = prob{x = x1}.
DeleteSo should the answers be put in the cell in terms of numbers or using cell name such as C22?
ReplyDeleteIn the formulas, you should use cell references. That was what the tutorial was about.
ReplyDelete