Archive
Smart.ly Platform
Smartly Institute
via Smart.ly Platform
03.08.2018
Online Educational Course “Microeconomics 1: Supply and Demand”
Introducing Microeconomics
Microeconomics: The study of how individuals, households, and firms make decisions about using limited resources.
Economic resources include:
Human resources: Workers and managers.
Nonhuman resources: Land, technology, minerals, oil, etc.
Microeconomists assume that people and firms are rational and seek to maximize benefits.
Trade-offs: Choosing one thing requires giving up another.
Scarcity: The existence of limited resources.
When an individual or group makes a decision, their opportunity cost is equal to the value of the foregone option(s).
Economic units: People, households, and firms.
Marginal benefits: Small, incremental benefits.
Supply and Demand
The law of demand: When the price of a good increases, demand for it decreases, and vice versa.
Demand schedule: Lists the quantity demanded of a product or service at various prices.
Market demand schedule: A demand schedule that encompasses the entire market’s demand for a good or service at various price points.
Demand curve (DC): Plots the quantity of a good or service demanded at different prices.
Market demand curve: Shows the market demand schedule.
When demand curves shift:
to the left—market demand has decreased.
to the right—market demand has increased.
Market price: The price at which a good or service is offered in the marketplace.
Law of supply: When the market price for a good increases, the quantity that suppliers produce and sell increases, and vice versa.
Supply schedule: Lists the quantity of a product supplied at various price points.
Supply curve (SC): Plots the supply schedule.
Market supply: The summation of all of the individual supplies of a good or service.
Market supply curve: Shows how the total quantity supplied of a good changes as its price changes.
When supply curves shift:
to the left—market supply has decreased.
to the right—market supply has increased.
Factors Contributing to Equilibrium
Equilibrium: When the amount of goods supplied is equal to the quantity demanded.
Equilibrium price: The price where equilibrium occurs ($9 on the chart).
Equilibrium quantity: The quantity where equilibrium occurs (400 on the chart).
Equilibrium point (EP): The point at which the equilibrium price is equal to the equilibrium quantity.
Price acts as a motivator:
When there is a low price for goods or services, consumers buy more and sellers supply less.
When there is a high price for goods or services, consumers buy less and sellers supply more.
Law of supply and demand: The price of any good will naturally adjust until market equilibrium is reached.
Supply > demand: There is a surplus. Prices will drop until equilibrium is met.
Demand > supply: There is a shortage. Prices will rise until equilibrium is met.
Supply = demand: The market has reached equilibrium.
To recognize events that alter equilibrium:
1. Identify a shift in the DC and/or the SC.
2. Determine if the curve(s) shift left or right.
3. Use a graph to see how the shifts change the EP.
Certificate
Alison Platform
Alison
via Alison.com Platform
03.06.2018
Online Educational Course “Forecasting – Winter’s Models, Goodness of forecast, Aggregate Planning, Tabular Method”
by G. Srinivasan
Learn how aggregate planning is used in many businesses to match supply and demand of output over the medium time range of up to approximately 12 months in the future by studying the course Applied Operations Management – Aggregate Planning.
Aggregate planning allows management to quantify materials and other resources that are to be procured so that the total cost of operations are kept to the minimum over a set period of time. The course begins by introducing the concept of aggregate planning and its use in medium term planning in businesses. You will be introduced to aggregate planning methodologies such as the tabular method and linear programming.
You will learn how a tabular approach uses spreadsheets and the values of different variables, such as production by regular workforce and inventory levels can be calculated by using the costs associated with production, overtime, subcontracting, hiring, inventory and back-orders. The tabular method is widely used because it is easy to understand and utilize. However, the generated solution may not be optimal and many trials and errors may be needed to find the optimal solution. The course also introduces the linear programming technique and a special type of linear programming known as the Transportation Model, which can be used to obtain aggregate plans that would allow balanced capacity and demand and the minimization of costs.
This course will be of great interest to all professionals working in the areas operations management or general management who would like to learn more about aggregate planning and the methods used in this important area of operations management. The course will also be of interest to all learners who are interested in operations management as a future career.
The key points from this module are:
Forecasting can be defined as the estimate of future demand.
Aggregate planning is carried out once information about future demand is obtained from forecasting.
A poor Aggregate Plan can result in the following:
– Lost sales and profits if unable to meet demand
– A large amount of excess inventory and capacity which increases costs
The question ‘What should the production capacity be such that the total production cost is minimized?’ is known as the aggregate planning problem.
The following costs are used to calculate the minimum production capacity production cost:
– Regular Time cost
– Overtime cost
– Inventory cost
– Shortage cost
The formula for Total Capacity is:
Total Capacity = Regular Time Capacity + Overtime Capacity
Regular time production is assumed to be less costlier than overtime production. Back order cost can be defined as the cost of back ordering per unit per month. Increasing or decreasing the number of production employees does not affect the regular time production capacity.
Linear Programming
R(t) – Regular Time production used in time t
O(t) – Overtime production used in time t
D(t) – Demand during time t
S(t) – Shortage at the end of period t
U(t) – Under utilization in period t
H(t) – Number of people hired in period t
W(t) – Number of people working in period t
L(t) – Number of people laid off in period t
In the linear programming formulation ‘I(t)’ (the inventory at the end of the previous period) has to be defined as a unrestricted variable which can take positive value or a negative value. Linear programming is a method to achieve the best outcome (such as maximum profit or lowest cost) in a mathematical model whose requirements are represented by linear relationships. In aggregate planning the planning horizon is often divided into Periods. The physical resources of the company are assumed to be fixed during the planning horizon of interest.
The following help a company cope with demand fluctuations:
– Changing the size of the work force by hiring and firing.
– Varying the production rate by introducing overtime.
– Accumulating seasonal inventories.
– Planning backorders.
The following costs are relevant to aggregate production planning:
– Basic production costs
– Costs associated with changes in the production rate
– Inventory related costs
In aggregate production planning the following are examples of basic production costs
– Material costs
– Direct labor costs
– Overhead costs
In aggregate production planning the following are costs associated with changes in the production rate:
– Hiring costs
– Training costs
– Laying off personnel costs
In the Aggregate Planning Problem the following are examples of constraints:
– Limits on overtime
– Limits on layoffs
– Limits on capital available
– Limits on stockouts and backlogs
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