CAS EC 203 Lecture Notes - Lecture 10: Mutual Exclusivity

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erinbadger658

27 Mar 2017

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There are some basic probability relationships that can be used to compute the probability of an event without knowledge of all the sample point probabilities. Complement of event a: the event consisting of all sample points that are not in a. The complement of a is denoted by ac. The union of events a and b is the event containing all sample points that are in a or b or both. The union of events a and b is denoted by a b . The intersection of events a and b is the set of all sample points that are in both a and b. The intersection of events a and b is denoted by a . The probability of event a occurring given that we know b occurred. The conditional probability of a given b is denoted by p(a|b). When knowing one thing occurred, doesn"t change the probability of the other thing occurring.

Related Questions

2011 marked two momentous events in American labor history and of labor unions. It is the 100th anniversary of the Triangle Shirtwaist Factory fire in New York City described in Baumol and Blinder on page 432. There have been or will be at least two television documentaries devoted to it.

The other event is the successful effort in Wisconsin to curb the power of labor unions representing State workers in that State. Similar efforts have been made in other States. In Wisconsin, workers have been forced to give up most rights to bargain over working conditions and wages after an effort by the minority Democrats to block the changes in the law by boycotting the session failed. The Governor's rationale for this new law is to save money at a time when the state's budget situation is very serious, but union leaders say they already agreed to wage cuts and suggest that the Governor is simply trying to break the union.

How, if at all, are the two events related? How are they different? How did the earlier event affect labor unions more generally beyond the immediate factory where the fire occurred? How will the action in Wisconsin hinder or boost the labor movement in the United States?

amberbutterfly835

Make sure you first review and understand all of the "shift factors" for the supply and demand curves in your textbook. I would have a list of these by my side as you read the article titled, "The Oil Conundrum." The later part of the article discusses some of the topics we will be learning about later this semester. You may also use the sort article, "Why Is Gas Still So Expensive in California?" Use both articles to identify how events discussed in the article are affecting supply AND demand for oil. Find three events that likely caused supply shifts and three events that likely caused demand for oil to shift. You will need to answer the following six times, three for demand and three for supply:

a. Event - Quote the article

b. Which determinant (shift factors), as discussed in chapter 3, are causing the supply or demand curve to shift given the event quoted?

c. Which direction will the curve shift.

d. Given the shift, what will happen to price, will it increase or decrease?

e. Given the shift, what will happen to quantity, will it increase or decrease?

Note that the terms IMF and GDP are the International Monetary Fund and Gross Domestic Product. The IMF is an international economic stability organization. GDP is a measure for the size of a country's economy.

Here's a hint where to find some examples in "The Oil Conundrum" article:

1st page, 1st and 2nd paragraph - Supply

2nd page, 4th paragraph - Supply

3rd page, 5th paragraph - Supply

4th page, 4th paragraph - Demand

6th page, 3rd paragraph - Demand

6th page, 4th paragraph - Demand

This assignment requires the following knowledge: For k different events, if the probability that each of them happens is p (0 < p < 1) and all events happen independently, the probability that all events happen together is p^k.
1. Five firms, namely A, B, C, D and E, issue discounted bonds with face value $1,000 and maturity 5 years in the market. All firms are pretty risky and each of them has a chance of 0.5 of collapse during the five years (thus bankrupted and can not pay back the bond accordingly). The bonds are all sold at an interest rate of 50% (the value is not surprising due to the extremely high risk of default).
(1) What is the present value of the bond given the interest rate, the face value and the maturity? Hint: we temporarily do not consider the issue of default.
(2) Say now you buy one bond from each of the five firms, what is the total amount you lend out today? Eventually only one firm does not fail and pays back the bond, what is the money you collect back 5 years later? You gain or loss in this case? If more than one firm pays back the bond, will you get more money back?
(3) What is the chance (probability) that you get nothing back assuming that firms fail independently? Together with the answer in (2), is it a good deal to buy one bond from each of the five firms?
(4) Repeat (2) and (3) with the only difference that now you buy 5 bonds from a single firm.
(5) Now we assume that the five firms all have similar businesses in Greece (and those are their only businesses), therefore, all firm fail together if the economy in Greece fails. Will you answer in (3) change?

CAS EC 203 Lecture Notes - Lecture 10: Mutual Exclusivity

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