I am unable to understand the difference between
-
Explicit vs Implicit objective function
-
Explicit vs Implicit costs
Please help!
I am unable to understand the difference between
Explicit vs Implicit objective function
Explicit vs Implicit costs
Please help!
Explicit cost = Any measurable amount of money that something costs.
implicit cost = when a behavior or consumption yields negative utility (subjectively measured only by the specific individual in “Utils”, but can then be translated to dollars by the same individual).
therefore… implicit benefit = added utility through consumption.
no idea on your first question tho.
Guess they really changed the curriculum
An objective function is the mathematical function that is to be solved. Because we are talking about utility, the objective function calculates (or tries to quantify) Utility given a set of variables that affect utility (i.e consumption):
U = F©
where U is utility and C is consumption
The difference between an explicit and an implicit function is more of a mathematical field, probably not relevant for the exam.
U = F© is an explicit function
U = F(C,U) is an implicit function … U is in function of C and U itself at the same time.
A simpler example of function U as implicit function would be 0 = F(C,U), and probably the book refers. I have not been there yet btw.
Hope this helps.
So this question is basis page 470 in volume 4- where they call out an explicit objective function as:
MAX (1/3 Size+1/3 Value+1/3 Momentum)
I really didn’t get what they were talking about when they mentioned that formula. Hence the question
Related question - Equity PM - Objective Function pg 473
Objective function for all managers is mentioned as explicit. While its clear for Manager A, its not obvious for B & C. Can anyone throw some light on this!!