​​​ For the analysis of business-related problems, in particular, a more specific skill set is required. For the purpose of Economic Techniques 102 a recommended approach to problem solving is: 1. To identify what you are being asked to find, e.g., a maximum or minimum. 2. Isolate from the information provided that which is useful, e.g., classify variables into endogenous, exogenous and parameter groups, and consider how you can use it to find an answer. 3. Further review the presented facts and remove irrelevant information from the 'usable' data set, e.g., the particular good being produced by a firm may not be important in setting up and solving the problem. 4. Find the formulae, algorithm or procedures relevant to the problem structure. s 5. Apply the procedures to these data and find a solution. 6. Apply a meta-analysis to this solution, e.g., say you have found the demand for a product and its price, economic theory suggests both should have non-negative values. If this is not the case review the problem structure and application of technique. 7. Conduct any secondary analysis required to confirm your result, e.g., for an optimisation problem is required that stationary values be confirmed as either maximum or minimum values through application of second-order conditions. Application: Price Elasticity of Demand (textbook Worked Example 2.19 (a) (i), p. 85) 1. In the worked example an inverse demand is supplied. You are asked to calculate the price elasticity of demand for the good at a given price. 2. The dependent variable is Q and the independent variable is P . 3. That the firm sells computers is irrelevant in calculating this elasticity. To calculate this elasticity the demand function will have to be found from the inverse demand function. 4. The appropriate formula to apply is given by equation (2.12). 5. Apply the procedures to provide an estimate of the elasticity of –3. (You must show your working) 6. Meta analysis suggests that the negative sign on elasticity for a normal good is correct. To make this judgement you should be clear on what a 'normal' good is. Further, because the elasticity is greater than one in absolute value, the good in question is said to be elastic. Again you should be clear on the consequences of this classification. 7. In this case no secondary analysis is required. Toward this end you are required to read Section 9.1 of the prescribed text (pp. 476–486), and based on this reading, set up and solve Q11 (p.486). The written solution is to be submitted with your take-home assignment. l Bradley, T.B. (2013) Essential Mathematics for Economics and Business, 4th Edition. John Wiley & Sons, Chichester.