Microeconomics is a branch of economics, that studies the market behavior of individual consumers and firms.

learn more… | top users | synonyms

0
votes
0answers
5 views

Question on combined partial equilibrium analysis for substitute goods

I'm considering the case of two partial substitute goods, where one is supplied by a monopolist and the other is supplied in a perfectly competitive market. Let's call the monopolist's good Gourmet ...
1
vote
0answers
24 views

Intermediate Microeconomic Theory 1 [on hold]

A consumer has intertemporal preferences for food given by the utility function: U(C1, C2) = C1'2'C2. The consumer gets a one-time only endowment of food at the beginning of period 1 equal to 60 units....
1
vote
0answers
15 views

Empirical Evidence of Cournot Competition?

Is there empirical evidence to validate the use of Cournot competition between multiple suppliers and a buyer? Are there models which extend Cournot competition to different levels in a larger supply ...
4
votes
0answers
71 views

Why should the statistical value of life exist?

In areas such as insurance pricing and government policy analysis, it is often necessary to assign human life a monetary amount in order to compare it with other monetary amounts. So economists have ...
0
votes
0answers
18 views

Use of Slutsky equation

I know that the Slutsky equation is defined as: $\frac{\partial x_1^s}{\partial p_1} = \frac{\partial x_1^m}{\partial p_1} + x_1^o \frac{\partial x_1^m}{\partial m}$ My problem is right now is ...
1
vote
1answer
31 views

Derive the Cost Function TC(Q)

Suppose $F(K,L)= 50L^{\frac{1}{2}}K^{\frac{1}{2}}$, the wage is $w = 5$ (euros) and rent is $r = 20$ (euros). What is the cost of producing 1,000 units? Derive the cost function TC(Q). I know ...
3
votes
1answer
46 views

Do standard definitions of substitute goods and complementary goods assume the Law of Demand?

It seems to me that they do. Suppose $x$ is a Giffen good (that is, it violates the law of demand). Then when $p_x$ increases, the quantity of $x$ demanded increases. Suppose also that this increase ...
0
votes
1answer
15 views

Mutual funds question [on hold]

If you save a percent of your money in a mutual fund annually can you get that amount taken off your income takes and pay for it when you take that money out...? Ex: I make 100,000 a year and save 10,...
4
votes
1answer
97 views

Is the Cobb-Douglas Utility Function Locally Non-Satiated at (0,0)?

My understanding of local non-satiation is that increasing your allocation of one good by a marginal amount increases utility. Suppose your utility takes the following form: $$U(x,y)=x^\alpha y^\beta$$...
1
vote
0answers
38 views

How to get hang of mathematical language that is so extensively used in economics?

For last couple of weeks I am trying to read "Game Theory" from Fudenberg and Tirole and "Microeconomics" from Jehle and Reny. But the kind of maths they use for their theorem-proof-theorem analysis, ...
4
votes
2answers
47 views

Is the Convex Combination of Two Pareto Optimal Allocations Also Pareto Optimal?

I am studying for my qualifiers, and I ran into this question from a previous year's exam. $\textbf{Question:}$ Consider a two-consumer two-good pure exchange economy. Both preferences are locally ...
1
vote
1answer
40 views

(Preference Relation/Set) Continuous $\succsim$ imply closedness of upper and lower contour sets

[ADDED/MODIFIED] : I have put my proof where the commodity space is simply $\mathbb{R_+}$(e.g. nonnegative reals) for simplicity below. Please share your 2 cent. I have put words to aid my own ...
3
votes
2answers
80 views

Continuous rational and monotone preference relation implies $x\succsim0$?

I updated my proof to a general version as follows: please share your thoughts & 2cent. Thanks Show a monotone continuous complete preorder on $\mathbb{R^L_+}$ has $y\geq x\rightarrow y\succsim ...
1
vote
0answers
24 views

(Proof/Validity Check) If X is a finite set of goods, then nonemptiness of the $C^*(B,\succsim)$, set of optimal choices

Please share your 2 cent on the below proof regarding showing nonemptiness of the set of decision maker's most preferred alternatives in B is captured in the set $C^*(B,\succsim)$ with a finite set of ...
0
votes
0answers
5 views

Is it correct to say that the inner product of continent claim prices and security payoffs is the price of the security?

Is it correct to say that the inner product of continent claim prices and security payoffs is the price of the security? Namely, p = e[mx] If yes, is there a way to think of p(x) = e[mx] as a ...
6
votes
1answer
58 views

Can integrals be interpreted simultaneously as aggregates and averages? (Mas-Colell et al. 1995, Proposition 4.C.4)

I'm currently reading chapter 4 of Mas-Colell, Whinston, and Green (1995). I have a problem with the way integrals are treated. For instance, Proposition 4.C.4 (p.113) states that when wealth is ...
-1
votes
0answers
22 views

How to calculate probability premium

This is from MWG#6.c.18 b Given $U= \sqrt {x (16, 4, 1/2, 1/2 )}$, I need to calculate certainty equivalent and probability premium. I calculated the expected value: $$1/2* 16 + 1/2*4=10=EV$$ the ...
5
votes
1answer
40 views

The Price is Right Bidding Strategies

I am currently reading this article. If you are unfamiliar with the game, "The Price is Right", at the beginning, four bidders are selected who have to guess the price of some consumer object. ...
3
votes
0answers
31 views

Weak Axiom of Revealed Preference

Maybe this is a well-known fact that I have somehow overlooked or forgotten etc., but I found myself curious recently if there are any conclusions about WARP holding over different dimensions for a ...
0
votes
0answers
29 views

Did I do this adverse selection calculation correctly?

I am trying to solve this Adverse selection, but unfortunately do not have an answer key. I am prepping for an entrance exam for a Master of Econ, unfortunately I did not cover adverse selection much ...
4
votes
0answers
46 views

Sen's Liberal Paradox

Economist and philosopher Amartya Sen posited that no social system could guarantee: A minimal sense of freedom in social choice Pareto efficiency His original article can be found here. In his ...
2
votes
0answers
38 views

How Would a Firm Which Produces a Giffen Good Maximize Profits?

I am curious as to how a firm which produces a giffen good would maximize profits? Having an upward sloping demand curve seems to imply that we cannot guarantee that there exists a quantity where ...
-3
votes
1answer
131 views

What is the most successful economic prediction? [closed]

The question above is closed and unanswered. Stop dodging the question. I am asking for one example. Successful defined as: Has been consistently correct for the longest number of years Has been ...
2
votes
1answer
50 views

Market equilibrium and pareto efficiency

How can I prove that the equilibrum point $D(p)=S(p)$ is pareto efficient? The definition of pareto efficient: there is no way to make any person better off without hurting anybody else $D(p)$ is ...
1
vote
0answers
18 views

Economies of scale in Robinson Crusoe economy?

I encountered the following question: Which of the following will NOT exist in a one-man economy? 1. competition 2. private property rights 3. economies of scale Turns out the answer was 1 and 2. I ...
-9
votes
1answer
44 views

Has anyone made a successful economic prediction more than once? [closed]

See title. Specifically it would be good to see something that proves some type of market economics and not just a simple monopoly model. This is not too broad because I am asking for literally one ...
1
vote
0answers
12 views

Shape of Isoprofit Curves for Strategic Complements

Two goods are strategic complements if: $$\frac{\partial \pi_1}{\partial q_2}>0\;\text{and}\;\frac{\partial \pi_2}{\partial q_1}>0$$ The image below is a picture of best response functions and ...
0
votes
1answer
28 views

price elasticity of output, makes sense?

I was wondering, in a log-log model of output, labour and commodity price where output is the depedent variable, does it make sense if the coefficient on the price variable is interpreted as the "...
1
vote
1answer
13 views

Retailer Price Setting for Existing Inventory in the Event of an Increase in Price Paid for the Good

If you are a retailer, and the price you pay for one of your retail goods goes up, how do you price the inventory you already had (which you paid a lower price for)? Here is an example of a TFD (True,...
7
votes
1answer
219 views

Are There Giffen Inputs?

I am studying for my candidacy exams and I came across this question on a previous exam. The question is in the TFD (True, False, Debatable) section of the exam. The claim is: There are no Giffen ...
1
vote
1answer
22 views

Pareto efficient quantity of public good (quasi-linear preferences)

I am doing a question on finding the Pareto efficient quantity of a public good. Instead of using the condition $\sum MRS_i = c'(G)$ where $c(G)$ denotes the cost of the public good, it asks you to ...
1
vote
0answers
24 views

What are the currently accepted methods to estimate a firm's productivity?

While there are a lot of methods one can think of, like computing the ratio of profits to assets or profits to sales, apparently it is a difficult problem. It would be useful to know how effectively ...
1
vote
0answers
18 views

Can supply and demand curves be used in electricity modelling? [closed]

Can the (Supply and Demand) curves be implemented in electricity modelling for a country ? How can this be modelled and how can the user set the interaction point between supply and demand?
1
vote
1answer
28 views

Transforming expected utility functions

I am using the following theorem: To better understand how I can transform expected utility functions. An example with which to work: I want to show that the preferences represented here ...
1
vote
1answer
21 views

What is the difference between knowledge-based and R&D?

So far, I always thought that knowledge-based companies and R&D companies were the same. But recently our TA mentioned that they are different, I've searched a lot to find the differences between ...
1
vote
0answers
24 views

Is there any difference between using LRAC and LRATC in a long-run market structure diagram?

I am currently being taught to use average total cost (ATC) to label the U-shaped curve in the short-run on a market structure diagram, and long-run average cost (LRAC) for the equivalent curve in a ...
6
votes
2answers
88 views

What are the textbook-like obvious advantages and disadvantages of tipping?

I just came from a coffee place with tipping and now I'm in one without tipping... prices are higher, but there is not tipping. It's not obvious why some places get rid of tipping and others don't. I ...
0
votes
1answer
12 views

Interpretation of %p.a. notation

Does anyone know the meaning of the notation x%p.a.? I'm reading a text on seigniorage, and the authors have used that notation to state the usual empirical limit to the seigniorage revenues just ...
3
votes
0answers
28 views

Estimating Demand for Goods with n Choices

I have a data set containing n observations (rows) of mobile applications. The dependent variable is the number of installations -- the variable is categorical (with more than 2 categories). Therefore ...
1
vote
1answer
60 views

Aggregation theorems hold if endowments are endogenous?

I have a specific question about considering a representative agent. According to Rubinstein 1974, in an inter-temporal economy with $N$ individuals each one with initial endowment $e_i$ and ...
0
votes
0answers
10 views

How are firms innovating in terms of contracts? Any references?

It seems that one of the directions in which firms could be innovating would be in writing better contracts, or contracts more adept to current realities at least. Is there research on the economics ...
3
votes
2answers
42 views

Can anyone explain the connection between complete market and perfect risk sharing?

I understand that in complete market, ex post consumption growth is equal for all investors. Why is that perfect risk sharing? The book also states that only aggregate shocks should matter for ...
0
votes
1answer
27 views

Can anyone help me understand the budget constraint of an investor in complete market?

In the problem below, u is a utility function; $\beta$ is a discount factor; pc(s) is the price for a contingent claim for state s. c is initial consumption and and y is initial wealth. s represents a ...
-1
votes
1answer
32 views

Please solve this question [closed]

If the cross elasticity of demand of X commodity for changes in the price of Y commodity is positive, the commodities X and Y are (a) complement (b)subsitutes (c) giffen (d) infirior goods
3
votes
0answers
24 views

Determining household utility functions

I have little to no background in micro, but I'm learning about utility functions. It seems that there are many forms of utility functions for households. In general terms, how does one go on to ...
0
votes
0answers
20 views

Binding and slack constraints in adverse selection problem

When I am dealing with a constrained maximization, once I face constraints with inequality sign, I have to understand which one are binding and which others are slack. If I find that a constraint is ...
0
votes
0answers
34 views

take $10 million today or take 1 million dollars at the end of each year for next 20 years? [duplicate]

I am mathematics background student and just for interest, I have started to self read/learn economics. I have chosen a cartoon book to start with, which is very good. The book is "The Cartoon ...
1
vote
1answer
27 views

Does good geographical location count as land in economics?

For example, the North pole is in the northern part of the earth and is very cold, making it suitable to build a site to study polar bears. Is the cold and northern location of north pole counted as ...
2
votes
1answer
23 views

Are all fixed capital public goods?

fixed capital: any kind of real or physical capital (fixed asset) that is not used up in the production of a product public goods: goods that are non-rival and non-excludable in consumption Both of ...