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

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Example of an altruistic agent, in an economy where Equilibria may not be efficient

I'm looking for a theoretic example of an economy where one agent is altruistic, while the others are not, that would make a walrasian equilibrium not efficient.
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28 views

Altruism and locally non-satiated preferences

Is there an altruistic utility function that cannot represent a locally non-satiated preference? As an example of an altruistic utility function: $U^1(x^1,...,x^H)=u^1(x^1)+\sum^H_{j=2}U^j(x^j)$, ...
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33 views

Proving government expenditure crowds out private consumption

Please help as I am not able to solve either parts.
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3answers
46 views

Literature Recommendation: Advanced Undergraduate Economics

I come from a strong quantitative background and am going to law school in the fall. I'm interested in financial product regulation and competition law. I have taken an introductory course in ...
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1answer
47 views

Muth exposition of the rational expectations hypothesis

I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that ...
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29 views

Indirect utility from expenditure function

I have the expenditure function: $$e(p,u)=\left(p_1^{\rho/{\rho-1}}+p_2^{\rho/{\rho-1}}\right)^{{\rho-1}/\rho}u$$ where $u$ is the utility, $p_1,p_2$ prices and $\rho$ a parameter. How do I derive the ...
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833 views

Are billboards beneficial for the economy? Why?

Billboards cost money to make and don't really seem to significantly benefit anyone other than billboard-makers. A company c putting up billboards presumably increases profits from the resulting ...
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2answers
44 views

Find the optimal demand functions for capital and labour for this firm

I'm trying to solve this question which states: Suppose that a profit maximizing producer has a production function described by Q = K^3/4 L^1/4 and faces the general isocost line (TC = rK + wL). ...
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2answers
50 views

Is net neutrality not important in a competitive market of internet providers?

In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. ...
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1answer
20 views

Find quantity from price elasticity

I have $P_1 = 24$, $Q_1 = 800000$, $P_2 = 32$ and price elasticity $e = -8$ and need to find the function $P(Q)$. I guess I need to find $Q_2$ by $$ \frac{(Q_2-Q_1)/Q_1}{-(P_2-P_1)/P_1} = -8 ...
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14 views

What does perfectly inelastic demand imply about gains from trade and domestic consumers?

Source: p 191, Question 9.7b, 9.7c, Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw Consider a country that imports a good. True or false. Explain your answer. b) “If demand is ...
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2answers
34 views

Taxes levied on sellers = Taxes levied on buyers

All page numbers refer to Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw. [p 125:] Taxes levied on sellers and taxes levied on buyers are equivalent. [p 156:] ... When a tax is levied ...
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1answer
26 views

How does Perfect Elasticity imply infinite quantity for any higher price?

I reference Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw. The graph above is from p 100. [p 99:] ...supply is perfectly elastic. This occurs as the price elasticity of supply ...
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1answer
35 views

Delegation with Discreteness

Consider a game of delegation. An uninformed principal must delegate some task to an informed agent with preferences imperfectly aligned. I'm aware of plenty of literature that studies these kinds of ...
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1answer
35 views

Estimate function expression for TC and MC

I have this Labor (L) 0 1 2 3 4 5 6 7 8 9 10 11 Output 0 32 72 114 161 204 242 272 292 304 302 288 and I need to estimate function expressions for $TC$, $AVC$, and ...
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34 views

Who pays for a tax levied on consumers, given perfectly elastic supply?

Foreword: All references to Mankiw concern Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I encountered this problem while trying to answer p 130, Question 6.6. The original on the ...
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38 views

Who pays for a tax levied on producers, given perfectly elastic supply?

Foreword: All references to Mankiw concern Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I encountered this problem while trying to answer p 130, Question 6.6. The original on the ...
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1answer
21 views

Deriving Equation for Engel Curve

I have a utility function of $U = B^{.67}Z^{.33}$ with Income $Y$, Price of Good B is $P_b$ and price of Z is $P_z$ I now need to derive an engel curve for this. I have no idea where to start.
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1answer
33 views

How are workers harmed, from firms' payroll tax revenue aimed at reducing workers' tax?

Source: p 130, Question 6.5, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 6.5, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw $5.$ A senator wants to ...
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19 views

Optimal commodity taxation - solving for the optimal tax rates?

I need to solve for optimal tax rates for two products. In my model there are N identical households that maximize their utility function subject to a budget ...
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2answers
53 views

If one always spends the same amount, what's one's price elasticity of demand?

Source: p 109, Question 5.9, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 5.7, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw 9. $\color{green } { \text ...
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18 views

Price and income elasticities for someone who spends a constant fraction of her income?

Source: p 109, Question 5.7, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 5.5, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw Maria has decided always to ...
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2answers
57 views

Intuition - Why does elasticity vary along a curve?

Source: p 96, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw Even though the slope of a linear demand curve is constant, the elasticity is not. This is true because the slope is ...
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1answer
32 views

Intuition: Difference in price elasticities of demand due to different bases

Source: pp 91-92, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw If you try calculating the price elasticity of demand between two points on a demand curve, you will quickly ...
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77 views

What is an example of a choice which is not necessitated by scarcity?

I am first year economics student and for the past month we have had it constantly drilled into us that all choices have an opportunity cost and thus they are all necessitated by scarcity. Thus when I ...
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1answer
49 views

When a relevant variable unnamed on either axis changes, can the curve NOT shift?

Source: pp 40-41, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw her demand curve would shift to the left (to curve D3). In economics, it is important to distinguish between ...
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1answer
39 views

Why do firms bother to produce at equilibrium quantities if at equilibrium quantity, MR < MC?

For almost all demand curves, the resulting marginal revenue curve is often to the left of and steeper than the demand curve. The marginal cost curve has its distinctive U-shape, and a particular ...
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2answers
33 views

Can people have neither a comparative advantage nor a comparative disadvantage?

Source: Question 9b, p 61, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 8b in Principles of Microeconomics, 4 Ed, 2008 9. Are the following statements true or false? ...
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1answer
41 views

How to determine demand without the price of a good?

If I have the utility function of an individual that exhibits perfect substitutes, think (U=ax+by), and I'm given the price of good x and the budget M, then how am I supposed to determine the demand ...
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30 views

How is Comparative Advantage a superset of Absolute Advantage? [duplicate]

Source: 'The Theory of Comparative Advantage - Overview', Prof Steven M. Suranovic Advantageous trade based on comparative advantage, then, covers a larger set of circumstances while still ...
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24 views

Why: one good's opportunity cost = the inverse of the other's? Intuition?

Source: p, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw ...the opportunity cost of one good is the inverse of the opportunity cost of the other... What's the intuition behind ...
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20 views

Intuition: Either each country has the comparative advantage or neither has one [duplicate]

Source: 'The Theory of Comparative Advantage - Overview', Prof Steven M. Suranovic Indeed there is only one circumstance in which England would not have a comparative advantage in either good, and ...
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67 views

Intuition behind Comparative Advantange

I already read and ask NOT about pp 52-54, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I understand such numerical examples that corroborate Comparative Advantage, but how can I ...
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2answers
57 views

Why are we taking the logarithm for risk-averse decision-makers?

I'm a mathematics student learning a bit of Game theory. Many examples are given within a very economic setting and up to know I could follow most of it because they were very basic and I learnt some ...
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2answers
15 views

Do capital goods have to be valued so that (discounted) real expected return on capital goods equal current present value of capital goods?

Let $P_k$ be the value of 1 quantity of a capital good. If one does not sell the capital good and keep it, the good provides interests. In such a case, does standard macro say that all expected ...
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1answer
41 views

Impact of government subsidy on labour supply

If the government pays a certain amount $b>0$ to every person who is not working, what is the impact of this subsidy on labour supply? How does it alter the reservation wage? Is your answer ...
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1answer
33 views

Income Offer Curve In Basic Microeconomics

Can anybody explain to me the income offer curve? Is it a relationship between $x_1$ and $m$? If the budget equation is $p_1x_1+p_2x_2=m$? With income being the variable $m$?
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1answer
38 views

Solving for optimal consumption bundle

Consider a consumer who can consume either A or B, with the quantities being denoted by $a$ and $b$ respectively. If the utility function of the consumer is given by $$-[(10-a)^2+(10-b)^2]$$(suppose ...
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28 views

How to find walrasian asignations?

In a economy Arrow Debreau of pure exchange with two agents and two goods. With utility function of Leontief for agent B, where $U_b(x_b,y_b)=\min(x_b,y_b)$; and for agent A a simple Cobb-Douglas ...
3
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2answers
43 views

Perfect competition: Finding short run equilibrium price?

I am trying to self teach myself some Economics, I am using an old textbook given to me by a friend, which does not contain an answer key. I have run into the following problem and I was wondering if ...
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11 views

Where can I find quarterly/monthly medicare/medicaid state level drug utilization data

I read a paper titled 'State generic substitution laws can lower drug outlays under medicaid'. It uses quarterly state level medicaid drug utilization data. However, I could only find yearly data at ...
2
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1answer
60 views

What does Hayek mean at the end of the first paragraph of The Use of Knowledge?

I reproduce here the first paragraph of Hayek's well-known essay The Use of Knowledge in Society: What is the problem we wish to solve when we try to construct a rational economic order? On ...
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64 views

Consumer Theory - Relationship between compensating variation (CV) and the equivalent variation (EV)

John consumes two products – X and Y and his preferences are represented by an unknown utility function – u(x,y) (we may assume his indifference curves are well-behaved). His income is m, while the ...
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2answers
37 views

Suitable terminology for the inverse elasticity?

In many microeconomic applications (e.g. monopoly price-setting) the inverse elasticity appears. Explaining such relations to laymen is often awkward because inverse proportionality is not as ...
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1answer
50 views

Basic microeconomics: supply, demand and substitutes in production

The question is: explain the change in the market for skim milk, if demand for ice cream rises. I'd say these two are unrelated in consumption (saying they're substitutes is kind of stretching it), ...
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1answer
68 views

Impact of working capital constraints onto output

I'm looking for empirical evidence (optimally from natural experiments, as described below) of the impact of working capital constraints onto firm output, and the differentials of firm size. I ...
3
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1answer
29 views

Converting word definitions of Pareto-Optimal into math symbols

I'd like to have a mathematical version of the following two definitions just because I remember symbols better than words. But I lack the math prowess to convert them from words to symbols. Can ...
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2answers
104 views

What are FOCs and SOCs?

I keep seeing the terms first-order conditions and second-order conditions used in my undergrad economics class on production functions, monopolies, etc but I have no idea what these terms mean. It ...
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4answers
139 views

Books for microeconomics and macroeconomics for selected topics

I am a mathematics undergraduate trying to self-learn some economics. I have no background in economics. I wish to know from which chapters of Hal Varian's "Intermediate Microeconomics" (7th edition) ...
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50 views

Does price affect quantity or vice versa?

On nearly all graphs found within economics textbooks, quantity is label on the x-axis and price on the y-axis, implying that the quantity supplied affects the price. Is this really so? Intuition ...