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

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Why is there no optimal price formula for roast chicken [on hold]

Why is there no optimal price formula for roast chicken per pound as oppose to gasonline and financial products?
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25 views

Why are there rarely a math based approach price theory book? [on hold]

Why does there seem to be an absence of price theory books based on a rigorous mathematical approach? I could only find one - namely price theory by Jack Hirshleifer, are there any others? ...
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37 views

Total cost function and (dis)economies of scale

I'm really confused about how I'd tackle this. I have an equation, $TC(Q) = 100Q + 20Q^2 + 3Q^3$. And I'm trying to find where the economies of scale, diseconomies of scale and constant return to ...
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24 views

How do I calculate quantity to minimize long-run average total cost?

I have a formula for the long-run total cost curve, $$TC(Q) = 6000Q + 40Q^2 + Q^3$$ and I'm trying to find the quantity that minimizes the long-run average total cost. I assume I'm trying to find ...
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How does the monopoly's deadweight loss affect market surplus and the economic pie?

Source: p 312, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw Welfare in a monopolized market, like all markets, includes the welfare of both consumers and producers. Whenever a ...
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Intuitively, why does a firm shut down in the short run, if Price $<$ Average Variable Cost?

Source: p 286, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw Therefore, the firm’s shutdown rule can be restated as $\color{darkred}{\text{ [1.] $\quad$ Shut down if Price $<$ ...
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27 views

Intuitively, why is Profit = (Price $-$ Average Cost) $\times$ Quantity?

Sources: p 289, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw p 259, Modern Principles of Economics (2 ed, 2011) by Tyler Cowen, Alex Tabarrok Definitions: Profit $:=$ Total Revenue $−$ ...
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21 views

Why is the social value curve NOT the supply curve shifted downwards?

Abbreviate 'Social Value' as SV. In some other resources such as this, the SV curve is known as the Social Marginal Benefit curve. The following quotes explain [1.] why the SV curve is the demand ...
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55 views

Are homothetic preferences monotonic?

I'm trying to understand intuitively what a homothetic preference is, and I am still not quite there. I understand the definition, that a homothetic preference implies that the slope of the ...
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1answer
23 views

demand impact on shares price

Knowing that share prices are determined by the forces of supply and demand, other factors can also play a role in this but lets consider the fact that prices are only based on supply and demand.In ...
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Modern theory of integrability of demand?

I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf I am wondering if there is any modern treatment of the ...
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When do supply and demand curves shift?

Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the ...
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1answer
39 views

Do assets without rental income streams appreciate relative to assets with rental income streams?

In his book "The Armchair Economist", economist Steve Landsburg critiques an op-ed concerning the relative value of stocks and real estate: James K. Glassman wrote a piece in The New Republic to ...
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2answers
40 views

Consumer Surplus question

The demand for rail travel is $Q^d = 600 - 2P$ where quantity is thousands of train journeys per quarter and $P$ is in £ per journey. How much would the consumer surplus change if rising cost of ...
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1answer
28 views

How does one calculate compensating variation for multiple price change?

For a single variable price change, $$CV = - \int_{p_x^o}^{p_x^f} x_H(\rho,p_y,v^o)d\rho$$ $x_H$ is the Hicksian demand function for good $x$. What happens if both prices change? How does one ...
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2answers
36 views

Intuition: Why does perfectly elastic supply imply no producer surplus?

Foreword: I ask NOT about the whole question; so I quote only the following part of the answer. Source: p 153, Question 7c, Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw = Chapter 7, ...
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1answer
62 views

What do supply-demand curves really look like?

In my basic high school economics course, we've always used supply-demand curves that are lines to simplify calculations. In real markets for real goods, what do the supply and demand curves look ...
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2answers
67 views

Struggling with uncompensated/compensated demand

I'm working on a problem set for my intermediate microeconomics course, but I'm having trouble deriving the compensated and uncompensated demand functions. This is the utility function: $U(x, y, z) = ...
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1answer
62 views

Doubts in modelling the Arthur(1991) paper: Designing economic agents that act like human agent

I am implementing Arthur's paper "Designing economic agents that act like human agent: A behavioral approach to bounded rationality" from 1991 in JAVA and I am having a problem understanding one part ...
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20 views

Instrumental variables for minimum wage

I was wondering if there is a classic instrument for minimum wage as there is for schooling or other variables. If so, how does it fares with respect to most established designs like spatial ...
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1answer
52 views

Shopping example in Kőszegi / Rabin (2006)

In "Section IV Shopping" of Kőszegi / Rabin (A model of reference-dependent preferences, QJE 2006), the example of consumer buying a pair of shoes is given. They claim that "her disutility from ...
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130 views

Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and ...
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75 views

Walrasian Equilibrium under Leontief Preferences

There are two people in the economy, A and B. Both have the utility function: U=min{x,y}. A has an initial endowment of (x,y)=(50,100) and B has (x,y)=(100,50). I know how to draw the Edgeworth box ...
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1answer
26 views

Symmetric and asymmetric preferences

I encountered a question where it was given that the consumers had asymmetric preferences. I couldn't find the definition of the term in any of the microeconomics book available to me. Can anybody ...
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An economy comprises of a consolidated household sector, a firm sector and the government. The household supplies labour (L) to the firm

An economy comprises of a consolidated household sector, a firm sector and the government. The household supplies labour ($L$) to the firm. The firm produces a single good ($Y$) by means of a ...
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30 views

Risk and uncertainty [closed]

A risk averse is given this: Option1: 1000 with p=0.25 and 100 with p=0.75. Option 2: 325 for sure. Which option would he choose? For this part, I know the person will choose option 2 over option 1. ...
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96 views

Moral Hazard or Adverse Selection?

I pay the doctor before he conducts the surgery. Can anyone explain to me whether this statement shows moral hazard or adverse selection?
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19 views

Sign of substitution and income effect of a price change

I just want to confirm with my understanding. It is correct to say that no matter price increase or price decrease, the substitution effect is always negative for both inferior goods and normal ...
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1answer
58 views

Estimating Price Elasticity from sales

I'm looking at data for an online shop with clothing items listed at different prices. I'd like to use this information to do some kind of profit maximization (i.e. I'd like to have some understanding ...
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1answer
39 views

Equi-marginal Principle

Hi the textbook i am studding from simply states that 'the rule for rational consumer behaviour is know as the equi-marginal principle. This states that a consumer will get the highest utility from a ...
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1answer
36 views

Corner solution-consumer theory [closed]

$$U(q_1,q_2)=4{q_1}^{0.5}+q_2$$ $$P_1=1$$ and $$P_2=2$$ Initially $$Income=40$$ Then the question asks :how do I know what income I can get a corner solution? Anyone can help me with this? Thank you ...
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20 views

Shifts in demand curves

When plotting a demand curve for a good, lets say carrots with price on the y-axis and quantity demanded on the x-axis. A shift any determinant of demand other than price of carrots results in a shift ...
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Borrowing and lending

Mr. B earns Rs. 500 today and Rs. 500 tomorrow. He can save for future by investing today in bonds that return tomorrow the principal plus the interest. He can also borrow from his bank paying an ...
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1answer
27 views

Does a General Equilibrium here require Pareto Optimality?

There are two consumers $A$ and $B$, and two producers $X$ and $Y$. he consumers are endowed with labour(L) and capital(K) $L_A,K_A$, and $L_B,K_B$ respectively. The preferences of the two consumers ...
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43 views

Marginal rate of substitution

This is a homework question. Suppose a consumer has preferences over two goods that can be represented by the utility function $U(x,y) = 2\sqrt{x} + y$ The marginal rate of substitution of $x$ for ...
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1answer
34 views

Effect of specific tax on demand and supply

There are intersecting supply and demand curves. A tax is levied on suppliers. Say the tax is a fixed tax (for example, VAT) and not an ad valorem tax. Why can we not just move along the demand ...
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72 views

What is a substitute/complement in terms of mixed partial derivatives?

I am trying to understand how substitutability relates to mixed partial derivatives. I thought the change in marginal utility with respect to a change in the amount of $x$ would correspond to ...
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56 views

Are Cobb Douglas goods complements or substitutes?

Given $$U(x,y)= x^\alpha y^{1-\alpha}$$ $\alpha \in (0,1)$, are Cobb Douglas goods (here $x$ and $y$) complements, substitutes, or neither? Why? An explanation with mixed partial derivatives would ...
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Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across with Acemoglu, Johnson and Robinson (AJR) paper on «The Colonial Origins of comparative development: An Empirical Investigation», and this paper seemed ...
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Question about the Ellsberg Paradox in Expected Utility Theory

The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility ...
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50 views

Papers on measuring institutions

I'm new to this subject, and I'm looking for papers on measuring the 'quality' of institutions and their possible role in the development of a country. ANy help would be appreciated.
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2answers
28 views

Discounted (present value) calculation

I had a homework problem regarding calculating a discounted present value. My solution is: 15000 * (1+.08)^1 + 15000 * (1+.08)^2 = $33 696 The question is this: ...
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2answers
59 views

Translog Preferences

What are translog preferences? The wikipedia article only clears up that it stands for transcendental logarithmic preferences, and that they are a generalization of Cobb-Douglas preferences. Do they ...
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2answers
43 views

Indifference curves and preferences?

I am going through some micro concepts and I am confused, is there a difference between deriving preferences through indifference curves and actual preferences of the consumers? The question I was ...
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1answer
46 views

labor leisure trade off

Walras has available 24 hours per day. He has to alloacate this 24 hours between leisure $(L)$ and work. His utility function depends on leisure and the composite good $(C)$ and is given by $U=LC$. ...
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73 views

Does concavity of the utility function has any bite?

A utility function in general has only ordinal meaning, any monotone transformation preserves the order isomorphism of the underlying preference ordering. However, there are several econometrics ...
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83 views

How does Google price the items on Google Play?

I am a fledgling computer science researcher working in intersection of economics and computation. Please excuse me if this question seems out of place to the administrator. I am currently studying ...
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on economic growth and Second Welfare theorem

While I was studying eighth edition of Mankiw's Macroeconomics, in chapter 9 on Economic Growth(pg. 245), the author mentions : "Some economists have proposed increasing the incentive to save by ...
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39 views

Deriving indifference curves

I have been trying to work this out for quite a while now, but I can't seem to understand how to solve these kind of questions. Any help (or hint) would be highly appreciated. Professor Goodheart's ...
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31 views

what is the optimum level of production?

The demand function of a monopolist is $q = 12 - p$ where $p$ is the price. Using the total cost and total revenue I was trying to calculate the optimal (short term) level of production. I tried to ...