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

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Why does quantity supplied increase with price in economics?

The Law of Supply is my worst enemy in economics because I could never truly understand it, and as a result, the stuff I learned after that was built on a weak foundation. The Law of Demand is totally ...
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40 views

Why does demand curve shift in, in a monopolistic competitive market?

In a monopolistic competitive market, demand curves shift in, if more firms enter the market. I can't seem to wrap my head around it. Demand remains the same, supply has increased. Shouldn't entry of ...
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Calculate producer surplus

The supply function of a certain product is P=20+3Q, where P is the price and Q is the number of units produced. Find the producer surplus at market equilibrium if the market price P=80?
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How to interpret elasticity of demand

Income elasticity of demand for apple is 2. Cross elasticity of demand between apple quantity and orange price is 0.5, Explain the impact on apple's revenue if consumers' income increase by 10% and ...
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1answer
20 views

Finding optimal price and quanity for a monopoly firm

A monopolist's demand equation is $P = 60 - 2Q$. It has a constant marginal cost of $20 which is equals to the average total cost. it only adopts one pricing. Identify the optimal price and ...
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43 views

At which point of the demand curve will a monopolist maximise profit?

A monopolist with a linear demand curve should always produce where the demand is unit elastic in order to maximise profit. True or false. Shouldn't he product at the highest price? Please explain ...
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12 views

Quasi linear utility maximization with borrowing

Utility is quasi linear in good m, and non linear in good c, Wealth W, price of m is 1, price c is p. The utility function is given by U(m,c)=m+f(c) As I solved so far , Marshallian demand function ...
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50 views

Market Equilibrium

Can help me with part b of this problem? The demand for wine is given by the equation $QD = 500 – 20P$, where $P$ is the price of wine per litre and $QD$ is the quantity of wine demanded in litres. ...
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23 views

Market behavior when consumer must choose product before knowing price?

What forces influence the price in a market, wherein the consumer must choose a good before knowing the price, and afterwards only knows the price of the good purchased, not that of any competing ...
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Pushing taxes - economic etymology

Frequently a description that is clear in the mind of its author is not as clear to a reader. It is even worse when the reader finds the description clear but actually misunderstands the intention of ...
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1answer
22 views

To calculate cross elasticity of demand, does percentage change in quantity demanded have to be market demand instead of individual demand? [closed]

If I try to calculate cross elasticity of demand (XED or CED) with individual demand quantity, it seems to break down since even small increase when the base number is small is a big increase in ...
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Is my logic on taxation for this question legit?

At Fenway Park, home of the Boston Red Sox, seating is limited to 39,000. Hence, the number of tickets issued is fixed at that figure. Seeing a golden opportunity to raise revenue, the City of Boston ...
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1answer
25 views

How do I calculate consumer surplus and producer surplus from this? [closed]

Calculate the consumer surplus, producer surplus and total surplus in the market equilibrium. Market for beef and home demand and home supply: $$ Q_d(p) = 50 - p $$ and $$ Q_s(p) = p $$ With $p$ ...
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15 views

How can Percentage Method and Total Outlay method give different price elasticities of demand for the same data?

My economics highschool textbook reads, "Any comparison using the expenditure approach and percentage method mught lead us to contradictory calculations of the price elasticity of demand" and ...
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5answers
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Why is fuel more expensive on the high way in Europe?

In Europe it's usual, that fuel prices are 10-20% higher on the highway, than in the city. This is not only my personal observation, but also mentioned on travel sites (eg here and here). I don't have ...
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21 views

Diminishing Nature of Utility Function From Convexity of Preference $\succsim$?

Is diminishing nature of utility function in consumer theory stemming from the assumption of convexity on the preference relation $\succsim$? My understanding is: $\succsim$ is convex. Then, $u(.)...
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1answer
82 views

List of theoretical models of learning

What are the most advanced theoretical models about "learning" such as learning-by-doing or learning from others? Overall, learning in economics spans different areas. Here there is a largely ...
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61 views

My Challenge in Econ 101 explanation of Marginal Benefit = Marginal Cost

In Econ 101 textbooks, there are lots of examples and emphasis on marginal analysis leading to the greatest equation of all, $MB=MC$. My challenge is the following and wonder if anyone had a similar ...
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Linearity in Pricing and Duality, UMP EMP

I have read the statement below and don't quite understand what it means. This is probably because I don't have full understanding of duality with support function in math, but just to foster ...
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1answer
47 views

Weierstrass Thm: Continuous Fn Attaining Extrema on Compact Domain $u:\mathbb{R^L}\rightarrow\mathbb{R}$

This is just semantics, but MWG doesn't use the Weierstrass Theorem in its Math Appendix when using the fact that a continuous function always has a max value on any compact set. Some books appeal ...
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41 views

Why do undergraduate texts insist on graphing price as a function of demand? [migrated]

It seems more intuitive to put price on the x-axis, since that is a variable that a producer can set, or is otherwise set for the consumer (a consumer walks into the store and sees the price, ...
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13 views

Private business case studies

I have a question as a contemplating entrepreneur who has now worked for a small tech startup and also a fortune 10 company. It seems that in today's new business/startup culture, there is tremedous ...
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61 views

Why is Price Vector Orthogonal to Vector connecting two bundles on Budget Hyperplane

Here is my revised version/understanding why price vector is orthogonal to any vector from a bundle on the budget hyperplane to another bundle on the hyperplane: (see below for original question) ...
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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 ...
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Intermediate Microeconomic Theory 1 [closed]

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....
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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 ...
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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 ...
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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 ...
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1answer
41 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 ...
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1answer
54 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 ...
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1answer
100 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: $$U(x,y)=x^\alpha y^\beta$$...
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4answers
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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, ...
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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 ...
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(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 ...
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2answers
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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 ...
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(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 ...
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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 ...
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1answer
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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 ...
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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. ...
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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 ...
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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 ...
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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 ...
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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 ...
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1answer
141 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 ...
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1answer
54 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 ...
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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 ...
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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 ...
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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 ...
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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 "...
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1answer
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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,...