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

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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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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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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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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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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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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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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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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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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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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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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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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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37 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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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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37 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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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 ...
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37 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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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 ...
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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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Basic Micro-economics - Consumer Theory - C.V. and E.V. relationship

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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35 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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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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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 ...
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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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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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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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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 ...
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When using consumables consider the purchase or market price?

Say I use two fuels to heat my home (space heating): oil and wood. I purchase both in bulk, at a price decided at the time of purchase. Wood is cheaper per kWh, but I purchase both because oil has ...
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41 views

Intuition behind the linkage principle

An important result in auction theory is Milgrom & Weber's linkage principle, which, roughly, holds that the expected revenue from an auction is higher is the seller commits ex ante to reveal as ...
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38 views

Why does $\frac{MP_L}{MP_K} = \frac{w}{r}$?

I did a practice problem set. I was given a production function $F(K,L)$ and had to derive the firm's cost function. To do this, I used the following relationship: \begin{equation} ...
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63 views

The Sonnenschein-Mantel-Debreu results, what are the implications for macroeconomics?

I have always wondered why such a negative result such as Sonnenschein–Mantel–Debreu theorem (SMD) theorem is usually ignored or disregarded by practitioners, specially in macro. The result roughly ...
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Demand and supply: public and private good

In a rural municipality, there are two lakes that are used to bath during the summer. The lakes contain 45m2 and 33m2 of water each. The consumption of the lakes is non-rival and non-excludable. The ...
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63 views

Random Utility interpretation

Can someone explain intuitively, the Block-Marschack Polynomials that completely characterize random utility.
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Is non-monotonic local non-satiation supported by consumer theory in economics?

In general (Walrasian) equilibrium, local non-satiation is one of the assumptions that guarantee existence of equilibrium. Question is, is non-monotonic local non-satiation preference supported by ...
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Difference between 'surplus' and 'welfare'

I see these two terms used interchangeably but I have the feeling they are not exactly the same. My gut feeling tells me this: 1) Surplus is the additional aggregate utility from the existence of one ...
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How is labor disutility modeled in Arrow-Debreu model?

In DSGE models, utility function contains labor disutility components. But I cannot not see how labor disutility is incorporated in Arrow-Debreu-Mackenzie model.
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Is special case of utility function in “Intertemporal Substitution in Macroeconomics” also a special case of a Ramsey growth model utility function?

So in RBC and Ramsey-derived utility function, the following is usually the form of utility: $$u(c,l) = c^{1-\sigma}(1 + \omega(l))$$ where $\omega(l)$ is arbitrary function of $l$, labor, that ...
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Does rioting impair the economy?

In this article, the author looks at some of the indirect effects caused by the rioting in Ferguson, Missouri after the jury's decision not to indict the police officer. He explains that the rioting ...
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If all firms in an economy are in monopolistic competition with constant elasticity of substitution, can they profit-maximize at $MC=MR=AC$?

Suppose all firms are monopolistically competitive with constant elasticity of substitution. Can they profit maximize at the quantity point $MC=AC$ (So $P \neq MC$ but $Q$ is set at where $MC=MR=AC$ ...
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Has any progress been made on the Pacman Conjecture on Finite Time Horizons?

The Pacman conjecture states that the optimal strategy for monopolistic durable goods manufacturers is to set price high and slowly drop it (i.e. eating their way down the demand curve). Empirically ...
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The relationship between the expenditure function and many others!

I dont understand the relationships between Hicksian demand, walrasian demand (marshallian), the expenditure function and the indirect utility function (including the value function V(b)). I have ...
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Are there any economic studies of License-On-Transfer agreements?

A recent entry at GitHub's blog caught my attention: https://github.com/LOT. The "network" claims to provide protection from patent trolls by entering into an agreement automatically granting all ...
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why is real wage divided by marginal product of labor often called real marginal cost?

As said in the title, why is real wage divided by marginal product of labor often called real marginal cost? In mathematical formula, $mc_t = (W_t/P_t)/MPN_t$ where $MPN_t$ refers to marginal product ...
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Is it possible to derive indifference curves given marshallian demand function?

In a two good world, will a marshallian demand function the likes of D(p,m) where p is the price of one good and m the income yield a utility function or ...
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62 views

Usage of natural gas in 1970 (where was the demand elasticity?)

The following historical graph of US Marketable Natural Gas volume has me puzzled: How was the gas used in 1970 (a peak production period), given that we would seem to be using a lot more gas now? ...
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Is this supply and demand reasoning in Picketty's book circular?

In his hugely successful book, Thomas Piketty writes: To be sure, there exists in principle a quite simple economic mechanism that should restore equilibrium to the process: the mechanism of ...
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Lee and Saez (2012): Pareto-Improvement?

I'm interested in the following quote that came up in this earlier answer. Second, when labor supply responses are along the extensive margin only, which is the empirically relevant case, the ...
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Best resource to learn Microeconomics fast? [closed]

I'm going to be honest, I have 2 full days to study for an Introductory Microeconomics exam final, and I am starting from scratch. The course was given online and the assignments were very easy to ...
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What is the advantage and disadvantage to have a high value of USD for USA?

What is the advantage and disadvantage to have a high value of USD for USA? China and Japan always want to keep their currency low as oppose to USA.
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Why absolute value in elasticities and marginal rate of substitution?

This is a point I find very confusing and very hard to justify to students. Depending on the books, one finds many different conventions regarding the sign of elasticities and marginal rate of ...