# All Questions

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### Cost minimisation for the production function $f(L,K) = L^\lambda + K^\gamma$

For the function: $f(L,K) = L^\lambda + K^\gamma$. The value for $\lambda$ and $\gamma$ is not given. What type of production function is this (quasi-linear, CES)? Is it true for there to be ...
10 views

### Looking for tools to model an economy (like the US) and the effect of changes such as Fed Interest rate or inflation

I am leaning toward a python solution and can work in a Win or Linux environment. I have looked into the area a bit and looked at some of the modelling efforts of the Federal Reserve and the "...
21 views

### Does GDP include value of raw materials in inventory stock?

We know that Value addition = Value of Output - Intermediate consumption Value of output of a firm = Sales + change in firm's inventory stock. And firm's inventory stock equals to finished goods, semi-...
• 101
1 vote
36 views

### Convergence between GDP(PPP) and GDP (Market exchange)

Economic theory predicts that as countries grow, their currency should appreciate. In other words, their GDP at market exchange rates should converge with cost-of-living-adjusted GDP (PPP). To measure ...
38 views

### Engineering student doing an eco/fin project on ESG. Need additional resources

I am trying to get a fin/eco project and my prof has asked me to read a paper on ESG titled, "ESG performance and business risk—Empirical evidence from China's listed companies." I am ...
13 views

### Association between maternal education and child health

I am trying to estimate the effect of maternal education on child vaccination using logistic regression. My independent variable is categorical and represents various levels education like none, ...
35 views

### How do I solve this Krugman model?

Suppose that there's a country with $m$ workers that have the following preferences over the consumption of a Krugman composite good which is composed on individual varieties with elasticity ...
19 views

### About the growth rate of the balanced growth path

I found the following excersise with solution but without explanation. Hence I don't understand it. Let $Y=BK^0E^{0.2}L^{0.8}$ be the production function. The growth rate of B is given by $g=0.2$ , of ...
• 1
1 vote
82 views

### Choice function and IIA

I'm new to microeconomics and struggle to understand choice function in practice. E.g. lets say I have a set X=(a,b,c). How many possible choice functions I could in theory have? Then other concept ...
• 11
1 vote
35 views

### What is wrong with this tax revenue formula?

The authors state that the tax revenue is $$T = tq^{*}c(q^{*})$$ , where $t$ being the tax percentage, $c$ being the total cost function based on the quantity supplied $q^{*}$. This is not quite right ...
• 15
1 vote
45 views

### When inflation expectations cause inflation, where does the corresponding money supply come from?

One cause given for inflation is inflation expectations. When firms expect inflation, they raise prices and employees demand increased wages However, this additional money in the economy must come ...
58 views

### The Efficiency of the Equilibrium Quantity (Mankiw)

Mankiw wrote as follows: But can the social planner raise total economic well-being by increasing or decreasing the quantity of the good? The answer is no, as stated in this third insight about ...
• 103
53 views

### Maximise Arbitrary Utility Subject to Budget Constraint

Suppose we have a general maximization problem of the form: $$\max_{q_1,q_2} U(q_1,q_2) \text{ subject to } p_1 q_1 + p_2 q_2 = y$$ Suppose I allow $U$ to be concave, increasing and invertible. What ...
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### Effects of an anti-trust tax

Suppose a corporate tax. It is levied on publicly traded companies. It is calculated as a percentage of the market capitalization of the company. The market capitalization in question is the average ...
• 125
15 views

### Heuristics for the government revenue maximization problem

I suppose it is an established fact that increasing tax rates yields diminishing returns for government revenue. From what I could gather, it is still an open question about the optimum point, though. ...
• 125
20 views

### Why Central Banks didn't Use Raising Compulsory Deposit Rates More as Tool to Cool off The Economy instead of raising rates?

Community! As sovereign debt raises worldwide even amid rising inflation, I wonder why I've never seem some action in the sense of raising compulsory deposit rates at the bank to shrink lending and ...
1 vote
34 views

### How is the Joint Probability Density Function derived under the Multinational Production model?

I was reading the paper "Trade, Multinational Production, and the Gains from Openness" by Ramondo and Rodríguez-Clare. In the paper （see Appendix A）, they define the following function for ...
• 283
1 vote
90 views

### Understanding Second-Order Approximations in Translog Production Functions

Consider a model with the following production technology: Q_i=F(\Omega_i,K_i,S_i,N_i) = \Omega_i\Big(\nu N_i^\sigma+(1-\nu)(\tau K_i^\rho+(1-\tau)S_i^\rho)^{\frac\sigma\rho}\Big)^{\...
• 143
204 views

### Replicating Econometrics Research

I took a course on Econometrics last year which covered OLS, GLS, panel data, binary dependent variables, instrumental variables, experiments and quasi-experiments, big data, time-series forecasting, ...
• 45
1 vote
71 views

### Take intermed or advanced series for phd application

I am an undergrad majoring in Math and want to apply for a PhD in Economics (maybe in theory and Econometrics). I have taken the intro series (intro micro and macro) already. Since I am about to ...
1 vote
65 views

### Convexity of indirect utility in probabilities

I am interested in the concavity in $p$ of the indirect utility function $$V(p,W)=max_{x,y,z} pf_1(x,y)+(1-p)f_2(x,z)$$ under the constraint $$x+py+(1-p)z=W$$ where $0<p<1$ and where $f_1,f_2$ ...
• 11
1 vote
19 views

### Can you predict with an AR model to replace missing data for a year?

Income data for 2023 is missing in my dataset because the official statistics bureau hasn't published that yet and won't for a while. My thesis adviser suggested I use an AR(2) model to predict 1-year ...
• 47
36 views

### What results in the money supply permanently increasing over the long term?

So, from what I understand, some ways in which the central bank increases the money supply is through Open market operations/buying government bonds: But eventually the bonds mature, and the money is ...
1 vote
34 views

### Is there a digital MONIAC machine?

Is there an app/site that reproduces Philipp's MONIAC hydraulic machine and lets users experiment and learn (perhaps better that through simple video-watching)?
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### Given Q=80-4P where MC=0, Q=Q_1+Q_2+Q_3+...+Q_n, find the reaction curve for firm A,B, and C

Does the condtion Q=Q_1+Q_2+Q_3+...+Q_n affect the process of finding the reaction curves and cournot equilibrium or do we treat it as if were given the condition of Q=Q_1+Q_2+Q_3??
48 views

### Proof of utility function for CARA [1(a)] and CRRA equality with power coefficient [1(b)]

I went through the first chapter of Cochrane's Asset pricing and am completely stuck at the first question. I admit that I am an economics idiot, but there is totally no structure to this problem, ...
• 133
1 vote
26 views

### Decision-Making Under Opportunity Cost for Entertainment Choices if one option is free but the other incurs some cost

You have a free ticket to attend a classical music concert. If you had to pay for the ticket, you would have to pay Rs. 500/- to attend the concert. On the same evening, you have an alternative ...
16 views

### How to explain the claim mathematically: The effect considered local, and locally, the elasticity is approximately constant if the demand is "smooth"?

My book has considered the effects of supply and demand changes on price (specifically the equilibrium price and quantity themselves) when the supply and demand themselves have constant elasticity and ...
• 15
26 views

### Why would arbitrage lead to price convergence?

I am a beginner to economics. I am thinking about arbitrage in a simple way, where the price of a good in two markets differs, so you make a profit by buying on the cheaper one and selling on the more ...
1 vote
14 views

### Expected welfare log-normal

I am reading a paper that assumes that individuals just consume their income and that welfare is $y^{1-\gamma} / 1-\gamma$, and they focus on the case where $\gamma>1$. If income is log-normally ...
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### Obtain profit-maximizing supply curve (an exercise)

Exercise 2.2.3 from Introduction to economic analysis by McAfee: An entrepreneur has a factory that produces $L\alpha$ widgets, where $\alpha<1$, when $L$ hours of labor is used. The cost of labor ...
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16 views

### How is ARR defined?

Suppose we invest 100 €.Year 1 we have a inflow of 100€,second year we have a inflow of 20€.If we want to calculate the ARR(accounting rate of return) we have to do we need to find the average of in ...
16 views

### Breakeven analysis for computer upgrade decision making

I need to perform a break-even analysis of moving from one system design to another. Definitions $M_0, M_1$ = one-time initial manufacturing cost of currently deployed system design and new system ...
54 views

### Characterization of profit functions arising from Cournot competitions

I would like to know what exactly are the functions of the form $$\pi(x, y) = P(x+y)x - C(x),$$ i.e., the profit functions arising from symmetric Cournot duopolies with inverse demand functions $P$ ...
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### A simple mathematical definition of arbitrage

I am trying to formulate an understanding of arbitrage to ensure I comprehend it. There are many reference materials online, of course. I envision a set of commodities ...
39 views

### Derivation of Choice Probabilities and Expected Values in Discrete Choice Models with minimal values

I'm working on a model involving choice probabilities in a discrete choice framework where the random utility component is assumed to be Gumbel. Below is the problem definition and my attempt at ...
• 283
70 views

### vNM theorem for finitely additive measure?

The main difference between vNM EU and Savage SEU is that one is objective one is subjective. However, there is another difference: vNM EU uses countably additive prob while Savage use finitely ...
• 329
1 vote
39 views

### Does indexing prices to inflation not simply reinforce inflation?

I'm no expert, but my salary is indexed to inflation, and so is the legal limit my rent can be increased, and my parents' pensions. Doesn't forcing all these payments and prices to grow simply ensure ...
201 views

### Lucas Model 1988, deriving the elasticity

I'm currently reading one of the most cited papers in Economics, On the Mechanics of Economic Development by Robert Lucas Jr. (1988), published in the Journal of Monetary Economics. The technology for ...
• 428
4k views

### If inflation/cost of living is such a complex difficult problem, then why has the price of drugs been absoultly perfectly stable my whole life?

The prices of all the different drugs that I use have not changed at all, in the 46 years I have been alive. (Which means, that the price has consistently gone down, if adjusted). Please explain how ...
• 113
55 views

### How are markets efficient at allocating resources for maximal social utility if they only give resources to the highest bidder?

One of the standard doctrines of market-based economics is that a market allocates resources to where they are most valued, which makes very little sense in the context of income inequality. The ...
95 views

### what are stakes in cost-benefit terms? Clarifying five examples/contentions

Please excuse me if this is off-topic, and don't be offended if it is stupid. Scholars theorize that the stakes matter for rational decision making or cost-benefit calculations (under uncertainty or ...
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36 views

### What is the best way to learn applied dynamic programming?

I want to learn dynamic programming in a more applied fashion. I want to be able to solve problems of the likes of Recursive Macroeconomic Theory. I want to be able to solve problems using pen and ...
1 vote
53 views

### CPI: Why is the inflation rate of "commodities less food" greater than both "Energy commodities" and "Commodities less food and energy commodities"?

The latest CPI report shows inflation for these line items (12 month unadjusted change to July 2024): Commodities less food: -1.7% Commodities less food and energy commodities: -1.9% Energy ...