Questions tagged [demand]

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1
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1answer
39 views

Is Hicksian always steeper than Marshallian?

The compensated demand curve eliminates income effects. It reflects only substitution effects. Given that the Marshallian demand curve reflects income effects, doesn't this mean it is always more ...
1
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1answer
36 views

When solving for a new equilibrium price after the institution of a tax, I keep getting a price that is lower than my previous equil price. Why?

For Example: $D(p) = 50 - p$ $S(p) = p/20$ The p* of this problem is $47.61$, however, when I add a .1 proportional tax I get an answer of $43.29$ which does not make sense because that price is lower ...
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1answer
59 views

Marshallian and Hicksian demand for an inferior good

How will the Marshallian and Hicksian demands for an inferior good differ assuming the price goes up? Also what happens if the demand is not affected by changes in income? I am assuming it will fall ...
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0answers
23 views

Staricase demand curve

I wonder what horizontal lines in staircase demand curve represent. I understand that we construct the demand curve considering WTP of each buyer. But why do we connect the points as horizontal lines? ...
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1answer
43 views

Calculate hicksian demand with utility function (with restriction)

$U(x_1, x_2) = 1/2 * x_1 $ I am trying to calculate the Hicksian demand when when $U(x_1, x_2) = 2$ and the value of the minimum expenditure when $p_1 = 9$ and $p_2 = 16$ For the hicksian demand I ...
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1answer
40 views

Fall in price of sugar affects price and quantity of candy [closed]

Using the supply and demand model, explain and illustrate how the price and quantity of candy would be affected by sugar prices dropping, starting from the equilibrium point. Am I right in stating ...
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1answer
81 views

Offer curves for giffen good [closed]

I learnt that giffen good doesn't satisfy the law of demand, but can we draw an offer curve to represent giffen good?
1
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1answer
104 views

Why it is unit elasticity

If I always spend a total of exactly $\\\$10$ per week on coffee, then does my demand function have unit elasticity? According to me, the change in income doesn't affect my coffee consumption, so it ...
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2answers
113 views

Demand for minimum of $4$ different goods

The consumer has the utility function with $4$ goods $$U=\min\left \{ \sqrt{x+y},z+w \right \}$$ The prices are $p=(3,2,2,1)$ with wage $m=1$. Find the demand. So far I have observed that it is ...
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0answers
38 views

Unsolveable Demand/Utility Problem?

A consume has a preference relation on $\mathbb{R}^4_+$ with a utility function defined as $$ U(x_1,x_2,x_3)=(\ln(3x_1+2x_2+x_3))^3$$ Find the demand at prices $p=(1,1,1)$ and wage $4$. Attempt I ...
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3answers
482 views

Demand curve is same as Marginal Benefit curve?

Demand curve is same as Marginal Benefit curve [Source: Microeconomics by Pindyck & Rubinfeld, Chapter 10, Section 5 - Monopsony]. I have only seen intuitive explanations for this statement. Can ...
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1answer
39 views

Concept of Utility in demand systems

I have seen that researchers use different utility function in demand systems estimation such as Stone Geary. What is the role of these utility functions? What are utility function other than stone ...
2
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1answer
57 views

Derive demand function from utility [closed]

Never encountered such a problem as I am new. $$U(x_1,x_2)=(a\ln(x_1)+b\ln(x_2))^n$$ and $a,b,n>0$ with income $w>0$ and prices $p_1,p_2>0$. Find the demand function. Attempt I am thinking ...
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1answer
36 views

Derive the market demand function and market supply function

In the second page of this paper Gjerstad et al derive the market demand and the supply for assets using the data shown in Table 1. The table is The demand function they find is $Q = 94 – 0.4 P$ and ...
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1answer
41 views

Why are constant price elasticities reported?

Price elasticity of demand $\mathrm{e_{D,P} = \dfrac{dD}{dP}. \dfrac{P}{Q^*}}$ clearly depends on the levels of price and quantity. Then why is everywhere (research papers, textbooks etc.) a constant ...
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0answers
43 views

Definition of strictly convex preference

Let $x,y\in X$. Does strictly convex preference (which implies that the utility is strictly quasiconcave) mean that: $x\succsim y$ implies $\alpha x+(1-\alpha)y\succ y$ for any $\alpha\in (0,1)$?
2
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1answer
81 views

Approaches in demand analysis

What is the difference between Engel Curve and the system approach of demand analysis?
4
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1answer
72 views

Equilibrium with substitute goods

I am attempting to solve the following problem The demand functions for two substitute goods, the production cost of which equals $c_1$ and $c_2$, are $q_1 = a_1 + b_{11}p_1 + b_{12}p_2$ and $q_2 = ...
2
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1answer
85 views

Finding restrictions on parameters for a demand function

I have a question that asks: Let $x_1$ be the quantity of a good 1, $p_1$ the price of good 1, $p_2$ the price of good 2, and $M$ is income. Let $𝑥_1(𝑝_1, 𝑝_2, 𝑀; 𝐴) = 𝐴𝑝_1^𝛼𝑝_2^𝛽𝑀^𝛾$ ...
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1answer
255 views

Determine marginal revenue given demand curve and marginal cost

a)Determine marginal revenue curve if firm can only charge 1 price,List demand curve,marginal revenue curve,,marginal cost,average total cost equations. b)What is optimal price and quantity? c)If firm ...
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0answers
32 views

Demand Function in monopoly [duplicate]

I am studying monopoly and I see that most exercises use inverse demand. why use the inverse demand function instead of the demand function?
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2answers
65 views

How to explain negative correlation between quantity sold and expenditure on advertisement?

I have received the following dataset from our economics Professor. It has 15 observations and 4 variables - 'qsold' (quantity sold of product X), psn (price of X), ...
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0answers
35 views

Market shares of Nested Logit demand model

Consider a Nested Logit demand model with two nests, $N_1, N_2$: $N_1$ contains the outside option only (labelled "0"), $N_2$ contains all the remaining alternatives (labelled "$j=1,...,...
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0answers
22 views

functional form for a consumption shock

In a DSGE model, how can I add a disturbance/shock in the consumption of households? For example given my utility function $$ U(C,H) = \frac{C_t^{1-\theta}}{1-\theta} - \frac{B}{\eta} H_t^\eta,$$ ...
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0answers
92 views

How to derive the Indirect Utility Function and Marshallian Demand from Homothetic Preferences

I need to prove the following relationships: 1 - If preferences are homothetic, then the indirect utility function can be written as $v(p, w) = v(p) · w$. 2 - If preferences are homothetic, then the ...
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1answer
85 views

Homework Question - Price Floor / Elasticity of Demand

I'm currently taking undergrad microeconomics and came across the following question: The current price floor in the agricultural lettuce market makes it such that price of lettuce is 25% higher than ...
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2answers
83 views

Why do stocks that don’t pay any dividends change price when the company does better?

I don’t understand why (non-dividend paying) stocks increase in price when a company is successful; is it just because everyone expects that everyone else will find it more valuable because the ...
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0answers
21 views

An Extension to CES Demand

I am reading a paper with an extended CES final good setting: The representative household consists of a continuum of members, indexed by $k$ $C_{t}=\int C_{k, t} d k$ $C_{k, t}=\left(\int_{j \in \...
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1answer
71 views

Essential goods: How does one restrict the utility function?

I understand that solutions on boundary of the set under consideration when doing constrained optimization are often problematical. Usually it is said that we assume that goods are essential to insure ...
1
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1answer
92 views

GDP in equilibrium

I have to find the GDP in equilibrium for a IS LM model. It is given that $M^d (Y,r)=M_0+M_1Y-M_2r$ and $M^d=M/P$, $M_0,M_1,M_2>0$ and $M^d$ is money demand. my solution so far I have found that $...
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1answer
47 views

Is my solution to finding the Hicksian demand correct? Maximize $x_1^{1/2} + x_2^{1/2}$ subejct to the budget constraint

Maximize $x_1^{\frac{1}{2}} + x_2^{\frac{1}{2}}$ subejct to the budget constraint $p_1x_1+p_2x_2=m$ Setting up the Lagrange and finding the first-order conditions: $L(x_1, x_2, \lambda)=x_1^{\frac{1}{...
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1answer
73 views

Marshall demand for simple CES utility

Assume that preferences are given by a utility function is given $$u(x_1,x_2) = (x_1^\rho + x_2^\rho)^{1/\rho}$$ what then are the Marshall demand given budget constraint $$p_1x_1 + p_2x_2 \leq I$$
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1answer
75 views

Correct and complete characterisation of the Walrasian demand function

I would like to propose to you the following problem and my proposed solution. In particular, I am unsure in how to correctly characterize the Walrasian demand. Can you please have a look at it and ...
4
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1answer
294 views

Perfect substitutes and Lagrange

How does one solve utility maximization of perfect substitutes using Lagrangian function? Consider the problem $$\max_{x,y} ax +by $$ subject to the constraint that $$px + qy \leq I$$ where $a,b,p,q,...
1
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1answer
20 views

The optimal price for a demand curve with a steep slope

Given the demand function, $$D(p)=A-ap$$ I've found the optimal price, $$p=\frac{A+ac}{2a}$$ Where $c$ is cost and $A,a >0$. My question is how is the optimal price is dependent of $a$ (1) - what ...
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1answer
98 views

Budget Set- closed and boundedness

I am fairly new to economics, and we were introduced to budget sets, The professor mentioned that the budget set $B(p,w) = \{x \in R^{l}_{+}: px \leq w\}$ is non empty and closed - I could prove the ...
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1answer
61 views

CES utility function in an Edgeworth box

Two consumers have the CES utility function $x_1^\beta +x_2^\beta$, for $0<\beta<1$, their initial endowments are $w^1=(1,0)$, $w^2=(0,1)$ Draw the Core of this economy in an Edgeworth box. Note ...
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1answer
57 views

Effect of price on utility

A consumer has an endowment vector $w$; at prices $p$ his demand for the first good exceeds his endowment; $x_1^+(p; pw)>w_1$ then a small increase of $p_1$ will lower his utility. I was discussing ...
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3answers
420 views

Price elasticity of demand always increases with price?

Is there a closed-form continuous demand function whose price elasticity of demand decreases with the price?
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1answer
118 views

Walrasian demand with a twist of Leontief function

A consumer has the utility function $u(x_1; x_2) = \min(x_1; x_2) + 5 \max(x_1; x_2)$. Find its Walrasian demand $x^*(p; w)$. I've tried searching it up when we have two Leontief functions summed ...
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1answer
51 views

Prove the equation

Let $$ x^0=x^*(p^0,w)$$ then $$v(p,px^0)$$ is minimized at $$p=p^0$$ What theorem are we supposed to use in order to solve this, because I am a bit lost. Thanks in advance for all the suggestions/help....
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1answer
49 views

What are the advantages of using demand systems estimation? How is this different from individual demand estimation for product?

I don't understand how is demand systems estimation is different from simple demand equation estimation. What's the best resource for getting a history line of demand systems?
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1answer
48 views

Examples of bounded, positive, inverse demand curves

The three most common examples of demand curves I am aware of are \begin{align} Q&= b - aP,\\ Q&= bP^a,\\ Q&= b e^{-aP}\\ \end{align} The first being our classic linear demand curve, the ...
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1answer
29 views

Can individual consumers ever be price-makers, and can they thereby have major effects on welfare?

Suppose there's a big demand shock on some good X. As long as X has fairly standard supply and demand curves, that'll raise the price. And all of the buyers who would have bought at the lower price ...
2
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1answer
51 views

Is saying that the demand is elastic or inelastic too oversimplified?

As we know that elasticity varies from infinity to zero as we move along a linear demand curve, then is it correct to label any demand curve elastic or inelastic as a whole?
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1answer
3k views

what is monotonicity and strict monotonicity in preferences?

I am really confused between monotonic preferences and strictly monotonic preferences, I saw some video and read certain answer where it is mentioned that the When preferences are monotone / weak ...
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1answer
35 views

Are all market demands residual demands to some extent?

I’ve been thinking about how the introduction of a new product, say a new substitute, impacts market demand. Intuitively I know that it would decrease demand and increase elasticity. I am curious ...
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1answer
28 views

Is whatever they calculated a valid "demand elasticity"?

https://medium.com/@kwrdarisipudi/demand-elasticity-of-iphones-1e3a7bbb9eac They are saying iPhone demand is less responsive to price over time, but I disagree. Income shifts the demand curve. Higher ...
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1answer
164 views

confusion regarding elasticity of a demand curve

The following question is on a quiz at Marginal Revolution University: https://mru.org/practice-questions/calculating-elasticity-demand-practice-questions The elasticity of demand is 2.0. Is the ...
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1answer
85 views

What additional axiom to GARP do we need to generate a differentiable or smooth utility function

After researching for a while, I find this: https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents They come up with an axiom called SSARP that generates a preference with smooth demand ...