Questions tagged [microeconomics]

Microeconomics is a branch of economics that studies the market behavior of individual actors (usually firms and consumers) and the aggregation of their actions in different institutional frameworks (usually the market).

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Local nonsatiation

Suppose that $x^*$ satisfies $x^*\succsim x$ for $\forall x\in\{{x∈X|p·x\leq m}\}$. How can we prove that $x\succsim x^*$ $\Rightarrow$ $p·x≥m$ if $\succsim$ is locally nonsatiated? My idea for this ...
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Microeconomics (signaling) [closed]

Suppose there are 10 individuals in a society, 5 of whom are of high ability, and 5 of low ability. Individuals know their own abilities. Suppose that each individual lives for two periods and is ...
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4answers
174 views

Why does anyone prepare their own food?

I'm not an econ person, so this is a super naive question, but here goes: why, given the comparative advantage that specialization produces, does anyone prepare their own food rather than buying from ...
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2answers
245 views

Under what condition is a cost function strictly concave in prices?

Define the unit cost function as $$ c(w) = \min_{z\geq 0} w\cdot z $$ subject to $f(z)\geq 1$. Where $w$ is a vector of input prices, $z$ is the vector of inputs and $f$ is a production function. We ...
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0answers
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Von Neumann–Morgenstern implications for repeated strategic games

I am currently studying game theory and have just begun looking at repeated strategic games. In my lecture notes, it states that "preferences are unique up to an affine transformation", ...
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1answer
24 views

Consumer Surplus

Is there a case where the consumer surplus being negative does not mean that the producer surplus increases? Is it true that as consumer surplus increases, producer surplus decreases and vice versa?
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1answer
73 views

How to compute elasticity of substitution in labor market of blacks and whites using experience-education groups?

I'm reading "Competition in the Promised Land – Black Migrants in Northern Cities and Labor Markets", by Leah Boustan, and I'm trying to understand her computation of black and white ...
5
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1answer
68 views

Signalling models and out of equilibrium beliefs

Consider the simplest version of the Spence signalling model. There are two types of worker, with either productivity $\theta_H$ or instead productivity $\theta_H < \theta_L$. The proportions of ...
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1answer
37 views

Lagrangian multiplier and optimal bundle

I would like to know where I am wrong (if I am) and why I am wrong here please: If a consumer has an income of 600 euros to spend for good x (Px = 10 euros) and good y (Py = 5 euros). What is the ...
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2answers
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Does elasticity make sense for different levels of prices? If not, how can we fix that?

Let's say we know that our customers can't make sense of a raise in 5% of the price. It's too little for them to notice. However, an increase above 10% is easily noticed. If this is true, different ...
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0answers
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Problem with the discrete demand curve

I am starting to learn microeconomics from a book named Intermediate Microeconomics by Hal R. Varian. The first chapter is on market. I was attempting to solve the end text problems but was stuck. ...
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0answers
38 views

Quasilinear Preferences [duplicate]

So, I understand that a utility function of the form $U(x,y)=x^{0,5}+y$ is linear in $y$ and so there is no income effect on $x$. But what about the function of the form $U(x,y)=x^{0,5}+\frac{y^{2}}{2}...
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It is argued that in optimization the first part of the second-order condition appears opposite to their interpretation? [closed]

It is argued that in optimization the first part of the second-order condition appears opposite to their interpretation
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1answer
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How to define the natural rate output

I'm following Woodford's Interest & Prices to derive the microfundations for a New Keynesian model with staggereed prices. I defined the utility function and disutility function (1.1 at page 144) ...
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2answers
53 views

Nested/Recursive Dynastic Utility Functions

I want to find a way of representing a dynastic utility function in which not only the head of the dynasty's utility is dependent on its descendants' utility, but all members of the family tree gain ...
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1answer
45 views

Finding optimum market value of vintage car

I am trying to find first and second order conditions for the following problem: $$P(t) = V(t)e^{-rt}- \int^t_0 me^{-r\tau}d \tau $$ I managed to find the first order condition: $$P'(t) = V'(t)e^{-rt} ...
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2answers
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Microeconomics: first fundamental theorem of welfare

Can somebody tell me why part (2) of this proof is of any relevance? (1) Assume that $x$ is Pareto-dominated by $y$. Since $x_i$ is optimal for consumer $i$: if $y_i\succ x_i$ then $p\cdot y_i > p\...
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0answers
29 views

Utility function parameters

I have the following utility function: u($x_1$,$x_2$)=($x_1$+$b_1$)$^c$($x_2$+$b_2$)$^{1-c}$ I'm asked to explain what $b_1$, $b_2$ and $c$ stand for, maybe for c is like a weight of every good. but I'...
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0answers
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Original formulation of the axioms of rationality [duplicate]

Completeness and transitivity are considered to be the two axioms of rationality in case of decisions under certainty. I wanted to know when were these axioms first proposed, by whom and the first ...
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1answer
67 views

I don't understand how a graph would look like for this situation

If there is a negative production externality of agriculture which is water wastage, and the government provides a 100% subsidy to the farmers so they can buy irrigation gadgets to reduce water ...
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1answer
27 views

Why wouldn't other firms follow suit if an individual firm decides to cut its price?

Why doesn't the demand curve an individual firm faces in a perfectly competitive market have the same elasticity as it does in a oligopolistic market? Under perfect competition, if a firm increases ...
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1answer
41 views

symmetry of equilibria with heterogeneous players

I have a question about game theory terminology. I am working on a model in which players are heterogeneous in two dimensions, and there are four types of players. For example one type of players ...
3
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1answer
25 views

Monotonicity and continuity implies that all bundles are weakly preferred to 0

Suppose a consumer has a preference ordering $\succsim$ on $X$ that is complete. Show that if preferences are continuous and monotone, then $x\succsim0$ for any $x\in\mathbb{R}_{+}^{N}$, where $0$ is ...
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0answers
38 views

What is the usefulness of Cobb Douglas functions? Why do we use them so often?

Hard to find much explanation as to why we generally use CD functions so often. My understanding is that it is usually well behaved when used for utility functions and preferances, since it is convex,...
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Is there a name for goods/services/rights/etc. for which the “direction” of payment in a transaction could vary based on circumstances?

For example, consider Amazon Hub Lockers, order pick-up boxes usually located in 3rd party retail venues such as drug/convenience stores, etc. Amazon benefits by reducing last mile delivery costs and ...
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1answer
47 views

Integration by parts with CDF

I am told that the following equality follows from integration by parts: $$\int_{R-k}^{1}(\theta-R)dG(\theta)-G(R-k)k=\int_{R-k}^{1}(1-G(\theta))d\theta-k$$ Where $R>k>0$ and $G$ is the CDF of $\...
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1answer
45 views

pdynmc package in R | GMM issue

I am a student, currently working on my Bachelor's Thesis. And as the next deadline approaches, I hope someone could give me a hand on my constant issue: I need to estimate the next model with GMM ...
2
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2answers
38 views

opportunity cost when inside production possibility frontier

I am a bit confused about whether there is a opportunity cost moving from within the PPF to be closer to the PPF and use some of the unemployed resources. I current thinking is that there is zero ...
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0answers
43 views

Labor Supply- how to do comparative statics?

Consider an economy with a competitive industry where the representative firm's production function takes the form of a Cobb Douglas production function $Y=z K^{\theta} L^{1-\theta}$. $z$ is an index ...
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1answer
19 views

Determining the elasticity of a supply/demand curve visually

Hi, I am self-studying microeconomics in preparation for a future course. I am confused about whether or not it is possible to visually determine the elasticity of a demand/supply curve by looking at ...
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1answer
41 views

Assumptions on preference relation

This question is from Harvard seminar problem set (Q-3 part b) https://www.studocu.com/en-us/document/harvard-university/economics/mandatory-assignments/econ2020a-14-ps01-please-give-as-much-...
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Power System Economics Question

I'm not sure where should I post this under since it's both about Power Systems and Economics but I want to understand the economics aspect of it. This is the answer: This is my attempt, tabulated: ...
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1answer
76 views

Offer curves in general equilibrium

I'm having trouble understanding how to find the offer curves in general equilibrium. Is there a general way that we can use to find it? I can understand the Pareto set and contract curve but when it ...
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1answer
47 views

Do points inside the PPF curve always mean productive inefficiency?

If a firm produces combinations of goods along the PPF curve, it has achieved its productive efficiency. And when a firm reaches productive efficiency, it means that all factors of production have ...
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1answer
72 views

Find Pareto optimal allocations and the core for the following economies

Find Pareto optimal allocations and the core for the following economies. There are two consumers and two goods. Utility functions are $u_1(x_1,y_1)= 10x_1-(y_1-2)^2$ and $u_2(x_2,y_2) = 10y_2 − (x_2 −...
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1answer
85 views

Payoff from an option contract

In period 1 the consumer of type $\theta$ selects an option contract consisting of an up-front fee, $B>0$, and exercise price, $\bar{R}$. The consumer pays $B$ at the end of the first period. In ...
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0answers
93 views

Arellano and Bond (1991) GMM estimation in R by using plm package

I am a last-year student at university, currently working on my Bachelor's (so still learning R), and I really hope that you would suggest a potential solution (even if to use Python). So, the main ...
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1answer
75 views

Is it enough to prove that $x \not \succsim^* y$?

I'm trying to negate that: $\exists B \in \mathcal{B}$ such that $x,y \in B$ and $x \in C(B)$. Looks that the negation is equivalent to: $\forall B \in \mathcal{B}(x,y \in B \implies x \not \in C(B))$....
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1answer
83 views

General Equilibrium with Perfect Substitutes

I came across the following problem: The quantities of an economy’s only two goods are denoted by $X$ and $Y$; no production is possible. Ann’s and Ben’s preferences are described by the utility ...
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1answer
31 views

Labor demand and supply curves in terms of elasticities

I would like to ask for your help to derive some expressions. Let the labor demand curve be described by: $N^D = N^D(W/P, \bar{K}), \quad N^D_{W/P}= \frac{1}{F_{NN}}< 0, \quad N^D_K = -\frac{F_{NK}}...
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0answers
35 views

Imputing # of unemployed from Labor Force Survey

I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates. ...
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0answers
11 views

How to distinguish if production costs changes the elasticity of the supply or shifts it?

I have specific doubts about how a factor affects supply elasticity and how it shifts the supply curve. In many cases, the literature shows that some factors affect supply in both ways. For example, a ...
2
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2answers
70 views

Can anyone solve this indifference curve question? [closed]

Draw the indifference curves for a preference relation which is neither monotonous or strictly convex, yet convex. My solution was to draw a circle but I'm pretty sure that is wrong.
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1answer
44 views

Is possible that, in a choice structure $(B,C)$, $C(b) = \emptyset$, for some $b \in B$

It is a very simple question but with some implications. I just start reading Mas-Colell and it's not clear for me if it is possible a choice structure, $(B,C(.))$, where $\exists b \in B, C(b)= \...
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1answer
38 views

Intuition of Shephard's Lemma in Reverse

I am not sure how to word this question. I understand the envelop theorem pretty well and as a result Shepard's Lemma. The proof is relatively straightforward. I am getting stuck on the intuition ...
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1answer
87 views

A world only with two contries (net exporter)

We assume that we have two and only two contries: Albania and Bulgaria. There is complete free trade between the two countries. The aggregate investments in Albania are given by: $$I^A=A-ar$$ where $A,...
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0answers
32 views

Production efficiency under monopoly

Sorry, I forgot to mention that in this case, the demand curve is above the LAC at the point where MR = MC. In other words, the price is set higher than the long-run average cost. I am trying to wrap ...
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0answers
27 views

Interpretation of market condition given by relation between elasticities

The total market demand is given by the sum of the two destinations ($e$ and $f$) given to the product. Given these conditions: Demand: $d(p) = e(p) + f(p)$ where: $d(p) > 0$, $d'(p) \leq 0$; $e(...
2
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0answers
16 views

Fehr-Schmidt, Ultimatum game, Subgame-Perfect Nash Equilibrium

I'm studying the different variations of the ultimatum games. I've spent some time on this following game: Assume now that each player does not only care about the amount of money she receives, but ...
0
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1answer
40 views

Exchange economy find core

Find Pareto optimal allocations and the core for the following economies Consider an exchange economy with two agents and two goods. Let consumption sets are the nonnegative orthant. Agent 1’s utility ...

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