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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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Outline the costs and benefits for consumers and producers in the statement below [on hold]

Q: A rent ceiling price of \$500 per month is imposed in a market where equilibrium rent would otherwise be \$650.
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10 views

For a normal good, is the Slutsky compensated demand curve flatter than the Hicksian compensated demand curve, or is it steeper?

Please explain with a diagram, showing both, the effect of increase and a decrease in price of the normal good, and the resulting changes in demand under the Hicksian and Slutsky compensated demand ...
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the competitive equilibrium for the Ramsey commodity taxation

I am trying to drive the competitive equilibrium for Ramsey commodity taxation that max the social welfare of skilled(pi) and unskilled(1-pi) workers subject to the feasibility constraint and the ...
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10 views

Producer's optimization problem

I am trying to solve the firms' profit maximization problem. I am wondering whether this is the right way to solve the problem.
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Lagrangian Optimization problem

Is this correct way to solve the Lagrangian optimization problem where MRS is not equal to MRT?
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Obtain F(L,K) given F(L*,K*), K* and L*

The question is, given the optimal production function to maximize profit F(L*,K*)=p/w , and the optimal demands of capital and labour K*=0, L*=(p^2)/(2w^2), retrieve the original production function ...
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19 views

Form of excess demand correspondence

Consider a pure exchange economy with L goods and I consumers. Suppose the utility function is quasiconcave rather than strictly concave, and therefore, the solution to the consumer's utility ...
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Solve consumer’s problem [on hold]

Suppose a consumer consumes three goods, his utility function is given by $$u=min\{x+y,x+z\}$$ Solve the consumer’s problem i.e. find the optimal consumption bundle. No other information is given in ...
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1answer
25 views

For a certain good, if there is a one-time fixed cost for a consumer to switch to a different firm, then this good is? [on hold]

For a certain good, if there is a one-time fixed cost for a consumer to switch to a different firm in a later time, then we say this good is ____ (or has property ___). Examples include Consumer: ...
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1answer
43 views

How do I find optimal price or maximise profit in a monopolistic market?

How do I find the optimal price for a monopolist given the monopolist's cost function and market demand? I have $Profit(y) = p*y + C(y)$ where $p$ is price, $y$ is output, and $C(y)$ is total cost. ...
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26 views

how to relate prices to demand [on hold]

I have two markets 1 and 2 and two firms A and B,The demand is related as demand for firm A in market 1 is equal to demand for firm B in market 2 and demand for firm A in market 2 is higher than ...
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29 views

Imperfect complement indifference curve

Although I've seen many resources about perfect complements, haven't found anything for imperfect ones. Suppose that with x1 and x2, x2 is used only when there are equal amounts of x1. Any excess of ...
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1answer
46 views

Cournot duopoly with differing costs

There are two firms in a Cournot duopoly that face inverse demand $P = \alpha - Q$, but one firm has total costs $c_1*q_1$ and the other has total costs $c_2*q_2$ with $c_1 < c_2$. I want to show ...
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24 views

hotelling model [closed]

I am stuck with this industrial economic question. The question is about hotelling model.
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29 views

what will happen to the equilibrium price and quantity? [closed]

If the price of the wooden chair (a substitute) increases, and as a result, at the same time lots of producers move from steel chair production to wood chair production, What will happen to the ...
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1answer
50 views

Utility Function Implies Consumption of Not All Goods

Suppose we have a utility function with three inputs, $j, k,$ and $s$ described by $$u(j,k,s) = A\ln(k^\alpha + \beta j^\alpha) + B\ln(s).$$ The price of $j, k,s$ are $p_j, p_k, p_s$, respectively, ...
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Demonstrating a Giffen good via Slutsky

I am trying to demonstrate a Giffen good, but I must use the substitution method (which is a lot less clear to me than the Lagrangian approach). Thus: \[\underset{{{x}_{1}},{{x}_{2}}}{\mathop{\max }}...
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1answer
153 views

Whats the difference between local non-satiation and monotonicity?

Is there a practical difference between local non-satiation and montonicity? Can one exist in a utility function without the other?
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1answer
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need help from theorists: proof in Cole, Mailath, and Postlewaite (2001)

I have one question in the proof for section 4.1. in Cole, Mailath, and Postlewaite (2001). $$\lim_{\varepsilon \to 0}\frac{1}{2\varepsilon}\int_{\overline{l}-\varepsilon}^{\overline{l}+\varepsilon} ...
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1answer
66 views

Profit maximization and returns to scale relation

Suppose we have 2 inputs a and b , output is y=f(a,b). In the long run, let us suppose profits are maximized at a* and b*. Profit is py-wa-kb[p is price and w and k are constants]. Now for max profit, ...
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0answers
25 views

Price Control and Black Market [closed]

I am in this intro Microeconomics class and our professor posted this question 3 weeks ago for us to solve. No one has yet to come up with the solution. The attached document includes the question we ...
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Insurance in a non-competitive market

Suppose that the market is monopolistic and firm charges prices higher than $\pi,$ which is the probability of loss. What can we say about the utility of the person under this scenario compared with ...
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2answers
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When demand increases why does the price decrease but equilibrium price increase?

On a demand curve when the demand increases the price will decrease. However on a demand and supply graph, when the demand shifts to the right, the price will increase. I understand why, but then what ...
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Can you get a production function from a cost function? [closed]

Lets say i have this cost function C(x,y) = sqrt(x*y), can i determine the production function out of that cost function.
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35 views

Kink versus a jump in a line passing through origin [closed]

Suppose I have a function defined as follows $n(r) = \begin{cases} n_h \quad \text{if} \quad r< \hat{r} \\ n_l \quad \text{if} \quad r \ge \hat{r}\end{cases}$. Where $n_h > n_l$ and $r \in [0,\...
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1answer
60 views

Market demand independent of distribution of income

If preferences are identical and homogeneous, then show that market demand for any good must be independent of the distribution of income. My workings are as follows: $$q^{d}(p)=\sum_{i=1}^{n}f(p_x,...
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Does pareto efficiency implies that aggregate profits are maximized?

Does stating that a contract results in a Pareto efficient allocation imply that aggregate profits are maximized? I believe that the answer is false, but can't seem to come up with a counterexample.
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1answer
55 views

Proof that EV = CV when there is no income effect

In every textbook it says that it is easy to see that with no income effect, the integral $\int_{p^0_1}^{p^1_1} \! h(p,u_0) \mathrm{d}p_1. = \int_{p^0_1}^{p^1_1} \! h(p,u_1) \, \mathrm{d}p_1$ Could ...
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1answer
61 views

Is there any formal definition of a relationship between resource availability and demand?

I do not have any background on economics. So my question might sound too simple and I hope it to be clear enough. I am curious about the following: Is there any formal definition of a relationship ...
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0answers
42 views

Quasi-linear Optimal Consumption Bundle

I have a question involving optimal consumption bundles for quasi-linear preferences. Utility is given by $$U(x_1,x_2) = 16\sqrt{x_1} + 2x_2$$ and $p_1 = 8, p_2 = 4, I = 30$. What I have so far ...
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What is the difference between $>$ and $≻$ in microeconomics?

As far as understood from the textbook the $≻$ (succeeds symbol) represents the preference of a consumer and the $>$ (greater than) is used to represent a number value (such as the utility). Is ...
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1answer
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Find optimal price from demand function?

I've been struggling with this for hours, trying to figure out how to solve this. "A perfectly competitive market has the marginal cost function, c (cost is C(y)=cy) and is facing the demand function:...
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1answer
71 views

Income effect $-\frac{\partial x_i}{\partial m} x_i$ or $\frac{\partial x_i}{\partial m}x_i$?

Recall that the slutsky equation is: $$\frac{\partial x_i}{\partial p_i}=\frac{\partial h_i}{\partial p_i}-\frac{\partial x_i}{\partial m}x_i$$ I know $\frac{\partial h_i}{\partial p_i}$ defined as ...
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1answer
43 views

The relationship between indirect utility and expenditure functions

I am trying to understand the fact that $e(p, v(p,y)) = y$. There is a proof in the text Advanced Microeconomic Theory (Jehle and Reny) that states the following: Because $u(·)$ is strictly ...
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Question about Supply and Demand of health supplements, equilibrium price and quantity

Nowadays, It is observed that people are more health conscious taking more regular health supplements. Moreover, more drug companies are involving in the production of health supplements. a) How ...
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1answer
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Slutsky equation with marshallian demand

We have marshallian demands for goods 1 and 2: $x_1^* = \frac{I}{2p_1}$ and $x_2^* = \frac{I}{2p_2}$ where $I$ is income and $p_i$ is price. We need to solve the slutsky equation for income effect ...
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2answers
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Utility function that generates a demand curve which will have an U shaped MR curve

This is based off an answer given by @Ubiquitous in here: Can marginal revenue be increasing? The solution he proposed involved a MR curve that sloped down, then up and then down. His equation for ...
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1answer
41 views

Existence of maximum utility with two bads

I am working with a consumption set $X = R_+^2$ and preferences that are complete, transitive, continuous and strongly monotonically decreasing. The economy is characterized by the presence of two ...
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Optimal consumption bundle with buying and selling

I have a microeconomics homework question I am hoping to get some guidance with... Here is the question: A person's utility function U(G, R), where G denotes gallons of gasoline, and R stands for ...
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1answer
50 views

Expenditure minimization with Leontief utility

I need to solve the expenditure minimization in a context where $u(x,y) = min\{x,y\}$, i.e. where utility is Leontief. The minimization problem is $$\text{min}_{x,y}\,\,p_xx+p_yy \\ \text{subject}\,...
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2answers
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Does $U(x,y) = x^2 + y^2 + 2xy$ represent transitive, monotonic preferences?

I'm a monitor for a microeconomics course and a student came up with this question. That this utility function represents monotonic preferences I think it's clear. Both goods have positive and ...
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1answer
40 views

What is the concept of ordinal utility?

I have read in many books that since utility cannot be measured - so ordinal concept or comparison concept is used. If that is so, how can one define a mathematical function for utility which gives a ...
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0answers
25 views

Anscombe and Auman Expected Utility

I would like to hopefully get some insights on the Anscombe and Aumann Expected utility. I've read some proofs and understood the Expected Utility Theorem (VNM) which allows us to approach consumers ...
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2answers
61 views

Regarding the group formation in an oil-price experiment

I'd like to have your opinion on the following; Assuming that I'm doing a research on setting the optimal price for gasoline for a company and my client wants me to perform a study on​ customers' ...
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1answer
77 views

Completeness from an example

I have a set $X = \{1,2,3\}$ and a binary relation $B = \{(1,1),(1,2),(1,3),(2,3),(3,1)\}$. I am trying to understand if this relation is complete. The completeness definition I am using is if for ...
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0answers
43 views

Stuck with deriving the Hicksian demand functions

I'm trying to derive the Hicksian demand functions to this utility function: $u(x) = \sum^{L}_{i=1} \beta_i ln(x_i)$ So far I've got the minimisation problem: $$\begin{align*}...
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0answers
28 views

Income consumption curve for 2 goods, given that the quantity demanded for one good is not dependent on income

Given the demand functions of $x$ and y, where $x$ is income dependent while $y$ is not, should the quantity demanded of $x$ be a constant 0? Let's say $x = f(p_x/p_y)$ while $y = g(I/p_y)$. In this ...
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0answers
61 views

Expected utility theory

I allow myself to write to you today, being stuck on a problem related to the Expected utility function properties. The problem is the following: A) Let X be a finite set. Suppose >~ is a binary ...
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1answer
69 views

Deriving average productivity from a CES production function

Following the work of Raurich et al. (2012) I got stuck trying to derive the average productivity starting from the following CES production function: $$Y=A\left [ \alpha K^{\frac{\sigma -1}{\sigma }}...
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0answers
37 views

One consumer, two goods: Walras' law and Compatibility with WARP

We have a consumer who chooses bundles of two goods: In the initial case we have prices $(p_1,p_2) = (1,1)$ and demand $(x_1,x_2) = (\frac{1}{2}, \frac{1}{2})$ at $w = 1$. In the new case we have $(p′...