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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21 views

Self study on Microeconomic theory book

I am attempting to learn Microeconomic theory book by Mas-Cole’s, Whinston and Green by myself. I am finding it bit complicated and time consuming to follow. If someone could suggest me a video ...
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Is marketing a field of economics?

I would argue that the marketing (or de-marketing as in the example of a recall) of goods and services is an implementation of knowledge and experience in microeconomics as it deals with the practical ...
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Why don't we give social security in such a way that previous optimal bundle is once agin the optimal budle?

In this the budget line has shifted inwards due to increase in the price of goods. And then we provide social security such that the past optimal bundle becomes affordable but is not optimal. So why ...
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Deriving Money demand function with utility function [closed]

What is the Money demand function when the utility of money for the household is given by u(Y, M/P)= 0.5lnY + 0.5ln(M/P ) I tried solving by differentiating and got it equal to Y but the answer is Y/i....
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Increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets w/ 2 separate buyers)

Would an increase in the price of skateboard wheels cause a decrease/no change in the demand of skateboards? (2 separate markets with 2 separate buyers) Note: I'm going to be mainly focused on the ...
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What can be said about $(p − q)x_0=C$ from the information given?

A consumer consumes only two goods $x$ and $y$. The price of good $x$ in the local market is $p$ and that in a distant market is $q$, where $p > q$. However, to go to the distant market, the ...
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29 views

Informed traders do know the cross section of the privately known signal between each other

I am having the following setup of privately known signals and I am trying to understand an assumption. Here, I quote the setup. Consider two agents idexed by $i=\{1,2\}$ and each one observes some ...
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87 views

How can I build a fixed point theorem argument in pure strategies?

To begin with, I am recalling the Banach Fixed Point Theorem. Let $(X,d)$ be a non-empty complete metric space with a contraction mapping $T:X\to X$. Then $T$ admits a unique fixed-point $x^*$ in $X$ ...
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51 views

Find a perfect Bayesian equilibrium

Each of two sellers, $1$ and $2$ owns one indivisible object that a buyer would like to buy. The two objects are identical. The buyer´s valuation depends on the number of objects he gets. The ...
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market for lemons with signals - equilibriums vs constraints

I checked online for a question similar to this but was unable to find one. I understand the concept of pooling and separating equilibrium and can apply it to labourers having different qualities of ...
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Absolute and Comparative Advantage Help

I started studying microeconomics and I am having trouble figuring our how can I find the "?" values in this table? If someone could help me I would be really grateful. ...
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Estimating multi-output production technologies

For a given firm, is it ever appropriate to estimate an independent production function for each output? For example, a university produces journal articles $A$ and services a number of students $S$ ...
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Find out inverse demand curve in Cournot competition

I am currently struggling with an exercise and I hope you can help me. These are the basic information: The inverse demand curve is P=a-bQ, while there are four firms competing (Cournot) in this ...
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How do I figure out whether the ICs are convex or concave?

Question: Randy Ratpack hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an ...
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Bargaining Theory: reading list

I looked around in the forum but I have not found this question yet. I would like to approach the topic of bargaining models in the spirit of Rubinstein, Ariel. "Perfect equilibrium in a ...
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Prove local non satiation and convexity? [closed]

If we have the following representation of a preference relation (in form of a utility function) $$u(x_1, x_2) = \max\{2x_1, 2x_2\} + \min\{x_1, x_2\}$$ does the relation satisfy local non satiation ...
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223 views

Can implicit costs make every option not worth doing?

I'm new to microeconomics so sorry if this is simplistic, but if an action should only be taken when benefits > costs and opportunity costs are included in cost calculations, how would one deal ...
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Relation between demands of $x, y$ and $z$

Question: Consider a consumer with utility function $U(x,y,z)=y\min\{x,z\}$. The prices of all three goods are the same. The consumer has $100 to spend on these three goods.The demands will be such ...
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Game theory and differential equations

Does anybody know, any (advanced/classic) textbook that combines game theory with differential equations in mathematical economics. Specifically, I an interested in asymmetric information problems.
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44 views

Generalizing demand for perfect substitutes utility function

I have the utility function: $U(x_1,...,x_n)=a_0+\sum_{i=1}^{n}a_ix_i\;\;\;\;\;\;\;\;\;a_j\in\mathbb{R}_+ \;\;\forall j=\{0,...,n\}$ (maybe $a_0$ could be zero) $\sum_{i=1}^{n}a_i\in (0,K)\;\;\;$ ...
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22 views

How do soda bottler costs break down?

I am curious what the typical breakdown of costs is for a soda bottler in the United States. I realize there are variations depending on region and brand. I am looking for ballpark estimates based on ...
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72 views

Coase theorem study material

I'd like to read a more detailed/mathematical analysis on the subject of Coase's theorem. Could you perhaps suggest any advanced textbook/paper on the matter?
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34 views

Why doesn't the San Francisco Bay Area have two-story houses?

The San Francisco Bay Area is an interesting place. Housing prices are through the roof (hehe) and increasing by an average of 5-20% per year for the past 20 years. This is largely driven by an ...
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Increased production costs associated with increased output produced? Why do firms have prices increase with the SRAS or Supply Curve?

In my textbook, it said (this is for SRAS and AD, but I'm also going to apply this a bit fo microeconomics.. sorry for mixing, but my question applies in both ways, I believe) "The average price ...
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100 views

How do I solve the Envelope Theorem condition in Microeconomics?

I am preparing myself for a MSc in Economics and don't understand why, according to the Envelope Theorem, when deriving a utility function $ u(θ, q(θ), r(θ)) = B(q-r) - C(\frac{q}{θ})$, its derivative ...
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how to calculate Leontief demand functions from first order conditions of a CES function when sigma tends to 0?

This question is NOT about how to approximate a CES function to a leontief function. Knowing that: $i= good (\begin{array}{*{20}{c}} {1}&{or}&{2} \end{array})$ $j= firm (\begin{array}{*{20}{c}}...
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Stag Hare inefficient Nash Equilibrium and level-K thinking

Two players $i,j$; both have two strategies $\{h,s\}$. The payoffs vector of $i,j$: $u(h,h)=(5,5)$ (if both players choose $\{h\}$ then $i$ receives 5 and $j$ receives 5) $u(h,s)=(10,0)$ $u(s,h)=(0,10)...
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50 views

Term for partial resource use economics

In economics, economies of scale are "the cost advantages that enterprises obtain due to their scale of operation" (Wikipedia/User:Loraof). There is a common type of scaling, mostly in ...
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In an intertemporal (2-period) consumption model, why is the investment rate independent of discount factor?

In lecture, my professor defined the following 2-period consumption model: $c_i = $ consumption in period $i$. $y =$ endowed income in period 1. $r = $ interest rate in perfect credit markets. $h = $ ...
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38 views

What kind of tax diagram can show the full consumer tax burden?

If a government increases a purchase tax on an apartment, the tax will be fully burdened by the consumer, as the "producer" will simply be the owner of the house. But in a diagram, should ...
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51 views

elasticity from inverse demand

I was wondering of my thinking here was right: Given $$ e=\frac{dQ}{dp}*\frac{p}{Q}, $$ where $ e $ is elasticity, $ dQ/dp $ is first derivative of demand function, $p$ is price and $Q$ is quantity. ...
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If the Yield (Y) of the cosnumers change, does the $Q_{D}$ remain parallel?

Because we have a change in Yield (Y) which is a factor of demand, we have a move in the $Q_D$. However, not all changes in the Yield affect the $Q_D$ the same way right? For example, if we know that $...
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38 views

Capital in terms of labor

I have a question that asks to find $\frac{\partial K}{\partial L} $ from $Q=cL^aK^b$, when $Q$ and $c$ are constants. It lists 4 answer choices but I’m just not sure how to approach it. Implicit ...
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63 views

Interpretation of $x c '(x)$

Consider a cost function that is continuous, differentiable and (possibly) convex: $c(x):\mathbb{R}^+\to \mathbb{R}$. I was wondering if there is a "common" way to interpret the expression: $...
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The existence of solution for profit maximization problem

I'm thinking about the conditions for existence of solution of this profit maximization problem(PMP), i.e., $\max_{z \in R_+^{K-1}} pf(z) -wz$, where $z \geq 0$: input vector, $p>0$: the price of ...
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68 views

Prove that budget constraint is Lower Hemi Continuos (LHC)

I need to prove that the following constraint is LHC. $B=\{x \in R^n : px\leqslant pw)$ But Im not capable of finding and sequence $\{x_n\}$ such that $x_n \in B(p_n,w_n) \forall n$ and that $x_n\...
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40 views

Where can I find economics theories to learn about? [closed]

I'm a beginner to economics so I do not have much knowledge. However, I enjoy learning new economics theories. For now, I normally search for economics theories by looking at those that won nobel ...
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Buyer and seller PBE

A seller offers a price $P \in \mathbb{R}^{+}$. Buyers can have type $\theta$ distributed uniformly on $ [0,1]$. If a buyer of type $\theta$ accepts, then he gets $\theta-p$, and the seller gets $P$. ...
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Convenient S-shaped production function (i.e. with IRS and DRS) to derive a discontinuous demand for labor

Let say that a firm produces a commodity using only one input (i.e. Labor if we suppose to be in the very short run). Then we have a general production function of the following form $y=f(L)$, for $L≥...
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Private signals [closed]

Following the literature of information asymmetry (see in Kyle among others), we have seen that many papers introduce a private signal, that is $$S=\tilde{v}+\tilde{e}$$ where, $(\tilde{v},\tilde{e})$...
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248 views

First welfare theorem and convexity

Are convex preferences needed for the first welfare theorem? It would see so. For example, we could have a situation in which B's indifference curve is non-convex, such that, at the equilibrium X, it ...
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64 views

Edgeworth box and identical tastes

If tastes are homothetic and identical, does this imply that the contract curve is the line connecting the lower left and upper right corners of the box? My understanding: no, it does not. Consumers' ...
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1answer
28 views

Capital/Income Ratio in Pikketty's Capital

In Capital by Thomas Pikketty, https://www.robertdkirkby.com/blog/2015/summary-of-piketty-i/, he states that World War I and World War II were the main reasons why the Capital Income to Labour Income ...
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198 views

Why do we need the specific utility assumption?

In many microeconomic models, we read the assumption that agents have CARA normal utility preferences. We need the assumption of the utility to do pricing, but should someone do differently? Namely, ...
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27 views

Auction Makrets and delearship markets

The largest difference is that the NYSE is an auction market and the Nasdaq is a dealer market. In the former, the highest bid for a stock is matched with the lowest asking price. In the latter, ...
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38 views

Find Price Elasticity of Demand for p = 0

Given a linear demand curve $q(p) = a - bp$, how would one find the price elasticity of demand at $p = 0$? The quantity that would be demanded is given: $Q_0 = a$ The formula for the price elasticity ...
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2answers
67 views

Can mixed strategies actually predict behaviour of rational actors in non-constant sum games?

I understand how the concept of the mixed NE (mathematically) works. But I don’t understand how we can expect players to behave in a way that would arrive at such an equilibrium. Consider the ...
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33 views

Is there a “name” for price leadership oligopoly?

Oligopoly equilibrium in the static setup consists of cournout equilibrium and bertrand equilibrium (Nash Equilibria)while in sequential games we have stackelberg equilibrium and price leadership ...
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49 views

Sequential price setting SPNE

Firms A and B are in an oligopoly. They both face the linear market demand curve $X=A-\alpha P$, where $X$ is total market demand, and $P$ is price. Assume constant marginal costs $C_{A}$ and $C_{B}$, ...

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