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).

Filter by
Sorted by
Tagged with
72 votes
13 answers
24k views

Fundamental equations in economics

For the other sciences it´s easy to point to the most important equations that ground the discipline. If I want to explain Economics to a physicist say, what are considered to be the most important ...
user avatar
  • 2,700
48 votes
10 answers
4k views

Seminal papers that later were proven to contain errors

I was reading on institutions, and I came across Acemoglu, Johnson and Robinson (AJR) paper on The Colonial Origins of comparative development: An Empirical Investigation, and this paper seemed so '...
user avatar
31 votes
6 answers
12k views

Why do celebrities get high wages?

In the youtube video Why We Look down on Low Wage Earners the author argued: "economics states that wages are determined [...] by the number of people willing and being able to do a given job that ...
user avatar
27 votes
8 answers
6k views

What's wrong with the "airline marginal cost pricing" argument?

This is a very common argument found in introductory classes and texts. Here's Mankiw's version: Thinking at the margin works for business decisions as well. Consider an airline deciding how much to ...
user avatar
25 votes
4 answers
4k views

How can power/electricity prices be negative?

Bloomberg shows this chart: I understand the above chart to mean that consumers were actually paid to use electricity. (Please correct me if I'm mistaken.) I was wondering how this is possible? How ...
user avatar
25 votes
3 answers
124k views

What are FOCs and SOCs?

I keep seeing the terms first-order conditions and second-order conditions used in my undergrad economics class on production functions, monopolies, etc but I have no idea what these terms mean. It ...
user avatar
24 votes
5 answers
7k views

Why is fuel more expensive on the high way in Europe?

In Europe it's usual, that fuel prices are 10-20% higher on the highway, than in the city. This is not only my personal observation, but also mentioned on travel sites (eg here and here). I don't have ...
user avatar
  • 343
24 votes
4 answers
81k views

Partial vs. general equilibrium

Microeconomic models are usually classified as partial and general equilibrium models. As a layman, I understand that partial equilibrium focuses attention on a few economic variables to find the ...
user avatar
  • 1,659
23 votes
4 answers
2k views

What are Giffen Goods?

What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence?
user avatar
  • 725
20 votes
1 answer
18k views

What do supply-demand curves really look like?

In my basic high school economics course, we've always used supply-demand curves that are lines to simplify calculations. In real markets for real goods, what do the supply and demand curves look like?...
user avatar
19 votes
4 answers
1k views

Is net neutrality not important in a competitive market of internet providers?

In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. ...
user avatar
18 votes
2 answers
5k views

Supermarket selling seasonal items below cost?

In a British supermarket, I saw the prices of Christmas chocolate gift boxes being cut dramatically (£1.50 to £0.15, and £7.50 to £0.22). I don't quite understand this behaviour, where the chocolate ...
user avatar
  • 283
18 votes
2 answers
554 views

How accurate is duality?

In economic theory we know that with the use of some calculus, Hotellings Lemma and Sheppards lemma we can derive a given firms supply function and in term its Profit function. With data of a given ...
user avatar
  • 7,685
16 votes
5 answers
4k views

Topological concepts in economic theory

QUESTION: What are the major or systematic applications of post-1960s mathematics to microeconomics? For example, in the late 19th century, Fisher first used the mathematical ideas of Gibbs to ...
user avatar
15 votes
12 answers
14k views

If I gain, then someone else loses. Correct?

On a very small scale, it's certainly true that if I gain, somebody else might lose. If I take away my brother's chocolate, then he will lose it, and will most probably not get anything comparable. ...
user avatar
15 votes
3 answers
1k views

Consumer optimum in an economy with a continuum of commodities

Consider an economy with a continuum of commodities, with one commodity for each point in $[0,1]$. Suppose a consumer wants to maximise $$U = \int_0^1 c_i^\theta\,di\qquad 0<\theta<1$$ subject ...
user avatar
15 votes
3 answers
1k views

Are there theories that invalidate the "tragedy of the commons"?

Wikipedia states: The tragedy of the commons is an economics theory by Garrett Hardin, according to which individuals, acting independently and rationally according to each one's self-interest, ...
user avatar
15 votes
3 answers
2k views

Are monotonic and continuous preferences necessarily rational?

Let $\succsim$ be a strictly monotonic and continuous preference relation, and let $X=\mathbb{R}^{n}$ be the consumption set. Is rationality of $\succsim$ implied by these conditions? I think ...
user avatar
  • 553
14 votes
5 answers
7k views

Should I stay or should I quit?

Is there an economic theory of quitting an activity? A theory that weighs the investment costs put into something and the opportunity costs of pursuing it. I am aware of Fershtman and Gneezy ...
user avatar
  • 6,652
14 votes
5 answers
3k views

The supply and demand of Virtual Products

We know that the fundamental economic problem is scarce resources relative to unlimited wants. **Does this apply to apps and Ebooks?**They are essentially virtual products who have in theory have ...
user avatar
14 votes
2 answers
13k views

The relationship between the expenditure function and many others!

I dont understand the relationships between Hicksian demand, walrasian demand (marshallian), the expenditure function and the indirect utility function (including the value function V(b)). I have ...
user avatar
  • 149
14 votes
4 answers
1k views

Most notable papers in Economics in 2021

This question is based on this one in Math Overflow I understand that I can't simply 'translate' the question into the area of economics. Thus, I'm open to improvements on the question framework. Here'...
user avatar
13 votes
7 answers
4k views

Does a store suffering increased theft generally cause higher prices?

If a store suffers an increase in theft, will it generally lead to higher prices at that store? My answer is that prices should have already been set to maximize the trade off between profit-per-sale ...
user avatar
  • 139
13 votes
2 answers
5k views

If public roads are public goods, in what way are they non-rivalrous?

I get why, say, the military is a public good, but I don't get why public roads are public goods, since they can't be non-rivalrous, given that at any time only a subset of the population can actually ...
user avatar
  • 241
13 votes
4 answers
599 views

What is it about certain business types that seem to restrict how much large they can grow?

For example, I've never heard of a large lawn-mowing corporation. Phone and computer repairers seem to consist mostly of 1 or two man operations. Wedding planners and photographers seem exclusively to ...
user avatar
12 votes
6 answers
3k views

Why are cost functions often assumed to be convex in microeconomics?

Why are cost functions typically assumed to be convex in producer theory of (introductory) microeconomics? For me this goes against the intuition of economies of scale. There are fixed costs (FC) ...
user avatar
12 votes
2 answers
11k views

What is a substitute/complement in terms of mixed partial derivatives?

I am trying to understand how substitutability relates to mixed partial derivatives. I thought the change in marginal utility with respect to a change in the amount of $x$ would correspond to $$\frac{\...
user avatar
12 votes
2 answers
37k views

Marshallian Demand for Cobb-Douglas

When trying maximize the utility having a cobb-douglas utility function $u=x_1^ax_2^b$, with $a+b = 1$, I found the following formulas (Wikipedia: Marshallian Demand): $x_1 = \frac{am}{p_1}\\ x_2 = \...
user avatar
12 votes
1 answer
290 views

Quality of French wine in the US vs French wine in France

I remember reading a study/paper saying that the AVERAGE bottle of french wine drunk in the US is better than the average bottle of french wine drunk in France, due to the fact that nobody bothers to ...
user avatar
12 votes
3 answers
378 views

What are the recent advancements in building a unified theory of bounded rationality?

It seems that bounded rationality models focus on explaining a particular psychological bias, in a very specific way. In particular, its seems that the state of the art consensus is that one size does ...
user avatar
  • 1,393
12 votes
2 answers
2k views

Depreciation and second-hand markets for bicycles

Probably the answer to this question is "business as usual", but I've observed of late that the market for bicycles is pretty weird. You can buy a brand new factory-produced bicycle in the US (I'm ...
user avatar
  • 336
12 votes
2 answers
270 views

Why use empirical macroeconomic models when they are not policy invariant (Lucas Critique)?

With high probability this question is duplicate, and I tried to find one already in the community, but I was unsuccessful. According to the Lucas Critique, in its more general terms, the problem ...
user avatar
11 votes
5 answers
18k views

When do supply and demand curves shift?

Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the ...
user avatar
  • 145
11 votes
3 answers
4k views

Is scalping tickets harmful?

IMHO, scalping tickets is no different from legitimate arbitrage unless manipulative. Iirc, arbitrage increases surplus and hindering scalping is setting a price ceiling which leads to deadweight ...
user avatar
  • 388
11 votes
5 answers
2k views

What are the arguments against the rational expectations hypothesis?

I believe the rational expectations hypothesis says that agents in a model bear expectations that are the same as mathematical expectations. Under what circumstances does this hypothesis become ...
user avatar
  • 1,659
11 votes
2 answers
1k views

When can one safely talk about decreasing marginal utility?

One thing I hear a lot is talk of decreasing marginal utility—the idea being that additional units of a good become progressively less attractive the more units of that good one has already. However, ...
user avatar
  • 16.6k
11 votes
4 answers
1k views

Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic ...
user avatar
  • 6,833
11 votes
3 answers
1k views

Intuitive explanation of $S(p,w)\cdot p=0$

Can anyone provide an intuitive explanation of why the Slutsky matrix right multiplied by the price vector yields a zero matrix? I know this is true but I do not really understand why it is true. ...
user avatar
  • 111
11 votes
5 answers
2k views

Are There Giffen Inputs?

I am studying for my candidacy exams and I came across this question on a previous exam. The question is in the TFD (True, False, Debatable) section of the exam. The claim is: There are no Giffen ...
user avatar
  • 1,548
11 votes
1 answer
667 views

Calculus and Indifference Curves in an Urban Economics Example

I am reading the paper 'The Structure of Urban Equilibria' by Jan Brueckner. It uses a monocentric city model, where all consumers earn income $y$ at the centre of the city. They buy $q$ housing for ...
user avatar
11 votes
1 answer
203 views

second order stochastic dominance without the same mean

Let $F$ and $G$ be two distributions with the same mean. $F$ is said to second order stochastically dominate (SOSD) $G$ if $$\int u(x)\mathrm dF(x)\ge \int u(x)\mathrm dG(x)\tag{1}$$ for all ...
user avatar
  • 14.4k
11 votes
1 answer
300 views

How does Google price the items on Google Play?

I am a fledgling computer science researcher working in intersection of economics and computation. Please excuse me if this question seems out of place to the administrator. I am currently studying ...
user avatar
11 votes
0 answers
144 views

Queuing Discipline and Lipschitz Continuity

I was reading a paper by Platz and Østerdal (2014) titled "The curse of the first-in-first-out queue discipline". I was wondering about a particular section of it, particularly the part about last-in-...
user avatar
  • 6,409
11 votes
0 answers
819 views

Modern theory of integrability of demand?

I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf I am wondering if there is any modern treatment of the ...
user avatar
  • 1,393
10 votes
4 answers
2k views

Has monopoly theory incorporated network effects as a source of monopoly?

I studied industrial organization for my Econ. Ph.D. four decades ago. At that time industrial organization had no way to incorporate 'network effects' into monopoly theory. With the advent of social ...
user avatar
  • 103
10 votes
2 answers
4k views

Intuition behind risk premium

In Lecture 20 of MIT's Microeconomics course, a situation is proposed where a 50/50 bet will either result in losing \$100 or gaining \$125 with a starting wealth of \$100. It is stated that a person ...
user avatar
  • 125
10 votes
3 answers
13k views

How to show that a homothetic utility function has demand functions which are linear in income

A homothetic utility function is one which is a monotonic transformation of a homogeneous utility function. I am asked to show that if a utility function is homothetic then the associated demand ...
user avatar
  • 326
10 votes
2 answers
5k views

Why is Roy's Identity so important?

I've been reviewing some of my microeconomics theory and have been reading up on Roy's Identity. Recall that Roy's identity is defined as: $$x^*_{i}(\text{p},m)=-\frac{\frac{\partial v}{\partial p_{i}...
user avatar
  • 7,685
10 votes
1 answer
604 views

Is it possible to derive indifference curves given marshallian demand function?

In a two good world, will a marshallian demand function the likes of D(p,m) where p is the price of one good and m the income yield a utility function or ...
user avatar
10 votes
3 answers
174 views

Do a group of economic agents really act as if they are rational?

When questioning the rational choice hypothesis, I often get responses that are similar to the followings: "Individuals may sometimes make irrational decisions, but a large group of economic ...
user avatar

1
2 3 4 5
49