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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Is the book by Nicholson and Snyder more rigorous when compared to Varian's Intermediate Microeconomics?
I am about to start learning college level Economics and the two books that are commonly used are Intermediate Microeconomics by Hal Varian and Microeconomic Theory: Basic Principles and Extensions by ...
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Marginal and Average costs for constant returns to scale production function being constant
Suppose that we are dealing with a production function $q = f(k,l)$, of inputs capital and labor. If this function exhibits constant returns to scale then I know that both the marginal cost and ...
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Trade and Opportunity Cost
This is a question on opportunity cost. I had problem in solving the last part. Please help me out.
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If utility function is convex, what can be said about preference relation?
It is known that if a utility function is concave, then it is quasiconcave, and the preference relation is convex.
What can be said if a utility function is convex?
I've found on the Internet then in ...
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If utility function is homogenous of order 1, then partial derivatives of demand function are equal
Prove that if $U(\alpha x)=\alpha U(x)$, then $$\frac{\partial x_i(p,w)}{\partial p_j}=\frac{\partial x_j(p,w)}{\partial p_i}$$ for any $i$ and $j$.
I've proved that $x(p,\alpha w)=\alpha x(p,w)$, but ...
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About infinite strategy sets and $\epsilon$-equilibrium from Game Theory: Analysis of Confilct by Roger Myerson
I am studying infinite strategy sets using Myerson's Game Theory: Analysis of Conflict. On Page 143, he defines an $\epsilon$-equilibrium as follows:
Definition For any nonnegative number $\epsilon$, ...
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Second-degree price discrimination exercise
A monopolist produces output with constant marginal cost equal to 1. There are two of
consumers that are potentially in the market for the good. Consumer A has inverse demand
function
$$p_A(x) = 7 − x,...
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Monopsony diagram curves
Why is the marginal cost curve not the same as the supply curve?
My personal explanation is that since the marginal cost curve is cost of producing each new product, the supply curve just represents ...
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Showing UMP and EMP do not exhibit duality if the assumption of local non-satiation is absent
I have been trying to use the contradiction method to prove this, but it does not seem to be working.
Suppose $x^*$ is optimal in both EMP and UMP. Then $u(x^*) \geq u(x')$ for all $x'$ in $B_pw$.
And ...
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Cost Minimization
Guys in the following optimisation problem why are we not considering the partial derivate of K and L in the Lagrangian in the first two equations
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Is my understanding of Arrow's dictatorship correct? The dictator is free to update her preference and the social choice will always follow her taste
Suppose $R$ is a social ordering, $f$ is the social choice function, and $R_i$ is an individual preference. A profile of individual preference is $<R_i>$.
$f(<R_i>)=R$
Suppose $i=1$ is ...
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Equilibrium asset prices of a risk-free bond and a stock
Setup:
Two-period economy with two equally likely states of the world in the second period.
Two consumers with Bernoulli utility and same discount factor
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FOCs for profit maximization using a transformation function
I'm (still) reading the microeconomics textbook of Mas-Colell et al. On p. 135, the profit maximization problem (PMP) for producers is introduced; characterizing the technology as $Y = \{ y \in \...
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Understanding consumption units normalisation by $u^\prime (c) $
It is frequently noted that if utility is given by $u(c)$, then the object
$$ \frac{u(c)}{u^\prime (c)} $$
puts the utility in consumption units via the normalisation by $u^\prime(c)$. What is the ...
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Determine if goods are substitutes or Complements based on demand function
So I have a consumer with a utility function of the Cobb-Douglas form $v(x_1,x_2)=x^{\frac{1}{2}}_1x^{\frac{1}{2}}_2$.
From that I constructed the demand function for good 1 and good 2:
$x_1=\frac{1}{...
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Price elasticity of demand when total expenditure is constant
I was recently given the following question: assuming that a consumer's total expenditure for a good does not change when the price of that good declines, what is the price elasticity of that consumer'...
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How to compare Preferences in Utility Functions?
When looking at utility functions, how do you compare preferences? I understand the economic concepts, but the math part is holding me down from understanding a lot in the textbook. (I am not typing ...
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Can anyone pls do the derivation of the cournot aggregation condition and make it explanatory
I'd like to know how the aggregation condition was derived.
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How could a market be designed to prevent hoarding?
Imagine that someone has been put in charge of creating a new market for some kind of commodity. They have ultimate regulatory power. What kind of market mechanisms could they put in place to ...
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Derive differen function of production
Find the optimal cost function, profit function, and input functions of the following supply functions: a. 𝑓(𝑙, 𝑘) = 4𝑙½k½ b. 𝑓(a,b)= (a^½+3b½)^2
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Can the following statement be rationalized if it yields a choice function?
A person choose an alternative to maximize another person's suffering.
I thought we could define a sort of relation where the person suffers more from x than y. And if we can always do this, we can ...
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Consumer surplus in Logit model should minus actural payment?
In Logit model, as Train(2003) said in his book(page 55) said,
"By
definition, a person’s consumer surplus is the utility, in dollar terms,
that the person receives in the choice situation. The ...
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Income and substitution effects
I’m currently reading the core economics textbook, and I’m confused by the description of income and substitution effects.
The income effect is defined as the effect on the point where marginal rate ...
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Textbooks for Teaching Intro Micro (Principles): What are the tradeoffs?
As a new AP, I'm assigned to teach Principles of Microeconomics. Different teaching mentors I've asked about course materials have mentioned different texts, but I'm having a hard time getting a sense ...
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Increasing Returns to Scale and Perfect Competition
Increasing returns to scale due to internal economies are incompatible with perfect competition BUT increasing returns to scale due to external economies are compatible with perfect competition
SOURCE:...
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Help Understanding AP Micro MCQ re: Monopolistically Competitive Firm's Demand Elasticity
Here is the question:
A monopolistically competitive firm’s demand curve will be least elastic if
A - the number of rival firms producing very similar products increases
B - the number of rival firms ...
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Explaining the relative share of the income & substitution effects of a price change
Let's say you have a Cobb-Douglas utility function, U = x^.1*y^.9
This will result in Marshallian demand functions x* = .1I / Px, and y* = .9I / Py.
If you perform a Slutsky decomposition for x* as Px ...
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Why is the budget correspondence lower hemicontinuous?
Given income $y$ and a vector of commodity prices $p\in R_+^L$, the set of feasible consumption bundles is described by the budget correspondence, $B(p,y)=\{x\in R_+^L:px\leq y\}$. $B(p,y)$ is both ...
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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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Determine Whether A Preference Relation Satisfies The Continuity Axiom - from Exercise 1.1 in Game Theory: Analysis of Conflict by Roger Myerson
I am self-studying game theory using Game Theory: Analysis of Conflict by Roger Myerson. Here is an exercise from the textbook. I tried it myself, but I am not sure if it is correct. I would really ...
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Dynamic price competition with capacity constraints
I have a dynamic price (Bertrand) competition with 2 players with the same capacity constraints. Grim trigger strategy is to set monopoly price at t=0 or if the monopoly price was set by both players ...
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Exponential Income Consumption Curve
From the Engel's Law we know that as income increases the share of income spent of foods decreases and the share of income spent on luxury goods increases. I wanted to represent this using Consumer ...
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Relationship between supply & demand and marginal cost & marginal revenue under perfect competition
Under perfect competition, $MR=MC=P$, but $P$ is also the point where the supply and demand curves intersect. Why is it that those will always correspond to the same point?
Or is the idea just that if ...
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MCQ on income and substitution effects
Person A spends their income only on bread and cheese. Given a rise in the price of bread leaving income constant and the price of cheese constant, the consumer consumes less bread and less cheese. ...
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How to deflate data from PPI
I have producer price index data. I have 4 products almond walnut pecan and peanuts, two of them start from 1991 almond and walnut (base year) another two from 1982 pecan and peanut. Does anyone know ...
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Equilibrium of Perturbed Dollar Auction Game - An Example from Game Theory: Analysis of Conflict by Roger Myerson
I am studying game theory using Myerson's textbook (Chapter 3 - Equilibria of Strategic-Form Games, Section 3.6 - The Decision-Analytic Approach to Games). I have difficulties understanding and ...
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the relationship between Returns to Scale and shape of Production Possibility Frontier (PPF)?
Guys any material that discusses the above in detail for a two commodity case?
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non-ponzi condition
What Is The Differences Between R(T) And R(S) In No-Ponzi Condition In Ramsey Growth Model?
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Debreu's ordinal representation theorem is unique up to a positive monotonic transformation, what is the source?
In Debreu's 1954 ordinal utility representation theorem, the utility is unique up to a positive monotonic transformation.
While the uniqueness result is well-known, I fail to find a proper reference. ...
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elasticity microeconomics
i have a question so that the answer can help me a lot in completing my graduation project.
a microeconomic theory (to be checked) can predict that the sum of the
three elasticities of the price of ...
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Ramsey model problem
Explain the no-Ponzi game condition throughout the function.
Does the constrain function: also reflect include the No-Ponzi condition?
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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 '...
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Deriving Unit cost function
Unit cost function is the minimum cost to produce one unit of output.
The solution to the above problem is:
where ai(w,r) is the amount of labour needed to produce 1 unit of good i at factor prices (...
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Deadweight loss and consumption externalities
here's the problem and my solution so far:
In this case, the Marginal Private Benefit (MPB) is given by the
equation MPB = 100 - 4q and the Marginal Social Cost (MSC) is given by
the equation MSC = ...
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When talking about the supply curve, does a price increase always result in an increase in quantity sold?
I thought I had an understanding of the law of supply (i.e that when price increases supply should also increase) but we were asked a question on a recent homework sheet that kind of puzzled me. the ...
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why is the MRS same for everyone?
If the consumers are optimizing and at interior solutions and facing the same prices, then the MRS=p1/p2 will be the same for everyone no matter the preferences and income. but why? I don't understand ...
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Positional externalities - Are marketing and higher education examples of market failure?
As Mankiw explains in chapter 10 of the latest edition of Economics (chapter 9 in the previous few, I believe).
Positional externalities lead to "a professional squash player getting the extra ...
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Can anyone help with these calculations?
This is from the this paper in section $3$ about the two period example.
Suppose that we have the following two period, $t=1,2$, sender(S) - receiver(R) model.
For an action path $a=(a_1,a_2)$ and a ...
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Question About Stochastic Choice - MWG Exercise 1.D.5
I am studying microeconomic theory using MWG. I got stuck on Exercise 1.D.5, specifically part (c), but I would also like to have my part (a) and (b) checked by someone. Here is the exercise and my ...
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Why does lump sum tax decrease budget line
I only need help with (f). A hint would be appreciated.
Problem: Donald derives utility from only two goods, carrots (Qc) and donuts (Qd). His utility function is as
follows:
U(Qc,Qd) = (Qc)(Qd)
The ...
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