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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28 views

If the market parcicipants in a market behave strategically, they will result to a suboptimal (Nash) Equilibrium?

Suppose that we have a market with one tradable risky security, where they participate three different types of agents. Informed agenns, say $n_i=3$, uninformed agents, that are price-takers, with ...
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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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Grouping students by teacher in PISA microdata

I'm looking to group the data on the individual students that participated in PISA 2018 according to their respective class or teacher. The data files are available for SPSS and SAS on this page, ...
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Questions about the Edgeworth box

I have some doubts about the Edgeworth box, it's a newbie one so thanks in advance for the patience. In case, I'm confused if we can count the root of the contract curve (point M) as one of the ...
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Regarding the Expenditure Function Underlying a Bliss Point

I've been looking at expenditure systems and have been really interested in the behaviour of the demand system that underlies bliss points: Consider the bliss point utility function of the following ...
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Discount & Interest rates

Small question, is discount rates and interest rates the same/similar thing in economics? A bit confused regarding this.
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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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Characteristics of market liquidity

The characteristics of market liquidity, accoridng to Kyle, are tightness of the market, depth of the marekt and resiliency of prices. By referring to tightness, it descriebes the cost of turning ...
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108 views

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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Study guide (and…) for “Intermediate Microeconomics with Calculus” by Varian

I have been googling study guides, solution manuals and other helpful material made by professors. But I have not found anything useful. Q: Do you guys know anything that will make the book easier ...
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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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intertemporal utility maximisation

Adam's consumption period 1 and 2 are denoted by $c_1$ and $c_2$ respectively. His utility function is $U(c_1,c_2)=4c_1^{0.5} + c_2$ Ben earns an income of \$3 in period 1 and \$3 in period 2, ...
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Why are so many pharmaceutical drugs so expensive? [closed]

In the US, the drug sofisbuvir, brand name sovaldir, and used to treat liver disease hepatitis C, was launched with a price tag of $1000 a pill; and in the UK, the manufacturer Gilead recommended a ...
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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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robinson economy with production

Facing a little bit of a problem with this questions, did a similar one BUT the utility function was not linear and got MRS dependent on goods (was not just a number) - here I am at a loss. 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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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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What is the difference between solving for utility maximization separately or aggregately?

I derived the Walrasian equilibrium for an economy of two consumers with their respective utility functions (u1, u2) and initial endowments but later on I am asked to maximize (u1+u2). Does anyone ...
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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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Math based proof for currency changes (microeconomics)

This isn't part of my homework but I am genuinely interested in the mathematical proof behind this question (this is my line of work currently). I tried to work through it but after 2 hours gave up. ...
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1answer
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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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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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Is a lack of “rules” dangerous for cryptocurrency

An issue/disadvantage that the gold standard had was a lack of mechanisms that forced economies to abide by the rules of the game. As a result, they could at any time de-monetize gold and therefore ...
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Indifference curve - Does $dU = 0$ hold in higher dimensions? / Problem of integrability

In two dimensions, we have on an indifference curve that $dU=0$. Does this apply to indifference objects in higher dimensions? I was thinking that if $dU > 0$, then one is moving to a higher ...
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154 views

how to explain the term “Compensated law of demand” in a plain way?

The term “compensated law of demand” I met in advanced microeconomics textbook, which appeared in “revealed Preference “
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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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Contribution by each factor

Must admit it has been many years since I have done advanced calculations or anything remotely like it, so please bear with me. I have problem that I hope to get some help with. Say I have below ...
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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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155 views

Check if a utility function represents a monotone preference

Given a function $u(x_1, x_2) = x_1 +x_2 + \min(2x_1, x_2)$, how do we mathematically prove that it monotonic or not? Is there is a general algebraic technique to show monotonicity of suchlike ...
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Some basic questions on infromation asymmetry

How does asymmetric information and bid-ask spread are connected? For instance, economic theory tells us that, the more the problem of information asymmetry, the higher the spread is. What is the ...
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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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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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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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How to derive substitution and income effect using Slutsky equation if we don't know which of the prices change?

We have the utility function $$U(x,y)=x + y$$ and we have to derive the substitution and income effects using Slutsky equation. But after I derive the Hicksian demand functions for e.g. x: $$h_x= \...
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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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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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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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1answer
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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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1answer
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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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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Is the Cobb-Douglas Utility Function Locally Non-Satiated at (0,0)?

My understanding of local non-satiation is that increasing your allocation of one good by a marginal amount increases utility. Suppose your utility takes the following form: $$U(x,y)=x^\alpha y^\beta$$...
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How is the defintion of the mean preserving spread (MPS) not too general?

The mean preserving spread is defined as follows: Consider two lotteries g and h. Let $x_g$ und $x_h$ denote the corresponding random variables. Then h is a mean preserving spread (MPS) of g, if: $...
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108 views

Monthly price elasticity and possibility of using daily values

I am calculating the price elasticity as a starting point to find a theoretical optimal price that would maximize our revenue. I am looking at 2 years data and to use the price elasticity formula, I ...
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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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