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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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0answers
6 views

Total factor productivity persistence

Would it make a difference whether a decrease in total factor productivity z on the labor, goods, and money market is persistent? (That is, whether decreased productivity today also is predictive of ...
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2answers
39 views

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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8 views

Order of Marginal Effects in Ordered Regression Model

I'm looking to validate my understanding of marginal effects on the probability of an ordered probit model. I don't understand how ME is calculated in respect to some alternatives. For example if I ...
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0answers
15 views

Linear Utility?

Consider a preference relation $\succeq$ on $X\subseteq\mathbb R^2$. If $\succeq$ satisifies: $$ \begin{align} &1.\mbox{ }(a_1,a_2)\succeq (b_1,b_2)\implies(a_1+t,a_2+s)\succeq (b_1+t,b_2+s),\...
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1answer
35 views

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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1answer
21 views

Question about the relationship between Weak Axiom and Slutsky Matrix

We know that if a differentiable Walrasian demand function $x(p,w)$ satisfies Walras' law ($p^Tx=w$), homogeneity of degree zero ($x(\alpha p,\alpha w)=x(p,w)$), and the weak axiom of revealed ...
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1answer
50 views

Why is the labour supply independent of the wage in this case?

Consider the model $\max U = \ln c + \ln l$ subject to $c=Lw$ and $1=l+L$, where $c$ denotes consumption, $l$ leisure, $L$ the labour and $w$ the wage rate. The optimal choices of $L$ and $l$ can be ...
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1answer
26 views

The assumptions of Rational Expectations Models

What are the assumptions between rational expectations models and how restricted are there for the following results of economic theory? Where can I find them all gathered in some textbook or in the ...
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0answers
10 views

How do you calculate the cost of down time in production?

We are looking at a process that will significantly reduce down time in production for (at least) one of our products. In addition to the saved labor and material costs, is there a way to calculate ...
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0answers
12 views

How to integrate technology lifetime in NPV

I want to calculate and compare the NPV for different ways of producing a good X. The NPV should be calculated for 30 years. The following technologies can be used for production: Technology A, which ...
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0answers
20 views

Production for multiplant firm?

A multi-plant firm will never produce at a plant with an increasing marginal cost when they own another plant with a decreasing marginal cost. Is this true? My reasoning behind this is that firms ...
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1answer
18 views

First-price symmetric auction with discrete value

I've been trying to work the following problem out but I can't quite seem to understand it, or the whole concept of first-place auctions. I don't understand how we get to the equilibrium. The problem ...
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2answers
81 views

Everyone has the same marginal rate of substitution

I'm currently reading Varian's Intermediate Microeconomics and what struck me, is this statement on page 89 of the 8th edition. If everyone faces the same prices for the two goods, then everyone ...
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How can I solve this? [on hold]

How can I solve the diminishing marginal rate of technical substitution?
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0answers
18 views

Is the supply of a price-taking firm increasing in price?

Is the supply of a price-taking firm increasing in price? When the price goes up, this means that firms can make more profit. Therefore, they would want to increase their supply. Is there a way to ...
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0answers
30 views

Examples of textbook definitions of transaction costs, for a non-econ student

I'm not an econ major, neither am I taking it as a minor, however seemingly out of nowhere economics has jumped into my CS class when talking about the role of IT in reducing transaction costs of ...
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3answers
79 views

Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

In the answer to this question, the answerer said "the minimum point of a short run cost curve will be above the long run cost curve". Is it true? If so, how would it be so? I thought that if e.g. ...
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2answers
137 views

Derive demand function $x(p,w)$ from utility function $u(x) = \min\{x1, x2\} + x3$

I know how to solve the two-good case with $u(x) = \min\{x1, x2\}$, but the addition of $x3$ confuses me. Problem Derive the demand function $x(p,w)$ from $u(x) = \min\{x1, x2\} + x3$ What I did ...
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1answer
23 views

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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1answer
24 views

Q: Determining Consumer Price Preferences

I have a homework question that I simply cannot make sense of: Points A and B are two bundles on the same indifference curve for an individual. At bundle A, $q_1 = 16$, $q_2 = 1$, and the $\mathrm{...
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0answers
14 views

utility derivation for a non Cobb Douglas function, find hicks and Marshall demands

I am having troubles answering to these following questions since the utility function is not a Cobb Douglas function, I am not sure about the results I need to find fo Hicksian and warlasian demand ...
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1answer
20 views

What is a substitution pattern?

I know what substitution effect is but I am not sure what substitution patterns are. To give some context the author says the following: "I analyze the substitution patterns between exchange ...
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2answers
1k views

Utility function used to indicate bliss point

How does one create a utility function to indicate existence of a bliss point? what do the goods marshillian demands look like in such a situation?
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2answers
70 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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2answers
84 views

Are there any examples for $u(x_1, x_2) = \max\{x_1, x_2\}$ in real word?

I know how its graph looks like, and it's like when you want to choose between 2 inferior goods you choose the cheaper one so you can have more, but is there another examples?
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2answers
26 views

Why are marginal rates of substitution are identical at equilibrium consumption levels?

According to wikipedia, "At equilibrium consumption levels (assuming no externalities), marginal rates of substitution are identical". Why is it so? What does "equilibrium consumption levels" here ...
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2answers
173 views

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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1answer
62 views

Does quasi-concave utility function imply convex indifference curve?

It is well-known that convex indifference curve (i.e. the function is convex)/ preference would imply quasi-concave utility function. But does quasi-concave utility function imply convex indifference ...
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1answer
48 views

How to prove the relationship between the expected value of a lottery and its certainty equivalent?

Utility function $u(x)$ is monotonic. I want to prove that $u(x)$ exhibits risk aversion if and only if for all lottery $F$: $E(x) \geq CE(F,u)$ (CE is certainty equivalent). (Definition of $CE$: the ...
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2answers
33 views

Why does average variable cost = marginal cost for this function?

I was hoping someone could explain the following. Suppose the short-run total cost function is TC = 50 + 12Q. Which of the following statements is true at all levels of production? The correct answer ...
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1answer
60 views

Equity-efficiency tradeoff examples

What could be an example of equity-efficiency tradeoff in healthcare, social protection or defense? For environment I did think of pollution permits that can cause geographical differences in ...
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0answers
22 views

Intermediate Microeconomics - consumer preferences, and more [closed]

Below is the information for an arbitrary firm: Q = K 0.35 * L0.75 C = 5*K + 2*L What is the production frontier of this firm (CRS, DRS or IRS)? Setting the capital fixed at 5, what is the MPL? ...
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19 views

How does definition of “price equilibrium with transfer” also include the case for the definition of “walrasian equilibrium”?

According to MWG and this answer, walrasian equilibrium is a special case of price equilibrium with transfers. However, since wealth distribution is predetermined in walrasian equilibrium, would it ...
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26 views

Special case for wealth allocation with quasilinear utility functions

Building on this question, regarding the answer from Bkay: Is it a general statement that when $m < \frac{p_y^2}{4 p_x}$, all income will be allocated to $x_M$? What about the case when the ...
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0answers
19 views

How to prove that the substitution effect is negative when price of another good is changed?

In Slutski equation, we have: $$\frac{\partial x_i(p,w)}{\partial p_j} = \frac{\partial h_i (p,u)}{\partial p_j} -\frac{\partial x_i(p,w)}{\partial w}x_j(p,w)$$ If $i \neq j$, the substitution effect ...
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1answer
16 views

Individual Firm and Market Demand Curve

In Section 10.2, Monopoly Power, in Pindyck's text on Microeconomics, an example says that suppose $N$ firms produce a particular product and the market demand curve is $P = -aQ + b$. An individual ...
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25 views

Software used for solving demands of different functions

I'm currently doing some research on demand systems and have been experimenting with different underlying utility functions which will generate different systems of demands. However I've been doing ...
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5answers
636 views

Is it possible to have a preference relation that is complete but not transitive?

I've been doing my own reading on non-rational preference relations. Im currently under the impression that transitivity follows as a direct result of completeness of preferences. However my (much ...
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0answers
28 views

Two different definitions for a Complete Relation

Many sources show this definition for completeness of a relation $$ \forall a, b \in A, a \neq b, (aRb) \text{ or } (bRa) \tag{1} $$ Others show only $$ \forall a, b \in A, (aRb) \text{ or } (bRa) \...
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1answer
76 views

Weakly monotone preferences with singleton indifference curves: do any of them admit a utility representation?

Inspired by this question. The original question was answered by Amit with some nice examples. I would like to know the generalized answer: Suppose we have a preference ordering $\succeq$, which is ...
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1answer
37 views

Economics Optimal bundle [on hold]

Kanghyock has preferences given by $U(x, y) = 3xy + 2x + y^2$, and an income of $I = 102$. Prices are given by $p_x = 1$, $p_y = 2$. Solve for his optimal consumption bundle. What happens to his ...
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1answer
22 views

How is the utility function with constant relative risk-aversion obtained?

In this slide, it says that constant relative risk-Aversion utility function have this form. $u(x) = \frac{1}{1-b} x^{1-b}$ for $b≠1$ $u(x) = In(x)$ for $b=1$ When I tried to derive the utility ...
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2answers
47 views

price, currency rate and quantities effects on sales revenues [on hold]

I am interpreting the august dashboard of our company In fact, the problem is the interpretation of sales revenue ,because, it depends from three factors with different changes In fact: Sales ...
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1answer
30 views

Empirically checking efficiency and equity

I am aware that because of externalities or public goods (or for other reasons) there can be no allocative efficiency on the market. I am also aware that policy makers' subjective judgement of the ...
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0answers
21 views

Change in Consumer Surplus with two goods

Suppose we have two goods, price changes in the two are independent; having seen this question I am considering why the change in total Consumer Surplus is the sum of the change in Consumer Surplus ...
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1answer
53 views

A question about the property of quasi-linear preference

In case of quasi-linear preference, why would one unit more of the numeraire good (good 1) give the same additional utility as spending an additional amount of wealth equal to the cost of one unit of ...
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1answer
71 views

A question about MWG Exercise 3.D.4

I'm doing exercises of Chapter3 of MWG, there's a problem that I don't understand (I didn't figure out the solution manual either...). It is about exercise 3.D.4, the full statement of the exercise ...
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1answer
35 views

What would be the shape of the Indifference curve with slope 1/xy? [on hold]

Let the utility function be: $U(x,y) = \log x +y^2$. In this case, the MRS is coming out to be $\frac{1}{2xy}$. Thus, how will the shape look like?
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conseder , Wl+rK=C derive the production function [closed]

I am not able to do the reverse of the cost function to production function, can your solve the question for me