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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Determining what type of Production function I have [closed]
Undergrad Econ student here. I have the production function Q = 2(KL + L + 1) what type of production function would this be and how would I be able to determine what type it is?
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AS/AD Graph how? [closed]
I come here with a homework assignment I cannot solve for the love of God. The question reads: Draw and carefully label and describe a graph that utilizes the Aggregate Demand/Aggregate Supply model ...
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Upward sloping demand curves can’t exist!
How can upward sloping demand curves exist given that consumer surplus will always be negative?
So, why would a person ever buy a positive quantity?
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Maximization of CD production function
I was reading the paper "Optimal Investment Under Uncertainty" (Abel, 1982). At one point the author addresses the following problem:
$$\max_{L_{t}}\left\{ p_{t}L_{t}^{\alpha}K_{t}^{1-\alpha}...
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If the income increases by $\$d$, will it mean the utility at the optimal point increases by $\lambda d$?
I read that if the income increases by $\\\$d$, then the utility at the optimal point will increase by $\lambda d$. How do I get a sense of this, both mathematically and intuitively?
Can we write that ...
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Hardcore elasticity of substitution (bad results)
I have a following function and would like to find the elasticity of substitution between pairs:
$$U = \left( x_1^\delta + x_2^\delta + x_3^\gamma + x_4^\gamma \right)^{\frac{1}{\delta + \gamma}}$$
...
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How to derive a cost function when a firm takes over another firm to form a monopoly
Let's say firm 1 has a production function = min(L1,K1)
And firm 2 has a production function = L^1/2*K^1/2
Total labour supply = L1+L2 Total capital =K1+K2
And firm 2 takes over firm 1
How to derive ...
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Suppliers holding back production in expectation of better price in future
Anthony’s Ephemera Emporium sells signed photos of cryptids like Bigfoot, chupacabra, and other mythical creatures. These photos are substitutes in production.
If Anthony expects the price of signed ...
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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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Convex curves and quasi-concave [closed]
For two goods, like U(x,y) = k, where k is a natural number, we define the Marginal Rate of Substitution (MRS) as the ratio of the partial derivatives of U with respect to x and y. If we take the ...
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What is the difference among information acquisition, information providing and information design?
Taking a look at the literature of information economics I see three different terminologies about information that seem to have some intersection, though my understanding is not so good. These terms ...
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What is the economic intuition of prudence in the static case?
How can we interpret a "prudent" agent in the static case (i.e., someone with $u'''(\cdot)>0$)?
I understand that in a dynamic setting, someone exhibiting prudence would do precautionary ...
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Looking for open learning material
in the next semester I am going to start studying some economics subjects at uni.
Since I have a little bit of time, I would like to start now already.
Does anyone know where I can find learning ...
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CES in Slutsky matrix (weird results)
We have a Slutsky matrix:
\begin{bmatrix}
\partial x_{1}^H/\partial P_1 & \partial x_{1}^H/\partial P_2 & \dots & \partial x_{1}^H/\partial P_n \\
\partial x_{2}^H/\partial P_1 &...
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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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How to solve the Bertrand model when marginal costs are different and not constant?
Find the equilibrium in the Bertrand model with two firms, with total costs given by:
$TC_1(q_1) = \alpha q_{1}^2$
$TC_2(q_2) = \beta q_{2}^2$
Inverse demand is given by
$P = A - Q$,
where $Q = q_1 + ...
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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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The formula for expansion path
Is there a way how to precisely compute the expansion path?
I know a consumer's utility function $U(\boldsymbol{x})$, I know the budget constraint $\sum P_i x_i \leq M$, I am able to compute 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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Different elasticities of substitution
I have been reading into generalizations of the concept of elasticity of substitution for more goods/inputs and three main possibilities emerged:
Hicksian EOS
Allen-Uzawa EOS
Morishima EOS
HICKS
As ...
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Can someone help me find the perfect Bayesian Equilibria of this game? [closed]
Hi, I had my microeconomics exam yesterday and I was stuck at finding the perfect bayesian equilibria for the game in the picture. I would greatly appreciate if someone could provide me the solution ...
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how does monopolisitic competition make profit in the long run in reality
guys, I have this doubt that if the fast food industry such as KFC, and Maccas are examples of monopolistic competition how are they still making a profit? Because as per the model in long run the ...
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Why is the supply function the first derivative of the profit function in the long run?
We have the profit function of the firm profit = $p^2 -2p -399$.
We take derivative of it we say that the output supply function is =$2p-2$
I understand that Profit = q*p - TC
But why do we say the ...
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Subgames in imperfect information games
I have not previously come across three player games and I am trying to solve for the subgame perfect NE/equilibria for the following game, where player 3's decision node is linked to the decisions of ...
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Profit Function: Just revenue maximization subject to constraint? if so where is $\lambda$?
Disclaimer: I dont know i'm getting confused with basic microeconomic prodoucer theory (note: Ive been watching some Hak Choi Videos on youtube),but this is my overall thought process.
We know that ...
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Supply function of a price-taking firm with a quadratic production function
For a firm with the production function
$$Q = 40L-L^2$$
where $L$ is labor and wage $w = 20$ find supply function of a price-taking firm under perfect competition. Fixed costs equal $10$.
Following ...
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Deriving the constant relative risk aversion utility function
Here is the question I am trying to tackle:
Suppose that we are given a utility function $u$ with relative risk aversion $R_u$. Show that $R_u$ is constant and equal to $\rho$ iff there exist $\zeta\...
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What kind of tax diagram can show the full consumer tax burden?
If a government increases a purchase tax on an apartment, the tax will be fully burdened by the consumer, as the "producer" will simply be the owner of the house.
But in a diagram, should ...
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Positional externalities - Are marketing and higher education examples of market failure?
As Mankiw explains in chapter 10 of the latest edition of Economics (chapter 9 in the previous few, I believe).
Positional externalities lead to "a professional squash player getting the extra ...
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What is the budget constraint when we assume a common utility function?
Let's consider an exchange economy with two identical consumers. The
common utility function is:
$$u^i (x_1, x_2) = x_1^α x_2^{1-α} \;\;\; \text{for} \;\;\; 0 < α < 1.$$
Society has 10 units of ...
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Relationship between supply & demand and marginal cost & marginal revenue under perfect competition
Under perfect competition, $MR=MC=P$, but $P$ is also the point where the supply and demand curves intersect. Why is it that those will always correspond to the same point?
Or is the idea just that if ...
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Finding Walrasian equilibria when Walrasian demands are not unique
I'm trying to solve the following excercise:
Find the Walrasian equilibria for a pure exchange economy where agents' ($A$ and $B$) preferences and endowments are given by:
$u_A = x_A + y_A$
$u_B = 2 ...
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reservation price
How do i use reservation price to determine when the car ride is the best option?
Assume we have utility function $$U(x_1,x_2)=4x_1^{0.5}+2x_2^{0.5}$$
and we have income $m=20$. If you stay in ...
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Why is there a Walrasian Equilibrium if excess demand goes to infinity as price goes to 0?
In one exercise, we have to argue that a Walrasian Equilibrium exists and the solution says that if we can see that excess demand goes to infinity as price goes to 0, and as price goes to infinity, ...
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Marginal utility vs Total utility [closed]
If marginal utility is positive, consuming an additional unit of a product will cause total utility to decline. Is that statement true and why?
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Does local non-satiation hold for this problem?
I am getting some confusing results solving this problem:
$max_{c_0\geq0, c_1\geq0} \bigg\{EU = R(1-c_0) [p t_1 + (1-p) c_1^{-2} t_2] \bigg\} ~ s.t. ~c_0+c_1 \leq 1$
where $p$ is the probability of $...
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Universal Basic Income (UBI) policy proposals optimal hours worked and consumption
can someone please help me check my work for this question? I want to make sure I did it correctly.
Question:
Work:
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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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Conditions on turnover as a function of number of sales to be a concave function
Suppose I have a customer base of size 100. An arbitrary customer has a private valuation for my product, which shall be represented by the random variable $X$. (Suppose $X$ takes on values between $0$...
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Determine for which prices and income the constraint is binding
Under what conditions constraints start to bind and how to find it
I was trying the following optimization problem:
$$ \mathscr{L} = x_1 x_2 + x_2 + \lambda(M-P_1 x_1-P_2 x_2) + \mu x_1$$
The thing is,...
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Constructing Valuation As a Function of Condition
Suppose there is an item that deteriorates with use, its condition expressed as a number between $0$ (completely broken condition) and $1$ (perfect condition), for which I want to assign a monetary ...
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Truth behind Samuelson's statement against elasticities
I found the following statement by Paul Samuelson:
Through the influence of Alfred Marshall economists have developed a fondness for certain dimensionless expressions called elasticity coefficients. ...
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What is the difference between preferences of the producer vs the consumer?
The book I am working with (Rubinstein) states that in the case of the profit-maximizing producer, preferences are linear and the constraint is a convex set. Meanwhile, in the consumer model, ...
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What does it mean if the derivative of the Utility function (at the optimal bundle) is 0?
It states in my book that under strict monotonocity, the derivative of U(x*)=0 can be possible although it's unlikely to happen.
What does this exactly mean?
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How to rationalize the following behaviors using preference relations?
The producer wishes to produce at least $y^*$ units. Once he has
achieved that goal, he maximizes profit.
The producer maximizes profit, but already employs $a^*_1$ workers
and will incur a cost c (...
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Questions regarding Solving Melitz (2003) model
I am editing my question regarding solving the model in order to be more specific.
Regarding the demand side, In the beginning of the model, we have a CES utility function over a continuum of goods
...
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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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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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Incidence of cap and trade
Is there a way to show the incidence of cap and trade in a diagram? Similar to how in an indirect tax graph you can show consumer and producer incidence. I assume that the consumer incidence of cap ...
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Help with checking work for preferences over consumption and leisure question
I was wondering if anyone could help me check my work for the following question, and if I am wrong, help me correct my mistakes?
Question:
Work:
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