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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14 views

Taking the partial derivative of the demand function

Define the demand function which maximizes x -> U(x) as: $\sum_{i=1}^n$$p_i$$\zeta_i$(p, I) = I According to my textbook if I differentiate this with respect to $p_j$ I will obtain, $\zeta_j$(p, ...
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How to Calculate Weighted average cost of capital (WACC) and Minimum attractive rate of return (MARR)?

If given salvage value is 0 and Depreciation is 4 years straight line. How do I calculate WACC and MARR from the given data (In Image)? Assuming actual dollar data (Including inflation) Is any data ...
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Preference to representation U (urgent) [closed]

Suppose that you know that a decision maker has a preference relation over the set of real numbers $[-100; 100]$, with a representation of the form $U(z) = b -(z - a)^2$, where $a, b$ are constants ...
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How to describe a utility function in words?

Suppose I have a utility function of Cobb-Douglas form $$U(x, y) =x^{0.2}*y^{0.8}$$ I want to describe it in words. I would say like: The utility of consumer is captured by number of good x and ...
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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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URGENT Lagrangian Multiplier for Microeconomics [closed]

How do I derive Lagrangian formula for L= U(C) + λ(P1C1 + P2C2 - m) where U(C) = C1 + C2, and the constraint is P1C1 + P2C2 = m I get stucked because U'(C1) and U'(C2) are both 1 What a great way ...
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If the payroll tax were eliminated on incomes below $30000 what would happen?

If you canceled all payroll taxes below $30000 / $60000 single / married what would happen? I know that this could increase firm profits, or increase wages, or the number of jobs, or decrease prices ...
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Completely lost on Economics Assignment [closed]

I am an economics student and one of the questions on my current assignment is: A new food is designed to add weight to mature beef cattle. The weight in pounds is given by W = 13xy(20 − x − 2y), ...
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41 views

Max Utility Function and Finding associated demand curve

I have a max utility function, therefore; U(x,y)= max(2x,y) and I am trying to find the demand function x = x(𝑝x , 𝑝y , 𝑀), note this function cannot be differentiated. I am familiar that the ...
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Need Help with Income Elasticity of Demand Problem

When​ Judy's income increased from \$400 to \$440 a​ week, she increased her demand for concert tickets by 15 percent and decreased her demand for bus rides by 20 percent. Calculate​ Judy's income ...
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What should Lowe's(the home improvement company) do to keep their company profitable during the next recession? [closed]

During the 2008-2009 recession Lowe's lost money because they did not act fast. What can Lowe's do in the event of a new recession to prevent a similar situation from occurring again.
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Time-dependent market-clearing equilibrium price

I'm working my way through Chiang and Wainwright's Fundamental Methods of Mathematical Economics (4th ed) while holed up at home. On p. 532, in exercise 16.4 2. (b), the authors ask you to find the ...
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1answer
164 views

Why are my 2SLS estimates much larger than my OLS estimates?

When performing IV regression, it is often taken as a sign of unbiasedness if the IV estimates are similar to the OLS estimates of the same model. My question is: If the estimates are very different,...
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'Constrained optimisation' for mutually exclusive goods?

Taking the standard approach to constrained optimisation, where we maximise utility subject to a budget constraint with some allocation on the consumption of two goods, does it make apply the same ...
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20 views

Production Possibility Frontier with 3 Goods

I want to make PPF Curve with 3 goods. Assumption : Economy that can produce three goods, Cloth $(C)$, Food $(F)$, Wine $(W)$. Two factors of production Capital $(K)$ and Labor $(L)$ So the ...
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Reason for the increase in aggregate demand due to the existence of black money

How can existence of black money amd black assets due to corruption, tax evasion etc., increase the aggregate demand? Can anyone explain this with an example?
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$a\geq 0$, $x\succsim y$ implies $x+a\succsim y+a$ so the preference is linear?

$\succsim$ is a continuous and local non-satiate weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (...
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Meaning of the sentence

I am having trouble understanding this economic concept: Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal ...
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1answer
30 views

Is it possible for a firm does not have shutdown point?

If a firm has a quadratic cost function, is it means that the firm does not have shut down point and never shut down? Are the changes in fixed cost do not affect the firm's shutdown decision?
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1answer
41 views

Difference(s) between Rational Expectations Equilibrium and Nash equilibium

What is the major difference between the notion of rational expectations equilibrium and Nash equilibium? And why do we, only, have a rational expectation about the first moment (the price) in the ...
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Does a depreciation in the Dollar lead to a reduction in the US' marginal propensity to import?

Does a depreciation in the Dollar lead to a reduction in the US' marginal propensity to import? I thought it would because a weaker dollar makes imports more expensive, so consumers spend less of ...
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Upwards budget curve [duplicate]

I believe the curve is upwards sloping from (5 cookies, 0 veggies) until becoming a horizontal line at (10 cookies, 2.5 veggies) just double checking I've worked this out correctly. Please find the ...
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1answer
36 views

Continuity of preferences

Let $\succsim$ be a transitive and reflexive relation on a metric space $X$ with closed upper and lower contour sets. If $\succsim$ is not complete, does it hold that: for all converging sequences ...
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1answer
60 views

$a\geq 0$, $x\sim y$ implies $x+a\sim y+a$ so the preference is linear?

$\succsim$ is a countinuous and convex weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (or ...
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30 views

Is it possible and logical to have an upwards sloping budget line?

The question I have is, for example, say Garry has two goods, cookies he pays 1 to consume a cookie and a maximum of 10 can be consumed, whilst he gets PAID 2 to consume vegetables. Garry is also ...
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37 views

$x\sim y$ implies $x+a\sim y+a$ for any $a\geq0$ and $x,y\in\mathbb R^n$, then the preference is linear?

$x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (or disprove by counterexample) that: Suppose $x\sim y$ ...
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27 views

Show that Division index = Laspeyres index = Paasche index [closed]

our uni is closed because of the COVID-19 and I'm homelearning economics. Currently I'm trying to solve the following problem: Assume that the consumer consumes only two goods that are perfect ...
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28 views

Calculation of CPI [closed]

My class was canceled due to the coronavirus and I am supposed to solve the following problem: Assume that the consumer consumes only two goods, and his utility function is $u=x_{1}x_{2}$. Last year ...
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24 views

Relationship between strictly convex preference and convex preference

Let X be a convex subset of linear topological space and let binary relation >= be a complete preordering. prove: If preference relation is strictly convex and continuous, then it is convex. Since ...
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Convex transaction costs

Why do we assume convex transaction costs in theoretic models? What is the intuition and the strict definition of this assumption? Well, I have in mind the Glosten model in 1994. Neither he provides ...
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581 views

Fixed cost of a firm

Suppose that a firm has a total cost function given by: $TC(q) = \frac{5}{q+1} + 5 + 5q + q^2$. What is the fixed cost? I seem to be able to come up with two "answers", which cannot be correct. My ...
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Incomplete and Intransitive Preferences: Reference Request

I've had the opportunity to read this blog post on incomplete and intransitive preferences and would like to cite it in a informal presentation. However I cant seem to find the author. The main site ...
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Does consumer surplus over-weigh the interests of high-income consumers?

An individual's willingness to pay for a good not only depends on how much they value that good, but also on their income level (at least under the conventional non-economics definition of the word '...
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2answers
31 views

Marginal rate of substitution notation:

I am having a dumb doubt in writing some slides for an undergraduate class. I want to be consistent with the use in microeconomics but this easy thing is really bugging me: Mas-colell pag. 54 $ ...
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Is optimizing revenue and expense objectives simultaneously better than optimizing profit as composite objective?

In the profit maximization problem, I am curious if co-optimizing revenue and expense objectives simultaneously are better than optimizing profit (revenue - expense) as a single composite objective? I ...
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What if the government impose both price control and supply restriction on the market?

Due to the virus outbreak, there is a surge in demand for mask and hand sanitizes. To prevent price hiking government impose a price ceiling on the products, however consumers are behaving irrational (...
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31 views

How to calculate the maximum willingness to pay? (Reservation price)

I have to solve the following exercise. I cant figure out what I have to do know. I hope i can get some help. Suppose you have the following utility: $U (x_1, x_2) = 4x_1 ^ .5+2x_2 ^ .5$ and you have ...
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1answer
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Negative long term effects of wage cap, especially on purpose of money?

It can be figured that a wage cap could have some noticeable short term effects - mainly, those who are higher paid will not receive as much money anymore, meaning less spending by the richest in the ...
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Calculating Social Welfare from an Energy Subsidy

In Allcott and Greenstone's paper, "Is there an energy efficiency gap?", one finds the following figure I quote now from p. 13: "When there are investment inefficiencies, the original marginal ...
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1answer
41 views

Is the consumer surplus on a Giffen/Veblen good negative?

When drawing the demand and supply curves on a quantity/product space for an upwards sloping demand, assuming the two curves intersect, I noticed that the traditional consumer surplus region lies ...
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1answer
63 views

Modelling involving sum of random variables: Simple CDF?

This question emerges from a project in microeconomic modeling. I have $n$ agents receiving noisy i.i.d signals $s$. In my model, a situation of interest occurs when the average signal across $n$ ...
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2answers
52 views

Notation conventions for superscripts and subscripts

I want to establish a consistent notation in my work, however, I struggle with the correct notation when more than one condition is present. First, I am wondering what to put in the superscripts and ...
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comparison of micro production functions

There are many different production function estimation methods, relevant for micro and firm data. For example Olley-Pakes, Levinsohn-Petrin, Ackerberg et al., Wooldridge etc. But does anyone know of ...
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Why is imputed rental income for owner-occupied housing included in the measurement of household income?

In the National Income Dynamics Study in South Africa, total household income is measured by totalling labour income, government income, investment income, capital income, agricultural income, ...
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Deriving long-run cost functions from production function

Suppose that I have a production function $(aK + bL)^3$ in a perfect competition where a and b are constants. I am confused on how to obtain the long-run cost function from this production function ...
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A question about homothetic function

What class of homothetic functions $y=f(x_1,x_2,...,x_n)$ is also homothetic in any $n-1$ factors, with the $n$-th factor held fixed at some level?
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How to apply the direct method to elicit time preferences without utility?

The direct method (Attema et al, 2016) elicits time preferences (patience, impatience, discount factor) via a choice list procedure that does not require to know utility. Say you give a choice list ...
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15 views

Optimising behaviour for labour supply

Suppose someone has an uncompensated labour supply schedule h(w,m)=A+Bw+Cm where h is hours of work, w is real wage rate and m is real unearned income. What are the requirements for optimising ...
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2answers
32 views

Budget Constraint

You have just emerged from medical school with a debt service burden of $25,000 per year, and have set up practice. You have to decide how hard to work . For each hour of work, you expect to earn 50 ...
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3answers
70 views

How to derive this Hicksian Demand?

So I have this utility function where I need to find t expenditure minimizing value of x. Normally, I would get the marginal utility of goods x and y, but doing that in this case doesn't leave any ...

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