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).

Filter by
Sorted by
Tagged with
1
vote
1answer
22 views

Utility maximization: pollution and housing prices

A factory releases a toxic pollutant which causes two types of damage to a representative area resident whose utility function is $U(S,H,x)= a \cdot \log(S) + b \cdot \log(H) + c \cdot \log (x)$ where ...
1
vote
0answers
13 views

Does SARP implies convex rationalization when $B_i=\{x\mid p_ix= p_ix_i\}$?

Backgroud: SARP can be defined on general budget set. SARP: Assume for all $B$ the choice $c(B)$ is only one element. If $x_i,x_{i+1}\in B_i$, and $x_i = c(B_i)$, for all $i\in \{1,N-1\}$, then $x_1=...
1
vote
1answer
37 views

Proof that two utility functions $u(x_1,x_2) \text{ and } v(x_1,x_2)$ with the same MRS represent the same preference

I am having some difficulty proving that two utility functions with the same marginal rate of substitution represent the same preference. I think I need two use some argument related to strictly ...
2
votes
2answers
105 views

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.
1
vote
1answer
1k views

How to find the maximum profit in a graph?

We know the maximum profit will occur at the quantity where the gap of total revenue over total cost is largest. But how can we find such gap?
0
votes
1answer
24 views

Multi dimensional Auction in economics

I am following this paper . They have different suppliers and one buyer and They are using auction to select best suppliers Suppliers will submit. suppliers offer a multidimensional bidding on quality ...
1
vote
1answer
25 views

What does 'establishment' mean in real estate industry?

I read data on real estate industry and there is a table titled "establishments". The title of it is "number of establishments in real estate for all establishment sizes". Is '...
6
votes
1answer
146 views

GARP and SARP assumed mononticity?

Monotonicity means the decision maker prefer more goods than less. It is not mentioned in textbook that SARP and GARP preasumed monotonicity, implicitly. GARP: if $a$ is indirectly revealed preferred ...
0
votes
2answers
112 views

How to estimate loss of customers due to customer support inefficiency?

I have a data about customers and their activity on a website for a two-year period. Also, I have a customer support work evaluation data for a shorter period of that two-year period. The question is: ...
0
votes
0answers
26 views

How to calculate substitution and income effect when only 1 bundle is given?

I was given information of a consumer that initially consumed 4 units of both good x and good y with the initial price of $5 for both goods (px = py = 5). The initial budget constraint is 40 = 5x +5y ...
0
votes
1answer
37 views

Constant marginal cost for a firm and perfect competition

What happens if the demand curve is flat because the firm is a price-taker in the market, but the firm has a constant marginal cost. If the equations are the same I assume the price would be set with ...
3
votes
0answers
25 views

Some basic Consumption CAPM questions

Say we are in a world described by the consumption CAPM. All investors in this world have quadratic utility. Also, assume that consumption is as follows: $$c_{t+1} = (1+m_t)c_t + s_t c_t e_t $$ where ...
-1
votes
0answers
23 views

how can Marginal price costing mitigating loss?

By a firm using marginal cost pricing, they set their price equal to marginal cost. This leads to no welfare loss. Marginal cost pricing however can make the firm take losses and not be able to ...
1
vote
2answers
92 views

Best book to self-study microeconomics

What textbook(s) (and other resources) would you recommend to someone who wants to self-study microeconomics to an advanced (graduate) level starting from 0 (i.e. no formal background in economics)? I ...
2
votes
1answer
31 views

Trouble Understanding the Integral Underlying Random Utility Models

Given a utility function, $U_{nj} = V_{nj} + \varepsilon_{nj}$, it makes sense that we can find the probability the decision maker $n$ chooses alternative $i$ as: $$Pr(U_{ni} > U_{nj} \forall j \...
1
vote
0answers
17 views

Selection of functional form for utility function in theoretical model

I am starting to work on an IO model and I am puzzled in front of the choice of the appropriate utility function. Since the concept of utility is so abstract, and one cannot directly refer to ...
2
votes
1answer
35 views

Revealed preference when there is no substitution effect

I've started reading about revealed preference, and in particular, how it works in the context of price changes. I understand that revealed preference can show us the general direction of the ...
-2
votes
1answer
30 views

How do non-price determinants of supply and demand affect the price of a product? [closed]

I am currently doing my IB economics homework about demand and supply, and this question just has me very confused The teacher then specifies that they must be non-price determinants. To my ...
0
votes
1answer
53 views

What will giffen goods and Veblen goods peform in general equilibrium model?

I'm a beginer of microeconomics. According to consumer behavior theory, a consumer possesses a set number of money as budget constraint at first. And their is negative income elasticity of demand and ...
1
vote
1answer
144 views

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) $\sum_{i=1}^{n}a_i\in (0,K)\;\;\;$ ...
0
votes
1answer
90 views

Why is the opportunity cost 0 in this case?

My book says that the opportunity cost of purchase of a specialized equipment that has no alternative use is zero and hence such an expenditure is a sunk cost. However, while calculating the user cost ...
0
votes
1answer
113 views

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 ...
2
votes
1answer
53 views

How did Cowen and Tabarrok calculate the probability of Hewlett-Packard sales?

The discussion on prediction markets in the chapter on the price system in Tyler Cowen and Alex Tabarrok's Modern Principles of Economics, Second Edition (pp. 123-124) contains the following ...
-1
votes
1answer
43 views

Find the set of Pareto efficient payoffs in game theory [closed]

Here I want to find Pareto efficient payoff set. The answer is (C,β), (B, β), (C, δ) But I don’t understand why? Please explain clearly this answer. Thanks a lot
3
votes
1answer
100 views

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 ...
0
votes
0answers
28 views

Why do vacationers spend more on food and essentials than the locals?

I cannot think of an answer to this question from the chapter on elasticity in Tyler Cowen and Alex Tabarrok's Modern Principles of Economics, Second Edition: How might elasticities explain why ...
2
votes
0answers
38 views

Pareto allocations and Competitive equilibrium

Consider the one-consumer one-firm economy. The consumer has preferences over leisure $l\in(0,L)$ and consumption good $x ≥ 0$ represented by utility function $u(x, l) = ax + l$, where $a > 0$ is a ...
2
votes
2answers
69 views

Optimal Price and Quantity of Externality

I am trying to solve the following question: Let $h \geq 0$ represent a negative externality of a firm's production on one (representative) consumer. The consumer has a quasi-linear utility function ...
2
votes
1answer
8k views

Intuition behind Engel Aggregation and Cournot Aggregation

Could anyone provide a possibly intuitive and friendly explanation to the Engel Aggregation $(\sum s_i \eta_i = 1)$ and Cournot Aggregation$(\sum s_i \epsilon_{ij} = -s_j)$? Here, $s_i = \frac{p_i,x_i}...
1
vote
1answer
48 views

Calculating optimal level of negative externality

I am trying to solve the following question(s): Let $h \geq 0$ represent a negative externality of a firm's production on one (representative) consumer. The consumer has a quasi-linear utility ...
4
votes
1answer
240 views

How does one derive the elasticity of substitution with implicit functions?

I would like to derive the elasticity of substitution. I'm aware that such a thread with a very straightforward explanation already exists, but my case is slightly different and I'm not sure how to ...
10
votes
4answers
600 views

Envelope Paradox

There are two envelopes. One contains $x$ money and the other contains $2x$ amount of money. The exact amount "$x$" is unknown to me, but I know the above. I pick one envelope and I open it. ...
4
votes
1answer
660 views

Are spectrum auctions a tax?

According to Wikipedia, A spectrum auction is a process whereby a government uses an auction system to sell the rights to transmit signals over specific bands of the electromagnetic spectrum and to ...
6
votes
1answer
88 views

Interior Solution for profit maximisation problem

A function $c: \mathbb{R}^K_+ \xrightarrow{} \mathbb{R}_+$ is is said to be a cost function if The value of function $c$ at $y = \textbf{0}$ is $0$: $c(\textbf{0}) = 0$ $c$ is continuous on the ...
3
votes
1answer
73 views

Multidimensional product differentiation and density functions

I’m having trouble with a model (link) I’m working on for a review. The author uses a two firms hotelling model with a multidimensional product space (x,y)with orthogonal characteristics, which are ...
4
votes
2answers
239 views

Is it right to derive social marginal benefit by adding individual prices instead of quantities?

I come across a lecture material on market functions and externalities that makes me quite confused. Here's the setup: Two stores are located next to each other. If one installs a camera system in ...
0
votes
2answers
74 views

How does “buy low, sell high” relate to supply and demand?

I'm taking introductory microeconomics, and I'm trying to consolidate my understanding by looking at some real world examples. In a perfectly competitive market, there are many consumers and suppliers ...
0
votes
1answer
437 views

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, ...
6
votes
3answers
177 views

What is the point of considering only pure strategies in a game? How could you restrict people from thinking about mixed strategy?

In an experimental setting, how could you effectively incentivize the subjects to not to adopt mixed strategy? I would like to re-emphasize that the question in concern is "how to prevent people ...
3
votes
1answer
40 views

How to compute elasticity of substituion in general?

We know that the elasticity of substitution is defined as $$ e=\frac{d \ln(x_2/x_1)}{d \ln(MRS_{12})}=\frac{\frac{d(x_2/x_1)}{x_2/x_1}}{\frac{d(MU_1/MU_2)}{MU_1/MU_2}} $$ When we compute ES for CES ...
8
votes
3answers
1k views

Citing non-economics studies in an economics research paper

I am currently working on a paper in economics that has some dimensions that discuss women's social value. As is the case in developing countries a lot of economic studies do not exist whereas there ...
2
votes
1answer
181 views

consumer surplus decreasing

MRU has the following question on a quiz: Suppose the government forced all bread manufacturers to sell their products at a “fair price” that was half the current, free-market price. To keep it ...
7
votes
5answers
1k views

list of math intense graduate level microeconomics books?

List of math intense graduate level microeconomics books? Except Reny's book, krep's books, varian's book and mas-collell's book books from subfields are acceptable, however by math intense i mean ...
8
votes
1answer
131 views

Seemingly simple consumer theory problem

A function $v: \mathbb{R}^K_+ \xrightarrow{} \mathbb{R}_+$ is is said to be a valuation function if The value of function $v$ at $x = \textbf{0}$ is $0$: $v(\textbf{0}) = 0$ $v$ is continuous on the ...
0
votes
1answer
110 views

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. ...
0
votes
1answer
45 views

Accounting profit in macroeconomics as compared to microeconomics

In Macroeconomics (2019) on p.103, it is argued that the reason there exists profit in an economy is that most firms own rather than rent capital. Thus: But, Microeconomics assumes a different ...
1
vote
1answer
50 views

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 ...
0
votes
1answer
45 views

How can I know whether a good is inferior or normal? I can't determine elasticity with this?

I just need to make sense out of elasticities and how to determine if a good is normal or inferior. I have determined by $X_1$ which is in the form $m/p_1 - p_1/p_2$, that I should just take the ...
4
votes
0answers
31 views

Order-driven vs quote-driven markets

What is the difference between order driven and quote driven markets? Is there any theoretical microstructure book that gives the intuition behind the types of markets with respect to the orders that ...
0
votes
1answer
77 views

Why do most function images take the form of a curve? [closed]

I always see curves (such as in dark blue below) and not any other type of (function) image. May I get a reason for why it is always like that? This figure is only for representation.

1
2 3 4 5
43