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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Decreasing and increasing returns to scale question
Hi, I have deduced that this function exhibit increasing returns to scale but I am not sure how to verify part d. My answer doesn't show that there is decreasing returns to scale but I can't be sure d ...
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Technology, Prices, and the Derived Demand for Energy
I was reading the paper by Berndt and Wood (1975), "Technology, Prices, and the Derived Demand for Energy". It was an interesting paper to read but there has not been anything done on this in nearly ...
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1answer
79 views
Offer curves in general equilibrium
I'm having trouble understanding how to find the offer curves in general equilibrium. Is there a general way that we can use to find it?
I can understand the Pareto set and contract curve but when it ...
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17 views
Power System Economics Question
I'm not sure where should I post this under since it's both about Power Systems and Economics but I want to understand the economics aspect of it.
This is the answer:
This is my attempt, tabulated:
...
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1answer
47 views
Do points inside the PPF curve always mean productive inefficiency?
If a firm produces combinations of goods along the PPF curve, it has achieved its productive efficiency. And when a firm reaches productive efficiency, it means that all factors of production have ...
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1answer
45 views
Set of rationalizable strategies for this 4 x 4 matrix
I would like to find the set of rationalizable strategies for this 4x4 game:
The first thing I did was try and find all PSNE. I found two, the ones I bolded.
Thus, my answer to this question is that ...
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1answer
75 views
Is it enough to prove that $x \not \succsim^* y$?
I'm trying to negate that: $\exists B \in \mathcal{B}$ such that $x,y \in B$ and $x \in C(B)$.
Looks that the negation is equivalent to: $\forall B \in \mathcal{B}(x,y \in B \implies x \not \in C(B))$....
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Find Pareto optimal allocations and the core for the following economies
Find Pareto optimal allocations and the core for the following economies.
There are two consumers and two goods. Utility functions are $u_1(x_1,y_1)= 10x_1-(y_1-2)^2$ and $u_2(x_2,y_2) = 10y_2 ā (x_2 ā...
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1answer
59 views
supply-demand imbalance
I have a basic question
What are the different means/mechanisms available to address supply-demand imbalance?
The answers that come to my mind are :
Using pricing (when demand > supply)
Using ...
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1answer
85 views
Payoff from an option contract
In period 1 the consumer of type $\theta$ selects an option contract consisting of an up-front fee, $B>0$, and exercise price, $\bar{R}$. The consumer pays $B$ at the end of the first period. In ...
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1answer
105 views
Mixed Strategy Nash Equilibrium for this particular 3x3 matrix
Suppose I am given the following matrix:
I would like to find all MSNE
I started by doing the double underline method to find any PSNE. I discovered that none exist. I then looked at which strategies ...
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1answer
87 views
General Equilibrium with Perfect Substitutes
I came across the following problem:
The quantities of an economyās only two goods are denoted by $X$ and $Y$; no production is possible. Annās and Benās preferences are described by the utility ...
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1answer
2k views
Advanced Microeconomics: Deriving Slutsky Equation
I am not sure how to derive the demand for consumption of today's bread; the first thing the problem asks for. I think it might be a piecewise function based on the interest rate that gets you from ...
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1answer
31 views
Labor demand and supply curves in terms of elasticities
I would like to ask for your help to derive some expressions. Let the labor demand curve be described by:
$N^D = N^D(W/P, \bar{K}), \quad N^D_{W/P}= \frac{1}{F_{NN}}< 0, \quad N^D_K = -\frac{F_{NK}}...
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2answers
71 views
Can anyone solve this indifference curve question? [closed]
Draw the indifference curves for a preference relation which is neither monotonous
or strictly convex, yet convex.
My solution was to draw a circle but I'm pretty sure that is wrong.
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0answers
35 views
Imputing # of unemployed from Labor Force Survey
I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates.
...
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1answer
194 views
Can $u(x) = \sqrt{x_1 x_2} + \sqrt{x_3 x_4}$ be solved by KuhnāTucker conditions?
Consider
$\max_{x_1, x_2, x_3, x_4} u(x) = \sqrt{x_1 x_2} + \sqrt{x_3 x_4}$
s.t. $\; p_1x_1 + p_2x_2 + p_3x_3 + p_4x_4 \le w$
I know we can solve the max problem through separately considering ...
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1answer
44 views
Is possible that, in a choice structure $(B,C)$, $C(b) = \emptyset$, for some $b \in B$
It is a very simple question but with some implications. I just start reading Mas-Colell and it's not clear for me if it is possible a choice structure, $(B,C(.))$, where $\exists b \in B, C(b)= \...
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11 views
How to distinguish if production costs changes the elasticity of the supply or shifts it?
I have specific doubts about how a factor affects supply elasticity and how it shifts the supply curve. In many cases, the literature shows that some factors affect supply in both ways. For example, a ...
2
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1answer
96 views
If production function is concave, then demonstrate that profit function will also be concave
Show that concavity of firm's production function implies concavity of its profit function.
(Hint: For a concave function, first order conditions gives the vector that maximizes the function)
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1answer
87 views
A world only with two contries (net exporter)
We assume that we have two and only two contries: Albania and Bulgaria. There is complete free trade between the two countries.
The aggregate investments in Albania are given by:
$$I^A=A-ar$$
where $A,...
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1answer
108 views
Question on General Equilibrium: how to write offer curves?
QUESTION:
Consider simple two-person, two-good economy in which agentsā utility functions are given by
$U_1(x_{11}, x_{21}) = min\{x_{11}, x_{21}\} $, and $U_2(x_{12}, x_{22}) = min\{4x_{12}, x_{22}\}...
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1answer
41 views
Intuition of Shephard's Lemma in Reverse
I am not sure how to word this question. I understand the envelop theorem pretty well and as a result Shepard's Lemma. The proof is relatively straightforward. I am getting stuck on the intuition ...
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What is the observable definition of “preference” by Frisch?
To make things weird, although Frisch was fully aware of the importance of random distribution in economics relations, he never mention the randomness in binary preference relations!
How to define ...
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27 views
Interpretation of market condition given by relation between elasticities
The total market demand is given by the sum of the two destinations ($e$ and $f$) given to the product.
Given these conditions:
Demand: $d(p) = e(p) + f(p)$ where:
$d(p) > 0$, $d'(p) \leq 0$;
$e(...
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0answers
32 views
Production efficiency under monopoly
Sorry, I forgot to mention that in this case, the demand curve is above the LAC at the point where MR = MC. In other words, the price is set higher than the long-run average cost.
I am trying to wrap ...
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1answer
40 views
Exchange economy find core
Find Pareto optimal allocations and the core for the following economies
Consider an exchange economy with two agents and two goods. Let consumption sets are the nonnegative orthant. Agent 1ās utility ...
2
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0answers
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Fehr-Schmidt, Ultimatum game, Subgame-Perfect Nash Equilibrium
I'm studying the different variations of the ultimatum games. I've spent some time on this following game:
Assume now that each player does not only care about the amount of money she receives, but ...
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2answers
58 views
Struggling with self-learning economics through textbook readings [closed]
I am trying to self-learn introductory microeconomics by following a textbook, Microeconomics by Christopher T.S. Ragan. I am not currently enrolled in a course, I am just self-learning in preparation ...
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1answer
60 views
Pareto Improvement with Monopolies
This may be one of the more 'elementary' questions on this site.. But I really can't wrap my head around it and a search on the web hasn't yielded much.
Given that Pareto efficiency is defined as when ...
2
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1answer
68 views
Maximum price a consumer is willing to offer?
In microeconomics it is standard to maximize utility subject to a constraint. For this problem income and prices are normally and the solution is the Marshall which plugged into direct utility ...
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1answer
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Differences between Hicksian and Slutskian approaches
When deriving the substitution effect for both Slutskian and Hicksian definitions, a 'phantom' budget line is drawn.However, for a Slutskian definition, the 'phantom' budget line is drawn parallel to ...
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42 views
Maximize marginal products
Say a firm is facing a budget line as stated below:($K$ stands for capital and $L$ stands for labor)
$$200K + 100L = 1000$$
Under this circumstance, a rational firm will look for ways to maximize its ...
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2answers
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Supermarket selling seasonal items below cost?
In a British supermarket, I saw the prices of Christmas chocolate gift boxes being cut dramatically (Ā£1.50 to Ā£0.15, and Ā£7.50 to Ā£0.22). I don't quite understand this behaviour, where the chocolate ...
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0answers
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Endogeneity in demand estimation using demand systems estimations
Assume I have quantities and prices for J products across M markets in T periods.
I want to estimate their elasticities.
I construct J regressions of this type:
$$\log \left(q_{j m t}\right)=\alpha_{t}...
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0answers
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Effect of a quantity tax in perfectly competitive market (Intermediate microeconomics)
Been stuck on this past paper question for quite some time. Doing my head in and going around in circles trying lots of different approaches...
Perfectly competitive market.
$C(š¦) = (0.5)y^2 + 40š¦ + ...
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2answers
100 views
Utility function for introductory microeconomics
What are the utility functions standardly used in introductory microeconomics courses. My own list would include
Perfect substitutes: $U(x,y) = ax+by$
Perfect complements: $U(x,y) = \min(ax,by)$
Cobb ...
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1answer
46 views
Individuals vs. groups as decision makers
In economics, why do people focus on the individual rather than groups of individuals as decision-makers? Wouldn't considering actions decided by a group of individuals reduce the chance of socially ...
2
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1answer
105 views
Multiple Forgone Job Opportunities and Economic Profit
I'm told that forgone job opportunities are implicit costs, to be included in calculating economic profit, but I can't seem to see how I could list and consider many different forgone opportunities. ...
2
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1answer
104 views
Cost function from CES production function
How can I find the cost function $c(w,p)$ given that the production is
$$ f(x)=(x_1^p + x_2^p)^{1/p} \ \ for\ \ 0<p <1 $$
I tried to solve it and found that
$$TC(y) = \left\{
\begin{...
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2answers
86 views
Cost function from an easy CES production function
How can I find the cost function c(w,p) given that the production is
$f(x) = x_1+x_2$
I did Lagrangien's method but my problem is that I got no $x_1$ and no $x_2$ after taking the derivate.
So I would ...
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1answer
53 views
demand curve shift in a monopolistic competitive market
As more firms enter the market, the quantity demanded at a given price level will thus decline. Therefore, the perceived demand curve for any individual firm will continue to shift leftward until the ...
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2answers
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What links can be made between the marginal productivities of the factors of production and the costs of production [closed]
What links can be made between the marginal productivities of the factors of production and the costs of
production
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1answer
43 views
Principal-Agent Problem with Two Agents
Consider the following principal-agent problem. You are a manager in charge of two workers, indexed with $i=1,2$. Each worker is asked to perform a particular task, and each can either work hard at ...
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0answers
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graph of dependent income
I would need help with the following problem about consumer theory. Let us say that $X$ is the amount of days at the sea and $Y$ is the amount of days on the cottage. We have some utility function $u(...
5
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1answer
144 views
CobbDouglas: Constant marginal costs and constant returns to scale
A company has a production function:
$$y=x_1^{\alpha}x_2^{1-\alpha}$$
where $0<\alpha<1$. Factor input 1 costs $w_1> 0$ and factor input 2 costs $w_2> 0$. The company wants to minimize its ...
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0answers
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Solved applied econmics question. Problem is the value of TVC, TC, AVC, ATC, & AFC are all negative. Should I ignore negative value?
Disclaimer: This is not a "Do my homework" type of question. Instead, this is, "I'm confused whether what I did is right or wrong?" type of question.
If I ignore negative signs in ...
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1answer
611 views
Calculus and Indifference Curves in an Urban Economics Example
I am reading the paper 'The Structure of Urban Equilibria' by Jan Brueckner.
It uses a monocentric city model, where all consumers earn income $y$ at the centre of the city. They buy $q$ housing for ...
0
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1answer
105 views
Long-term equilibrium price inelastic?
I have doubts about some
economic interpretation:
Why is the long-term equilibrium price inelastic?
But in the short run, the equilibrium price is not necessarily inelastic. What is the economic ...
0
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1answer
105 views
Find pareto optimal allocations
Consumer 1: $U_1(x_1,y_1)=x_1y_1$
Consumer 2:$ u_2(x_2,y_2)=min\{x_2y_2 , 4\} $
Initial endowments e1=(1,4) and e2=(4,1)
I want to find Pareto optimal allocations and show its edgeworth box
My ...
