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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205 views

What are some ways to add quality to the supply-demand model?

Please excuse me, I hardly know anything about economics yet. When the quality of a product changes, the demand curve moves. But what if there are different versions of a product, of varying ...
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2answers
363 views

Why are there estate taxes after the owner passes away?

Isn't it unfair for estates to be taxed after death? The person who bequeathed the estate probably purchased it with after tax money, so wouldn't it then be taxed twice? What is the purpose of the tax ...
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1answer
148 views

What would happen if total welfare were evenly distributed?

Suppose that there is a market with a large number of consumers and producers. Assume that the government knows the reservation prices of all people in the market. Suppose that the government uses ...
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1answer
76 views

What is an equilibrium generated by replication?

Sorry this might be a little too rudimentary for you, but I'm not an Econ background. When I was doing exercises for MGW chapter 17 "Positive Existence of Equilibrium" I came across the following ...
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1answer
1k views

Profit maximizing in monopsonist market

The question is as follows: The Happyland Hospital is a monopsonist employer of nurses in the small city of Happyland. The market supply function of nurses is $S(W) = 0.1W - 100$, where $W$ is the ...
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328 views

Constrained optimization for $u(x_1,x_2,x_3,x_4)=\alpha \min \{a x_1, b x_2\} + \beta \min \{c x_3, d x_4 \}$ [duplicate]

Suppose preferences are represented by the following utility function \begin{equation} u(x_1,x_2,x_3,x_4)=\alpha \min \{a x_1, b x_2\} + \beta \min \{c x_3, d x_4 \} \end{equation} Write the ...
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Microeconomic Model of Knowledge and Technology

Can you point me to any microeconomic models of knowledge and technology? It is intended to be used for simulation. The problem that arises is that you need to simulate the effects of technology on ...
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0answers
267 views

Convex consumer preferences

Man has blue and red marbles. If he has more red marbles then blue one he wants to exchange one red for two blue($1R:2B$). If otherwise (more blue then red)he wants to exchange one blue for two red($...
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1answer
344 views

Does vNM rationality depend on the good chosen?

The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility function,...
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2answers
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Finding an intercept on percentage based data and using dummy variables

How do I find an intercept on a percentage data? My data has percentage of grades ( I have converted to numbers where $A^*=8, A=7,B=6...U=0$) by ethnicity and other indicators which I want to test for ...
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A stable equilibrium with demand and supply?

My doubt pertains to something that is mentioned in the book by Koutsoyiannis for microeconomics (in the chapter for general equilibrium). http://www.upload.ee/image/5306829/1.jpg http://www.upload....
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What textbook can I use to really understand microeconomics, macroeconomics and mathematical economics [closed]

What textbook can I use to really understand microeconomics, macroeconomics and mathematical economics. It can be different textbooks. I'm in first year college taking introductory courses in ...
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293 views

Curvature of Cost and Production Function

I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct; If the cost function $C(w,q)$ is convex in $q$, the ...
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5answers
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When do supply and demand curves shift?

Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the ...
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1answer
172 views

Any information on a toy economy with 3 types of agents in it

I was thinking about a theoretical economy where there are 3 types of roles for the agents. They can be : workers : produce good A criminals : steal good A cops : protects good A without going into ...
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1answer
263 views

How to solve a pricing competition for complementary goods

I am preparing for an exam and I have come across this question in my textbook but I am not quite sure how to solve it so would really appreciate some help! Suppose that company L produces left ...
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1answer
292 views

Estimating the second derivative of function from optimizers

Consider the following optimization $$x^*(s) = \max_{x\in X} \big(\,f(x)-sx\,\big)$$ where $f$ is assumed to be a strictly concave function and $X$ is an interval constraint, e.g $X = [0,b]$. We do ...
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2answers
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Having trouble solving system of equations through matrix approach

So I have this system of reaction functions: $$s_1 = 2 + \frac{1}{3} s_2$$ $$s_2 = 7 + \frac{1}{8} s_1$$ I have to solve this through inverse matrix and confirm the result through Cramer's rule. The ...
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1answer
788 views

Examples of Applied Micro Paper with R (!) Code and Data in Public Repository

Can anyone suggest examples of relatively simple applied micro papers (e.g. an RCT or straightforward regression model) of possible interest to a general audience, that have their data and code, ...
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3answers
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When do trades between two countries not result in gains for either of them?

So are there any circumstances where two countries trade with each other and they both do not gain anything? is it possible? and if you could also explain why that is the case? I have looked around ...
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1answer
305 views

What is the relationship between indirect utility function and the expenditure function? [closed]

What is the relationship between indirect utility function and the expenditure function? Explain what accounts for this relationship.
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2answers
4k views

How to derive the reaction function from these provided variables?

This is the question. I cant seem to reach a concrete solution because of the scarce information. Firm 1 spends 2 million, plus 33.33% on advertising what firm 2 spends on and firm 2 spends $7 ...
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0answers
489 views

Short Run vs Long Run Cost Functions

Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run. Now let's suppose that the price of one of the inputs in ...
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Is product opportunity frontier the same as PPF?

In CFA level 1 reading 14, they have this term called Production Opportunity frontier and it is defined as Curve describing the maximum number of units of one good a company can produce, for any ...
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1answer
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Decreasing Costs, Increasing Returns to Scale, & C''(q)

Given a profit-maximizing firm with production function $f(x_1,x_2)$, I understand that we can formulate a firm's cost function $C(q)$ by using the contingent demand functions $x_1^c$ and $x_2^c$. We ...
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1answer
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Separating and supporting hyperplane theorems

I am having trouble understanding the separating and supporting hyperplane theorems. I've read what I can online but am just not able to develop any intuition. Can someone please give a basic outline ...
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1answer
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How does the companies set up utility function for its own purposes?

How does the companies set up utility function for its own purposes? In another word, what is the types statistics data that is usually consider and statistical method being used to set up these ...
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1answer
139 views

Utility Representation of Lotteries

We went over a lemma in class leading up to a larger theorem. The Lemma states: Let $\succeq$ be a rational preference relation on $\mathscr{L}$ and let $\succeq$ admit utility representation under ...
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243 views

Present Value of Costs and Benefits [closed]

The state of Minnesota is considering building a highway through undeveloped wilderness. The construction will take 1 year and the construction costs are estimated at 10 million. The annual routine ...
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0answers
108 views

How to calculate rating of merchant in e-commerce [closed]

Could u help me to solve this case? Here's the case.. The first, There are 3 aspects for calculate Rating of each merchant. The scale of rating is from 1 until n ( Based on sum of Merchants). The ...
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1answer
616 views

How can a good be considered both a luxury and a normal one?

Let's say I spend $20$ on pizza with an income of $100$. If my income jumps to $110$, I then spend $25$ on pizza. While my income grew by 10%, my expenditures towards pizza grew by 25%. Hence, I would ...
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1answer
642 views

How to show that the income elasticity of Marshallian demand is equal to unity? [closed]

Suppose that the expenditure function is multiplicatively separable in $\textbf{p}$ and u so that $$e(p,u) =k(u)g(\textbf{p}),$$ where k(·) is some positive monotonic function of a single variable, ...
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Import Substitution Industrialization [closed]

What are the advantages of Import Substitution Industrialization? I had been researching and cant find answers.
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1answer
464 views

Independence axiom of lottery when $\alpha \ge 1$

When studying preference over lotteries we learned the independence axiom which goes like this: The preference relation $\succsim$ on the space of simple lotteries $\mathscr{L}$ satisfies the ...
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3answers
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Examples of how economists come up with a production function for a firm?

I am a young man studying economics on his own. In every microeconomics text I find, they teach you what a production function is, but they never show examples (or practice problems) on how one comes ...
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1answer
5k views

The period of the business cycle in which the real GDP is increasing is called the?

The period of the business cycle in which the real GDP is increasing is called the? And no, this is not an homework question. I'm a college student and we starting our exams soon. I'm just going ...
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1answer
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Self-teaching 1st year PhD Microeconomic Theory

How should one proceed if he wanted to master the microecon theory course typically taught in the 1st year of a PhD program on his own? Which text(s) and/or online course(s) should he follow? Suppose ...
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1answer
5k views

What is the difference between average cost and marginal cost?

$$AC(q) = \frac {C(q)}{q}$$ $$MC(q) = \frac{\partial C(q)}{\partial q}$$ These are the definitions. But I don't understand what the difference is. Is the average cost the cost per unit while the ...
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1answer
11k views

Why does marginal cost (derivative of total cost) differ from variable cost at each level?

Why does the marginal cost equation (as the derivative of total cost equation) make predictions of variable costs that are very different from costs calculated using the Total Cost equation? Marginal ...
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2answers
260 views

Throw-away paradox with independent goods

The throw-away paradox is a situation in which a trader can gain by throwing away some of his initial endowment. The specific example, brought by Aumann and Peleg in 1974, concerns an economy with ...
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1answer
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Shadow Price vs Marginal Cost

Is there a difference between the two? If so can you intuitively explain it? I see internet resources saying these are equivalent, but I thought I remember someone telling me once shadow price was ...
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1answer
543 views

Instrumental variables for minimum wage

I was wondering if there is a classic instrument for minimum wage as there is for schooling or other variables. If so, how does it fares with respect to most established designs like spatial ...
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2answers
1k views

Existence of solution to maximization problem

I'm a first year grad student and we're learning about the utility maximization problem and the producer's problem now. We have been assuming that a solution to these problems exists. But every now ...
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1answer
263 views

Nash social welfare function with negative exponential utilities

I got one question about the Nash-SWF. Typically it is defined as the product of individual utilities, ie. $$ NSWF:=u_1(x_1) \cdot u_2(x_2) \cdot u_3(x_3) \cdot ... $$ For this to make sense, ...
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0answers
86 views

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth. I was reading through a textbook and saw that the devaluation of a nation's ...
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2answers
828 views

Effect of a good's inputs on elasticity of supply

I am trying the answer the question: If a good is produced using inputs for which there are no substitutes, the good's A. Elasticity of supply is likely to be small B. Elasticity of ...
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3answers
773 views

Intuitive explanation of $S(p,w)\cdot p=0$

Can anyone provide an intuitive explanation of why the Slutsky matrix right multiplied by the price vector yields a zero matrix? I know this is true but I do not really understand why it is true. ...
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2answers
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Local Non-Satiation Proof

I have been having trouble with how to go forward with a proof for about three days now. I know the basic structure of the proof, but can't seem to construct it. Basically, I am trying to do a proof ...
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1answer
86 views

About marshallian demands

Let an agent with utility function $U(x_1,x_2,x_3)=min\{ x_1, x_2 \} +x_3$. We want to maximize $U$ subject to $p_1 x_1+p_2 x_2 +p_3 x_3= I$ First intuitively $x_1^*=x_2^*$ substituting en the budget ...
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29 views

Business agreement design - is there science behind this?

I am working on schemas how advertisement space is sold to the ad agencies, ad networks and individual customers. There are lot of questions involved how to design the business agreement. E.g. one can ...

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