# 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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### 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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162 views

### 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 ...
0answers
272 views

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### 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 ...
2answers
114 views

### 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 ...
1answer
2k views

### 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 ...
1answer
1k views

### 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 ...
1answer
463 views

### 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 ...
1answer
149 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 ...
0answers
257 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 ...
0answers
119 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 ...
1answer
658 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 ...
1answer
671 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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31 views

### Import Substitution Industrialization [closed]

What are the advantages of Import Substitution Industrialization? I had been researching and cant find answers.
1answer
474 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 ...
3answers
1k views

### 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 ...
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 ...
1answer
1k views

### 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 ...
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 ...
1answer
12k 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 ...
2answers
281 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 ...
1answer
1k views

### 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 ...
1answer
581 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 ...
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 ...
1answer
281 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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### 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 ...
2answers
925 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 ...
3answers
842 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. ...
2answers
3k views

### 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 ...
1answer
90 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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### 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 ...
2answers
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### Which utility function yields a constant price elasticity of demand function?

How do I know which utility function I can use to find an isoelastic demand function, e.g., $x(p)=Ap^a$? And similarly, which cost function can I use to find an isoelastic supply function? Does it ...
3answers
2k views

### Are monotonic and continuous preferences necessarily rational?

Let $\succsim$ be a strictly monotonic and continuous preference relation, and let $X=\mathbb{R}^{n}$ be the consumption set. Is rationality of $\succsim$ implied by these conditions? I think ...
2answers
174 views

### Tests of rational inattention

Can you provide a reference regarding a revealed preference test(s) of rational inattention models, as proposed by Sims, ergo, using a mutual information measure as the cost of putting attention. And ...
2answers
257 views

### Why use empirical macroeconomic models when they are not policy invariant (Lucas Critique)?

With high probability this question is duplicate, and I tried to find one already in the community, but I was unsuccessful. According to the Lucas Critique, in its more general terms, the problem ...
1answer
631 views

### Prove that a continuous $\succsim$ is quasilinear

This question is closely related to Mas-colell, Whinston, Green: Microeconomic Theory, Question 3.C.5b Let $\succsim$ be a strictly monotone, continuous, and rational preference relation on \$(-\...