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
2
votes
2answers
1k views

Weak axiom of revealed preference and choice coherence - how to show they are equivalent

$B$ and $B'$ are elements of the family of subsets of $X$ WARP For every pair $x,y \in B \cap B' $ and if $x \in c(B)$ , then if $y \in c(B'), x$ must $\in c(B').$ Choice Coherence For very pair $x,...
4
votes
1answer
190 views

In a competitive equilibrium, can price of a commodity ever be zero?

I don't think they can be, but I'm not very sure. Are their special cases where the equilibrium is competitive even when prices are zero?
2
votes
1answer
114 views

RBC model and indivisible labour

First of all, I would like to apologise for the fact that I will include a link in my question rather than a direct question, however, I have no idea how to do it in a different way. I have been ...
1
vote
1answer
93 views

How does this company gain from economies of scale?

Given this story, I am (my younger brother is) asked why (rather than how?) a particular company Pepper plc is likely to benefit from economies of scale. In short, Jo has a shop that sells electrical ...
4
votes
3answers
18k views

Taxes levied on sellers = Taxes levied on buyers

All page numbers refer to Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw. [p 125:] Taxes levied on sellers and taxes levied on buyers are equivalent. [p 156:] ... When a tax is levied on ...
1
vote
1answer
760 views

Finding equilibrium of perfect competition in the short run with a cost function

I am having a lot of problems trying to find the equilibrium price when we are given a cost function and demand function, but no supply function. All firms have the following production function: $...
0
votes
1answer
122 views

Minimization of costs combination of factors of production

Given the production function $D(x,y,z)=\min\{2x, \left( 2y+4z\right)\}$, and knowing that P-price $P_x=30,P_y=20,P_z=5$ and volume of production $D=200$. How much of x,y and z is needed to minimize ...
0
votes
1answer
142 views

Why do all apartment complexes in Albuquerque have pools?

Apartment builders have a constrained optimization problem whereby they balance building different amenities to attract tenants with varying preferences. Recently when searching for apartments I ...
2
votes
1answer
416 views

Budget constraint hyperplanes

This question relates to a specific paper by Eric Budish, published in 2011 in JPE, but I've tried to put all relevant information in this question. On page 1072, he defines budget constraint ...
1
vote
1answer
68 views

Substitutive or supportive factors of production

Given the function: $y=A K^\alpha L^\beta, A,\alpha,\beta >0$ $y=aK+bL^{0.5}, a,b>0$ Decide whether capital and labour are substitute or supportive factors of production. How to solve this ...
2
votes
1answer
522 views

Find Change in output from marginal products of labor/capital

A firm produces 231 doohickeys with 8.4 units of labour and 22.1 units of capital. the marginal product of labour is 18, the marginal product of capital is 20. Approximately how many doohickeys will ...
5
votes
1answer
131 views

How to write the dual problem of this maximization problem?

On this note for Shapley-Shubik model, there's a maximization problem: $$\max_{x_{ij} \in \mathbb{R}^{M \times N}}\sum_{j \in N}\sum_{i \in M}v_{ij}x_{ij}$$ $$\text{s.t.} \ \sum_{j \in N}x_{ij} \...
1
vote
0answers
304 views

Given Cobb-Douglas production functions for 2 factories (same owner), how will the owner produce $y$?

So my question is this: A company owns two factories, A and B, each with the following production functions: $f_A(x_1,x_2)=x_1^{\alpha}x_2^{1-\alpha}$ $f_B(x_1,x_2)=x_1^{\beta}x_2^{1-\beta}$ Now ...
2
votes
2answers
567 views

Is Marginal Rate of Substitution a multivariable function?

Suppose I have $U(x,y)$ and a level set of indifference curves. Suppose the value of $U$ along a given curve is $\bar{U}$. We know $dU = 0$. We compute total derivative, rearrange, and now have $$\...
4
votes
0answers
136 views

Proof of Proposition 1.4 from Microfoundations I by Kreps

Regardless of the size of X (set of all possible objects), if a preference relation which is complete and transitive is defined on it, then the corresponding choice function generated by it will ...
5
votes
1answer
77 views

Do assets without rental income streams appreciate relative to assets with rental income streams?

In his book "The Armchair Economist", economist Steve Landsburg critiques an op-ed concerning the relative value of stocks and real estate: James K. Glassman wrote a piece in The New Republic to ...
0
votes
1answer
3k views

Why is the social value curve NOT the supply curve shifted downwards?

Abbreviate 'Social Value' as SV. In some other resources such as this, the SV curve is known as the Social Marginal Benefit curve. The following quotes explain [1.] why the SV curve is the demand ...
-2
votes
1answer
937 views

Intuitively, why is Profit = (Price $-$ Average Cost) $\times$ Quantity?

Sources: p 289, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw p 259, Modern Principles of Economics (2 ed, 2011) by Tyler Cowen, Alex Tabarrok Definitions: Profit $:=$ Total Revenue $−$ ...
2
votes
1answer
65 views

demand impact on shares price

Knowing that share prices are determined by the forces of supply and demand, other factors can also play a role in this but lets consider the fact that prices are only based on supply and demand.In ...
10
votes
0answers
781 views

Modern theory of integrability of demand?

I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf I am wondering if there is any modern treatment of the ...
2
votes
2answers
2k views

Consumer Surplus question

The demand for rail travel is $Q^d = 600 - 2P$ where quantity is thousands of train journeys per quarter and $P$ is in £ per journey. How much would the consumer surplus change if rising cost of ...
3
votes
2answers
1k views

Struggling with uncompensated/compensated demand

I'm working on a problem set for my intermediate microeconomics course, but I'm having trouble deriving the compensated and uncompensated demand functions. This is the utility function: $U(x, y, z) = ...
4
votes
1answer
2k views

How does one calculate compensating variation for multiple price change?

For a single variable price change, $$CV = - \int_{p_x^o}^{p_x^f} x_H(\rho,p_y,v^o)d\rho$$ $x_H$ is the Hicksian demand function for good $x$. What happens if both prices change? How does one ...
2
votes
3answers
8k views

How are workers harmed, from firms' payroll tax revenue aimed at reducing workers' tax?

Source: p 130, Question 6.5, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = (page unknown), Question 6.5, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw p 125, Case ...
2
votes
1answer
84 views

Doubts in modelling the Arthur(1991) paper: Designing economic agents that act like human agent

I am implementing Arthur's paper "Designing economic agents that act like human agent: A behavioral approach to bounded rationality" from 1991 in JAVA and I am having a problem understanding one part ...
7
votes
1answer
1k views

Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
14
votes
2answers
12k views

The relationship between the expenditure function and many others!

I dont understand the relationships between Hicksian demand, walrasian demand (marshallian), the expenditure function and the indirect utility function (including the value function V(b)). I have ...
3
votes
1answer
592 views

Effect of specific tax on demand and supply

There are intersecting supply and demand curves. A tax is levied on suppliers. Say the tax is a fixed tax (for example, VAT) and not an ad valorem tax. Why can we not just move along the demand ...
2
votes
1answer
2k views

Walrasian Equilibrium under Leontief Preferences

There are two people in the economy, A and B. Both have the utility function: U=min{x,y}. A has an initial endowment of (x,y)=(50,100) and B has (x,y)=(100,50). I know how to draw the Edgeworth box ...
5
votes
1answer
524 views

Moral Hazard or Adverse Selection?

I pay the doctor before he conducts the surgery. Can anyone explain to me whether this statement shows moral hazard or adverse selection?
11
votes
2answers
10k views

What is a substitute/complement in terms of mixed partial derivatives?

I am trying to understand how substitutability relates to mixed partial derivatives. I thought the change in marginal utility with respect to a change in the amount of $x$ would correspond to $$\frac{\...
6
votes
1answer
505 views

Estimating Price Elasticity from sales

I'm looking at data for an online shop with clothing items listed at different prices. I'd like to use this information to do some kind of profit maximization (i.e. I'd like to have some understanding ...
1
vote
0answers
285 views

Risk and uncertainty [closed]

A risk averse is given this: Option1: 1000 with p=0.25 and 100 with p=0.75. Option 2: 325 for sure. Which option would he choose? For this part, I know the person will choose option 2 over option 1. ...
5
votes
3answers
1k views

Question about the Ellsberg Paradox in Expected Utility Theory

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,...
11
votes
1answer
286 views

How does Google price the items on Google Play?

I am a fledgling computer science researcher working in intersection of economics and computation. Please excuse me if this question seems out of place to the administrator. I am currently studying ...
1
vote
1answer
938 views

Equi-marginal Principle

Hi the textbook i am studding from simply states that 'the rule for rational consumer behaviour is know as the equi-marginal principle. This states that a consumer will get the highest utility from a ...
3
votes
1answer
2k views

Corner solution-consumer theory [closed]

$$U(q_1,q_2)=4{q_1}^{0.5}+q_2$$ $$P_1=1$$ and $$P_2=2$$ Initially $$Income=40$$ Then the question asks :how do I know what income I can get a corner solution? Anyone can help me with this? Thank you
1
vote
1answer
527 views

Shifts in demand curves

When plotting a demand curve for a good, lets say carrots with price on the y-axis and quantity demanded on the x-axis. A shift any determinant of demand other than price of carrots results in a shift ...
3
votes
2answers
707 views

Marginal rate of substitution

This is a homework question. Suppose a consumer has preferences over two goods that can be represented by the utility function $U(x,y) = 2\sqrt{x} + y$ The marginal rate of substitution of $x$ for $...
8
votes
2answers
3k views

Translog Preferences

What are translog preferences? The wikipedia article only clears up that it stands for transcendental logarithmic preferences, and that they are a generalization of Cobb-Douglas preferences. Do they ...
3
votes
3answers
100 views

Papers on measuring institutions

I'm new to this subject, and I'm looking for papers on measuring the 'quality' of institutions and their possible role in the development of a country. ANy help would be appreciated.
2
votes
2answers
9k views

Are Cobb Douglas goods complements or substitutes?

Given $$U(x,y)= x^\alpha y^{1-\alpha}$$ $\alpha \in (0,1)$, are Cobb Douglas goods (here $x$ and $y$) complements, substitutes, or neither? Why? An explanation with mixed partial derivatives would ...
2
votes
2answers
717 views

Discounted (present value) calculation

I had a homework problem regarding calculating a discounted present value. My solution is: 15000 * (1+.08)^1 + 15000 * (1+.08)^2 = $33 696 The question is this: ...
23
votes
4answers
2k views

What are Giffen Goods?

What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence?
2
votes
1answer
786 views

labor leisure trade off

Walras has available 24 hours per day. He has to alloacate this 24 hours between leisure $(L)$ and work. His utility function depends on leisure and the composite good $(C)$ and is given by $U=LC$. ...
7
votes
2answers
690 views

on economic growth and Second Welfare theorem

While I was studying eighth edition of Mankiw's Macroeconomics, in chapter 9 on Economic Growth(pg. 245), the author mentions : "Some economists have proposed increasing the incentive to save by ...
3
votes
2answers
1k views

Does concavity of the utility function has any bite?

A utility function in general has only ordinal meaning, any monotone transformation preserves the order isomorphism of the underlying preference ordering. However, there are several econometrics ...
2
votes
1answer
852 views

Deriving indifference curves

I have been trying to work this out for quite a while now, but I can't seem to understand how to solve these kind of questions. Any help (or hint) would be highly appreciated. Professor Goodheart's ...
1
vote
1answer
9k views

what is the optimum level of production?

The demand function of a monopolist is $q = 12 - p$ where $p$ is the price. Using the total cost and total revenue I was trying to calculate the optimal (short term) level of production. I tried to ...
-1
votes
1answer
94 views