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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1answer
214 views

Question on consumer theory

The story of my question is I have multiple question. (1) when John doesn’t work in the underground economy at all , t=0, how can I find the optimal value of $l$ and consumption bundle and his ...
11
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1answer
239 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 ...
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3answers
1k views

Quasilinear Utility: Pareto Optimality Implies Total Utility Maximization?

I read that if we have quasilinear utility for all consumers, then any pareto optimal allocation maximizes the sum of utility levels of all consumers. That is: $\textbf{What we know:}$ $$1)\quad u^i(...
6
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2answers
504 views

Deriving the translog production function

Ive been having difficulty deriving the translog production function defined as: $$\ln y=\alpha_0+\sum_{i=1}^n\alpha_i \ln x_i+\frac{1}{2}\sum_{i=1}^n\sum_{j=1}^n\ \beta_{ij}\ln x_i\ln x_j $$ I know ...
4
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1answer
1k views

Mixed strategy Nash equilibrium in 3x3 game

What is the MSNE for the following game? I think you can eliminate strategies $A$ for player 1 and $C$ for player $2$, as these will are weakly dominated by all other strategies. Then, the game ...
4
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1answer
18k views

Equilibrium price and quantity - consumer and producer surplus

Inverse function of market demand for certain good is equal to $P=100-0.25Q$, inverse supply function is $P=20+0.55Q$. Calculate equilibrium price and quantity. Furthermore calculate consumer and ...
4
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3answers
721 views

Why labour, capital, and output levels cannot be pinned down in perfect competition?

Consider a firm producing with the following technology: \begin{equation} Y = AL^{\alpha}K^{\beta} \end{equation} Assuming that factors are paid their marginal contribution to output, it can be ...
3
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3answers
327 views

Consumer preferences

I want to know under what preferences relation will I not want to consume all of my budget. Because if my preferences are strictly monotonic, strictly convex or convex, even LNS or continuous. I would ...
3
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3answers
437 views

Literature Recommendation: Advanced Undergraduate Economics

I come from a strong quantitative background and am going to law school in the fall. I'm interested in financial product regulation and competition law. I have taken an introductory course in ...
3
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1answer
251 views

Question on uncertainity

Please imagine that Nicole is uncertain of her future wealth. Her wealth in the bad state of the world is zero. Her wealth in the good state is $w>0$. Each state is initially equally likely. ...
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1answer
82 views

What is the assumption behind “indifference curve does not cross”?

If only weak-ordering and continuity is assumed, "ICs" can definitely intersect. If we assume Monotonicity or convexity in addition to weak-ordering, then we can get "no cross of IC". But those two ...
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1answer
312 views

How does the limit of $U(x, y) = (ax^{-c} + by^{-c})^{-\frac{1}{c}}$ as c approaches 0 yield the Cobb-Douglas utlity function? [duplicate]

\begin{equation*} U(x, y) = (ax^{-c} + by^{-c})^{-\frac{1}{c}} \end{equation*} I ask this mainly because after logging both sides of the Utility equation (the first step to proving the assertion, I ...
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0answers
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Most important but untested theories in economics? [closed]

In the opinion of the economists here, what are some of the more important theories in economics that remain untested? By untested I mean theories that, though perhaps evaluated using empirical data, ...
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1answer
349 views

Question about budget constraint and utility maximization [closed]

I have also following budget set $$B=\{x=(x_1,x_2)\in R^2_+ \mid 2\sqrt{x_1}+x_2\le y\}$$ where y is income. Assume that there are two stories. The agent can shop in both of them. The first store ...
6
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1answer
246 views

Does the envelope theorem hold at a corner solution?

Suppose we have the following production function: $$F(L,K)=\max_{L_K}H(L,L_K,K)=\max_{L_K}\left[(L-L_K+1)^\alpha(L_K+K)^{1-\alpha}\right]=(L-L_K^*+1)^\alpha(L_K^*+K)^{1-\alpha}$$ With the ...
5
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1answer
2k views

why is real wage divided by marginal product of labor often called real marginal cost?

As said in the title, why is real wage divided by marginal product of labor often called real marginal cost? In mathematical formula, $mc_t = (W_t/P_t)/MPN_t$ where $MPN_t$ refers to marginal product ...
5
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1answer
425 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 ...
5
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2answers
379 views

Does consumer theory assume that utility functions are consistent overtime?

I'm interested in how we model a consumer with a changing utility function over time. Example: an individual's demand for candy/sweets at 10 years of age will be different when he is 20,30 or 40 ...
5
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1answer
359 views

Converting word definitions of Pareto-Optimal into math symbols

I'd like to have a mathematical version of the following two definitions just because I remember symbols better than words. But I lack the math prowess to convert them from words to symbols. Can ...
5
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2answers
778 views

Why do so many models assume homothetic preferences?

...when Engels Law, backed by a good amount empirical evidence, demonstrates that overall consumer preferences are not homothetic. See for example, Jorgenson (1997)
4
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1answer
320 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 ...
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2answers
1k views

Do discontinuous preferences imply no continuous utility function?

I am trying to think of a preference relation that can be represented by a utility function but such that there does not exist a continuous utility function. I know that you can represent continuous ...
4
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1answer
2k views

Symmetric and asymmetric preferences

I encountered a question where it was given that the consumers had asymmetric preferences. I couldn't find the definition of the term in any of the microeconomics book available to me. Can anybody ...
4
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2answers
1k views

Meaning of Additively Separable, Linear in X

Often I see both in micro and macro two common terminology : Additively separable. Linear in price or linear in probability. I understand exactly as they sound by looking at the functional form ...
4
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2answers
2k views

Transformation Function

In Mas-Colell microeconomics textbook I have found that profit maximization problem (as well as many further optimization tasks) could be represented with application of some transformation function (...
4
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2answers
236 views

Modifying Hotelling's lemma: Is this valid?

Hotelling's lemma is stated as: $$\frac{\partial \pi}{\partial p}=y$$ knowing however that on the more basic level, output $y$ is determined by the input(s) $x(p,w)$,let the profit function be ...
4
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1answer
773 views

Is the Cobb-Douglas Utility Function Locally Non-Satiated at (0,0)?

My understanding of local non-satiation is that increasing your allocation of one good by a marginal amount increases utility. Suppose your utility takes the following form: $$U(x,y)=x^\alpha y^\beta$$...
4
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2answers
250 views

Research Design: Indifference curves and budget lines

I have a basic Idea on how to construct indifference curves such that we must use two goods and then ask for pairs of bundles which are preference indifferent. When doing applied research on ...
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4answers
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 ...
4
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1answer
2k views

Cournot Competition game with 3 Firms

Three firms are in Cournot competition. The inverse demand curve is denoted p(q) where p is the price if a total of q units are produced. Assumptions are: p(0)>0 and p'(q)<0 and p''(q) $\le 0$ ...
3
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1answer
1k views

Positive Monotonic Transformations and Nested Functions

Suppose there is an economic agent with the utility function $u(x,y)$. A second agent has the utility function $h(g(f(u(x,y))))$. Am I correct in thinking that if $f'(x)>0$, $g'(x)>0$, and $h'(...
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4answers
4k views

Can someone explain graphically why MRS is invariant under monotonic transformation?

Let $U(x,y)$ be a utility function. Suppose I have an indifference curve for which $U(x,y) = \bar{U}$. Then $dU = 0$ along the curve and I can rearrange to find the MRS. Suppose I have a monotonic ...
3
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1answer
6k 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 ...
3
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2answers
113 views

Pushing taxes - economic etymology

Frequently a description that is clear in the mind of its author is not as clear to a reader. It is even worse when the reader finds the description clear but actually misunderstands the intention of ...
3
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2answers
141 views

Ruling out boundary solutions in Utility Maximization

Solving the basic Utility Maximization Problem, i.e. \begin{align} max_{x\geq 0} u(x) \\ s.t. \,\,\, p^Tx\leq w \end{align} we get the Kuhn-Tucker first order condition \begin{gather} \frac{\...
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2answers
1k views

If one always spends the same amount, what's one's price elasticity of demand?

Source: p 109, Question 5.9, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 5.7, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw 9. $\color{green } { \text { ...
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1answer
147 views

Subgame perfect equilibrium and expected profit

I am so confused because I cannot set up the monopolist's profit maximization problem.What I did is the following one: Any help will be appreciated. Thank you.
2
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2answers
83 views

The economics of continually selling a product for under its market value?

What are the economic principles behind a company continually selling a product for well under its market value. Continually here expressing that it does not appear to be some short term method to ...
2
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1answer
126 views

Economics of Education: Private School Behaviour

In producer theory, we assume the firm's objective is profit maximisation. Can we make the same assumption when looking at private schools or does this assumption not apply?
2
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1answer
934 views

applications of the slutsky equation

Calculate the substitution and income effects for the following utility function: $$ u(x,y)=\frac{x^a}{a}+\frac{y^a}{a}$$ I know that we are supposed to use the Slutsky equation which accounts for ...
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2answers
5k views

What does perfectly inelastic demand imply about gains from trade and domestic consumers?

Source: p 191, Question 9.7b, 9.7c, Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw Consider a country that imports a good. True or false. Explain your answer. b) “If demand is perfectly ...
2
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1answer
214 views

Stackelberg setup

I am completely confused because I cannot find the leader's best response. I do not know if it is exactly the same as it was a Cournot game. What I did is: Any help will be appreciated a lot. Thank ...
2
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1answer
87 views

Consumer preference and price in the Cobb-Douglas function

I believe I’m using the most basic version of Cobb-Douglas: $U(x,y)=x^\beta * y ^{(1-\beta)}$. The question I have is: in this example would a consumer’s preference ($\beta$) change if the price of ...
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1answer
924 views

Utility function used to indicate bliss point

How does one create a utility function to indicate existence of a bliss point? what do the goods marshillian demands look like in such a situation?
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1answer
92 views

How does demand-supply equilibrium interact with profit maximisation?

My understanding of supply and demand is that at higher prices sellers are more willing to supply and buyers will demand less, and the total transaction volume will be supply or demand, whichever is ...
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1answer
460 views

Pure exchange economy with free and non-free disposal

Question is as follows: My answers are (I) Let k is constant utility level Then $$k=\sqrt{x_A^1x_A^2}$$ $$k^2/x_A^1=x_A^2$$ The first derivative is negative. So the indifference curve is ...
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1answer
4k 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}...
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1answer
232 views

Question on subgame perfect equilibrium

Consider a world of complete information with two agents X and Y and two time periods 1 and 2. Person X only lives in second period. Person Y lives in 1st and 2nd periods both. X and Y are each ...
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1answer
73 views

Is the study of the volunteer sector inappropriate for a labour economist?

In the basics of labour economics the driving factor for increase in labour supply (for the workers in a given market) is increase in wages. The volunteer sector consists of general and skilled ...
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1answer
84 views

What are some applications of Real Analysis in Graduate Economics?

I am interested as to what areas of masters/PhD coursework that learning the fundamentals of Real Analysis would be beneficial for? I am aware of its applications in Econometrics proofs and analysis, ...