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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2
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0answers
42 views

The core and competitive equilibrium

Can someone please explain why the concept of a core is equivalent to a competitive equilibrium? I am just writing a term paper for my matching theory class and I'm having a hard time following along ...
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1answer
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Is the expected utility the inverse of the utility function?

Can somebody explain to me if that it's true and also graphically explain it?
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1answer
107 views

Dead Weight Loss (Tax)

Problem Given demand $D(p)=A-ap$, and $A,a>0$ and a fixed price $0<p_1<A/a$ by some company. My solution so far CS is $CS=\int_{p}^{A/a}D(p)dp=\int_{p}^{A/a}(A-ap)dp=\frac{1}{2a}(A-ap)^2=\...
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1answer
39 views

Competitive equilibrium with production

Consider an economy with four goods, two individuals and two firms. Firm 1 produces good $x$, firm 2 produces good $y$. Consumers' utilities are $u_1(x,y,z,w)=\min\{x,2y\}$ and $u_2(x,y,z,w)=\min\{2x,...
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18 views

Triple Difference model using Repeated cross-sectional data

I have a repeated cross-sectional data from the Demographic and Health Surveys. And I want to run a triple difference model, along the lines of Yelowitz (1995). My identification strategy is such that ...
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30 views

What does an interior Pareto-efficient allocation looks like in this set up?

"Had a question on a mid-term paper yesterday (now submitted). One question stumped me a little bit. In particular the "interior Pareto-efficient allocation" part stumped me (I'll ...
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2answers
411 views

Integral solution (or a simpler) to consumer surplus - What is wrong?

Problem Given demand $D(p)=A-ap$, and $A,a>0$ and a fixed price $0<p_1<A/a$ by some company. Calculate the consumer surplus and its derivative with respect to $p$. What is this number? My ...
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0answers
34 views

Identifiability of Non-Parametric Utility Function?

I recently learned that EU characterized by independence and weak ordering is identifiable, but a utility function like: $U(x)=v_1(x)v_2(x)$ is not identifiable. Does it mean that "cardinal ...
3
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1answer
49 views

Effect of price on utility

A consumer has an endowment vector $w$; at prices $p$ his demand for the first good exceeds his endowment; $x_1^+(p; pw)>w_1$ then a small increase of $p_1$ will lower his utility. I was discussing ...
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1answer
27 views

The current economic understanding of the effect of labour unions on employment and wages

What are the currently largely accepted views on the effect of labour unions on employment and wages? Where can I read more about the currently established theoretical models that model labour unions?
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1answer
35 views

If a rational preference relation over simple lotteries $\succsim$ are convex then they satisfy independence?

Let´s say there is an uncertain situation with $N$ possible consequences $C = \{C_1, . . . C_N\}$. Assume that there is a rational preference relation $\succsim$ over simple lotteries. I know that if ...
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2answers
949 views

What makes a company too big to fail?

I have read the too big to fail Wikipedia and as far as I understand, a company is too big to fail (and thus will receive government bail-outs) if it's failure has a significant impact on an important ...
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1answer
60 views

Walrasian demand with a twist of Leontief function

A consumer has the utility function $u(x_1; x_2) = \min(x_1; x_2) + 5 \max(x_1; x_2)$. Find its Walrasian demand $x^*(p; w)$. I've tried searching it up when we have two Leontief functions summed ...
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1answer
47 views

Expenditure function

Let $u (x) = \prod_{{i\leq n}}$ $(x_i-m_i)^{a_i}$, where $m_i\geq$0 and $a_i\geq$0, Σ$_{{i\leq n}}a_i=1$ show that the expenditure function $e(p,u)$ is linear in $u$. Based on the definition of the EF,...
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1answer
29 views

How would a firm increase price in such a scenario?

I have the following question: If a firm with a lower marginal cost wants to increase prices in a homogenous goods industry in which demand is perfectly inelastic and supply is in excess, what should ...
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1answer
43 views

Prove the equation

Let $$ x^0=x^*(p^0,w)$$ then $$v(p,px^0)$$ is minimized at $$p=p^0$$ What theorem are we supposed to use in order to solve this, because I am a bit lost. Thanks in advance for all the suggestions/help....
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4answers
159 views

Who is losing in an arbitrage?

When some entity takes advantage of an arbitrage opportunity, who is losing money? For example, when there are price differences across cryptocurrency exchanges and someone exploits an arbitrage ...
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0answers
34 views

Proof of certainty equivalence

The questions say two lotteries are denoted L1 = (0.3,0.7,0.0) and L2= (0.9,0.0,0.1) and denote c(L1) and c(L2) the certainty equivalents of those two lotteries. Then prove L1 ≻ L2 if and only if c(L1)...
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1answer
42 views

Utility functions and positive monotone transformations

We let $g(z)$ be a strictly monotonous function so: $$\frac{dg(z)}{dz}>0$$ Consumer 1 has preferences given by the utility function $u(x_1,x_2)=ln(x_1)+2ln(x_2)$, while consumer 2 has preferences ...
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1answer
59 views

Quadratic utility: monotonicity and risk aversion

I am taking macro class this fall. One of the problems asks whether decreasing absolute risk-aversion and ever-increasing consumption are two unattractive implications of the quadractic utility ...
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2answers
77 views

How to find $\phi$, that denotes the correlation of signals among informed traders?

Since I do not have an answer on Quantitative Finance in my question I cross-post here the problem to tag some other categories The following assumptions are part of the paper of Back, Chao and ...
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2answers
75 views

Prove that if a good is inferior, it is also a Giffen good [duplicate]

This was asked in my online midterm test, and I proved it using the fact that a Giffen good and an inferior good behave in the same manner with respect to increase or decrease in purchasing power. ...
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2answers
36 views

Effects of change in tax on output

Suppose the government imposes a tax on each unit of output produced of $t. What is the firm’s new profit maximizing level of output? The question suggests the use of comparative to determine how a ...
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0answers
36 views

Question about deadweight social burden triangle. Error in the test?

I have been trying to answer the following question for the past two hours. I've looked at textbook examples, online resources and lecture notes. There seem to be two correct answers but I may be ...
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1answer
51 views

Compare taxes Cobb-Douglass and more

Let a utility function for a consumer be defined as $u(x_{1},x_{2})=x_{1}^{1/2} x_{2}^{1/2}$. With the budget $x_{1}p_{1}+x_{2}p_{2}=m$. With values $p_1=p_2=1, m=32$. The state now adds a tax of unit ...
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0answers
22 views

How can I distinguish between those factors that affect supply elasticity and those that shift it?

How can I distinguish between those factors that affect supply elasticity and those that shift it? I am trying to make two regressions, one with the determinants that affect its elasticity and the ...
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0answers
26 views

Prodest package in R for TFP estimation, gives different results

I have the following issue: each time I run the estimation of the TFP by using prodest package in R 4.0.3, I obtain different coefficients before the variables as well as omega variable is different: ...
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0answers
90 views

Certainty equivalence when the utility is semi-continuous instead of continuous

Let $U:\mathbb R^2\to\mathbb R$ be a utility function. If $U$ is strictly increasing and continuous, then it is well known that for any $(x_1,x_2)$ there exists a certainty $(c,c)$ such that $$U(x_1,...
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0answers
20 views

Walrasian Equilibrium

Need help solving last two parts of this problem. We’ve solved for the general equilibrium but not sure how to go from there. The endowments of two consumers are given by $w_1 = (40,80)$ and $w_2 = (...
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1answer
48 views

A question from MWG 2F12

This question is from MWG if walrasian demand function is generated by a rational preference relation then it must satisfy weak axiom. I cannot prove this statement. How can I do?Thanks alot.
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2answers
160 views

which type of goods maximum utility function represent?

I am not sure, which type of goods does the maximum utility function represent i.e., $U(X_1, X_2) =\max(X_1, X_2)$. As the $U(X_1, X_2) =\min(X_1, X_2)$ represent the complementary goods, and $U(X_1, ...
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1answer
34 views

What is the long run equilibrium in layman's terms?

My textbook states An economy's long-run equilibrium is the position it would eventually reach if no new economic shocks occurred during the adjustment to full employment. You can think of long- run ...
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1answer
38 views

Find equilibrium price using excess demand function

Consider an economy with two agents. There are two goods, x and y. Agents' preferences are Leontif ones as follows: $u_1(x,y)=\min(x,4y)$ and $u_2(x,y)=\min(x,y)$. Initial endowment for 1 is (2,4), ...
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1answer
308 views

Is it necessary to ask permission before including someone in the acknowledgements of a economic research paper?

Do I need permission to thank someone, even if I said “all mistakes are our own”? Do I have to make sure that the person being thanked must read the paper, or, it is fine if he just discussed about ...
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2answers
60 views

Two part tariff-income effects

I understand that a monopolist optimally sets a two-part tariff by pricing at marginal cost and then extracting CS as a lump sum fee. However, wouldn't the lump sum fee induce a decrease in consumer ...
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1answer
33 views

What are the advantages of using demand systems estimation? How is this different from individual demand estimation for product?

I am unable to understand how is demand systems estimation is different from simple demand equation estimation. What's the best resource for getting a history line of demand systems?
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1answer
26 views

Slope vs elasticity of demand function - Is it the same thing?

Do the slope of a linear demand function and the elastisicy of demand coincide when we use specific preferences for pricing. As a paradigm, if we consider the case of CARA normal preferences, by ...
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5answers
2k views

Why does increasing the money supply decrease the interest rate in layman's terms?

If money supply increases, then I will have more money in my pocket to spend more. I imagine that prices will also increase over time to adjust to there being more money in circulation. Is it because ...
3
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0answers
66 views

Who were the first economists arguing that utility maximization is the core of rationality and economic behavior?

I am looking for the first economists arguing that maximizing utility function is the iff condition of rational behavior. I've learned that neoclassical economics is founded on this argument. Is this ...
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1answer
23 views

Economic and Statistical Significance Of Coefficient

I want to know If I am comprehending these terms correctly Summarizing the difference between economic and statistical significance of coefficients (Describing the terms, process of assessing each ...
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1answer
44 views

Adverse Selection: Positive Selection of Worker Types (Mas-Collel)

I'm reviewing some question from Mas-Collel and I am stuck on a chapter 13 question related to adverse selection. Consider a model of positive selection in which there are workers of two possible ...
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1answer
42 views

Examples of bounded, positive, inverse demand curves

The three most common examples of demand curves I am aware of are \begin{align} Q&= b - aP,\\ Q&= bP^a,\\ Q&= b e^{-aP}\\ \end{align} The first being our classic linear demand curve, the ...
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1answer
26 views

Economic impact of employer ignorance to cliff effects?

Let's say an employee, Mike in Indiana, earns \$10.50 an hour. He gets a raise to \$13, but because he is no longer eligible for SNAP (food stamps), his net earnings actually go down. His wage has ...
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1answer
229 views

Rational preferences/individual decision-making theory

I am taking advanced micro course this semester. In one of the problems we need to determine whether the preference relation is rational (i.e. complete and transitive). Since we have not really ...
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1answer
28 views

Can individual consumers ever be price-makers, and can they thereby have major effects on welfare?

Suppose there's a big demand shock on some good X. As long as X has fairly standard supply and demand curves, that'll raise the price. And all of the buyers who would have bought at the lower price ...
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1answer
31 views

Perfect complements indifference curve

What would be the I.C of this function? $u(x,y)=\min(x,√y)$ I understand since it is a perfect complements case it should be "L" shaped but I wanted a more detailed graph.
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0answers
42 views

Why is my elasticity of substitution wrong?

I am calculating elasticity of substitution for the following production function: $$F(K,L) = A(aK^{-\gamma}+bL^{-\gamma})^{-\mu/\gamma}$$ where $A, a, b, \mu, \gamma$ are constants. $A, a, b, > 0$,...
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2answers
40 views

Question about the Law of Supply

I have a contention with the Law of Supply's dictum "if the price of a good falls, then the quantity supplied of that good falls, ceteris paribus." Imagine a market for widgets produced by ...
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1answer
22 views

why federal fund rate vs treasury bond yield generally move in the same direction?

My own thought is, if the fed lowred federal fund rate, peoole should look for investment with greater return, like treasury bond. More demand=decline in yields but why do they generally move in the ...
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1answer
47 views

Proof on weak axiom of revealed preferences

I read the following statement. “ A utility maximizer with strictly convex and strongly monotonic preferences satisfies weak axiom of revealed preferences.” How can I prove or show this? I cannot ...

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