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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54 views

Why do two-sided marketplaces often charge both sides of the transaction?

Why do marketplace apps often charge both sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler? i.e. if the marketplace knows which side of the market ...
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1answer
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Measuring income effect before knowing substitution effect

Suppose on the x axis we have shelter and on the y axis we have composite goods. Now, if the price of shelter increases, the optimal bundle changes from point A to point D. Standard textbook tells me ...
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In a game with alternating moves and complete information, the Nash equilibrium cannot be a non-trivial mixed equilibrium?

Where I can find a simple proof for this fact? For example, a trivial bimatrix game with alternating move has the following payoff matrix: \begin{array}{|c|c|c|} \hline & 1 & 2 \\ \hline U &...
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Which mathematics are required for fully understanding the theories of the firm?

When I say "theories of the firm", I'm referring, in particular, to the theories exposed in the next works: 1) Transaction Cost Economics exposed in "Transaction Cost Economics" by ...
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2answers
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indifference curve

Suppose my preferences are such that I like more of both goods, but only up to a point. After I have 5 units of both goods, that’s as good as it gets, and I’m indifferent if I get more. how do u draw ...
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1answer
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Comparing utility functions [closed]

I'm doing an econ course after not having any math or micro for a few years, now I'm totally missing the basics again. I'm wondering how to show that utility functions are an equivalent to each other: ...
4
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1answer
62 views

Utility representation of single peaked preferences

Is it true that a single-peaked preference (with the peak at some finite point) over the set of real numbers, always has a utility representation ?? If yes, can you please hint towards the proof or ...
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23 views

Violation of the transitivity axiom [duplicate]

I'm struggling to think of a way to violate the transitivity axiom. I was thinking about the following scenario: Let's say that you're voting on three different choices, A, B and C. If you pit A vs. B,...
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1answer
31 views

Strictly increasing but not convex preferences

Is it possible to have preferences that is strictly increasing but not convex? Will perfect substitutes indifference curves show strictly increasing but not convex preferences? I am confused, as won't ...
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Binary relation on the set $X = \{v, w, x, y , z\}$ that is asymmetric and transitive but not negatively transitive

So I am trying to find a binary relation on the set $X = \{v, w, x, y, z\}$ that is asymmetric and transitive but not negatively transitive, and is quite tricky. Will $R = (v, w)$ be asymmetric and ...
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1answer
45 views

Question about an interpretation of the MRS

Given the marginal rate of substitution of $x$ for $y$ : $\frac{u'(x)}{u'(y)} $ I know one can interpret this as the amount of $y$ one is willing to give up for an additional unit of $x$, or the ...
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1answer
31 views

Raise/Lower Seller Fees on Platform - Expected Seller Behaviour?

Say there is a marketplace company that facilitates buy/sell of digital content (i.e. marginal cost = 0). And that content is somewhat substitutable but not completely so. As an example, for a ...
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1answer
59 views

Returns to Scale Microeconomics

Are there any production function $f(x_1,\ldots,x_n)$ that is having decreasing returns to scale, given that the marginal product in every input $i$ in the function $f$ is constant?
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1answer
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If $x \succsim_i x_i^*$ then $p \cdot x_i\ge w_i.$ (MWG 16.C.2)

(MWG 16.C.2) Suppose that the preference relation $\succsim_i$ is locally nonsatiated and that $x_i^*$ is maximal for $\succsim_i$ in set $\{x_i \in X_i: p \cdot x_i \le w_i\}$. Prove that the ...
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2answers
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Geometric intuition behind the point where the indifference curve meets the budget line

So, this isn't to solve any kind of problem, but rather about the intuition behind the concept. I was wondering if at the optimal point where the indifference curve is tangent to the budget line and ...
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What is the term for requiring taxes/regulatory changes to be above a certain threshold to overcome organisational communication barriers

Help remembering the specific term for the following would be very much appreciated! The following: When a government implements a tax/regulation that is too low in stringency, the new policy may not ...
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1answer
24 views

Where can I find research on the impact of informal/unregulated suppliers on prices and externalities?

I am looking for research and papers on the impact of informal/unregulated suppliers on market prices and negative externalities. I am particularly interested in the manufacturing sector.
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1answer
72 views

What additional axiom to GARP do we need to generate a differentiable or smooth utility function

After researching for a while, I find this: https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents They come up with an axiom called SSARP that generates a preference with smooth demand ...
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Calculating cross price elasticity of demand

$Q=0.3L^{-1}M^{\frac{1}{3}}R^\frac{2}{3}Y^{\frac{1}{2}}$ I'm asked to find both the cross-price elasticity of demand for $R$ wrt $Q$ ($1$) at current prices and cross-price elasticity of demand for $L$...
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1answer
44 views

Proving that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I$ with certain conditions

Can I please have some feedback/help proving the following. My proof is below but I am quite uncertain as to whether my solution is efficient. Thank you. If $u(x)$ is a homothetic utility, then show ...
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1answer
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Could low interest rates encourage savings?

We normally assume that a lower interest rate will induce less saving as the returns on saving are lower. However, if a central bank committed itself to a low or even negative interest rate for a long ...
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1answer
24 views

Does a 2sls model use logarithm?

In an ols model demand ~ price , is it reasonable to use log-log for price and demand, but in a 2sls model does the logic remain the same? I found articles simply using 2sls without using a log to ...
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3answers
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Long Term Economic Profit for Perfectly Competitive market

When we consider a perfectly competitive market, in the short run we will run a firm if the total economic profit though negative till price is above shutdown point.In long run we will run at an ...
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Demand curve:log Quantity, logprice,logprice of N substitute goods,log income, need something else?

Imagine the following situation: a seller of a company has the price and quantity sold for a certain good, that seller can simply make a regression like: ln(Quantity) = ln(Price) ~ ln(price of ...
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What is the relationship between Marshallian demand and Two-Stage Least Squares Estimation Procedure

I was reading Varian, and he gives an example of how to find the quantities demanded using a CobbDouglas utility function with observable data, and a question arose: what is the relationship between ...
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1answer
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Can the Income Consumption Curve have a non smooth shape?

Can the Income Consumption Curve have a shape that is kinked?
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law of diminishing marginal returns and regression on the factors of production

Does it make any sense to create an equation with Profit ~ Production factor1 + Production factor1 ^ 2 + Production factor2 + Production factor2 ^ 2 to explain how much the increase of 1 in a company'...
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43 views

profit maximization intuition capital(K) and labor (L)

$$\underset{K,L}{\text{max}}\;\;{F(K,L)−rK−wL}$$ What is the difference between maximizing profit using this process above, or simply increasing each factor of production by 1 when the existing number ...
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2answers
224 views

What is the best way to estimate a demand curve?

I did a linear regression on quantity sold and price for a good and simply the coefficients don't make any sense. number of observations = 16 Demand=1868 -14*P Suply=0 +45*P So p*= 1421.778 and Q*= ...
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1answer
44 views

What is 2nd round of rationalizability for a 1st price auction?

Consider a first-price auction. Suppose that we have $N$ bidders, and they believe that their opponents' values is drawn from a uniform distribution on interval $[0,1]$. Let us eliminate weakly ...
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2answers
535 views

Slope of the Budget Line

When we try to maximise utility constraint to a budget. We find the utility function or indifference curve which is having the budget line as tangent. So for solving a question we can equate the slope ...
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Continuous logit models - random utility with uncountable choice set

This question is about the mathematical foundations of the continuous logit model, as derived in McFadden (1976) (https://eml.berkeley.edu/reprints/mcfadden/math_theory.pdf) and Ben-Akiva et al (1985) ...
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1answer
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Prove that Choice Coherence Implies IIA

Prove that Choice Coherence implies Independence of Irrelevant Alternatives (IIA). From the definition of choice coherence, we have this: A choice function c satisfies choice coherence if, for every ...
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1answer
81 views

Interpretation of Demand and Cost Curves

I am currently starting on the topic of monopolies in school and I encountered the following scenario: A monopolist faces a demand curve given by $Q = \frac {100} p$ and a cost function given by $C = ...
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46 views

Quasi-linear utility. Deriving demand

I was trying to derive a general demand for the good $x$ for this quasi-linear function $u(x,y) = y + 2\sqrt{x}$ subject to standard budget constraint $p_x x + p_y y \leq M$ Using Kuhn-Tucker ...
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1answer
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Doesn't the Pareto-extension rule invalidate Eliaz's (2004) unified theorem of social choice?

Eliaz (2004) uses social aggregators to provide a unique "meta-theorem" from which Arrow and Gibbard-Satterthwaite follow as corollaries. He defines social aggregators as follows. Let $\...
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Parsing problem 1.D.5 in MWG

I am a little confused about the statement of 1.D.5 in MWG, which I will reproduce here for convenience. I have "solved" the problem, I just don't understand something particular. $\textbf{(...
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1answer
107 views

Difference between social choice functions and social decision functions?

A social decision function (SDF) à la Sen (1970) is defined as a collective choice rule whose range is restricted to social preference relations which generate a choice function. From Gaertner (2009), ...
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Topological intuition to continuous preference relation

For a Microeconomics Course, we are going through MWG, and in the lecture we discussed the notion of a continuous preference relation. A preference relation $\succsim$ on a set $X$ is called ...
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Some questions about Kyle's model in Continuous Auctions and Insider Trading (1985)

I was trying to understand Kyle'e Theorem 1 in page $1319$ in Continuous Auctions and Insider Trading in 1985. As we can see by the proof, this factor $\beta=\frac{1}{2\lambda}$ refers to the ...
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0answers
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MWG_3D4_C, why the solution seems in reverse?

I'm doing exercises of Chapter3 of MWG, there's a problem that I don't understand (I didn't figure out the solution manual either...). It is about exercise 3.D.4, the full statement of the exercise is ...
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2answers
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In demand and supply chart, why is it assumed that import will only happen if domestic suppliers are unable to supply?

First Review What I do understand, The demand and supply chart shows once imports are allowed... Tariff is added on imports resulting in loss of consumer surplus and increase in supplier surplus. I ...
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1answer
46 views

Please help a layman distinguish among sorts of normal goods

I'm trying to organize my thinking about differences among types of normal goods, and I'm sure that someone smarter than me has already done the necessary work. Here's one sort of distinction that I ...
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1answer
182 views

Convex Preference but Convex Utility

Can preference be convex when utility is not a concave function (e.g. $U=x_1^2 + x_2^2$)?
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1answer
68 views

Confusion over shut-down point

In my textbook, the shutdown point is defined as the intersection between the average variable costs curve and the marginal costs curve. Suppose Company A has total costs function $TC(q_A)=\frac{1}{2}...
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1answer
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Questions regarding Marginal Rate of Technological Substitution

Definition of MRTS is: keeping constant the total output, how much input 1 has to decrease if input 2 increases by one extra unit. How then is MRTS_KL = MP_L / MP_K if MP_L = ΔQ/ΔL and MP_K = ΔQ/ΔK. ...
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30 views

Perfectly Inelastic Supply curve and Producer margin [duplicate]

If the supply curve is perfectly inelastic then it is vertical as no matter what the price is supply will be same. Producer surplus is area below equilibrium price and above supply curve. so in case ...
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1answer
73 views

Microeconomics undergraduate ELASTICITY help (differentiating log-linear demand curve) [closed]

How do you show that the price elasticity of demand is a constant if the demand function is log-linear? To show this, how do you differentiate the log-linear demand curve to determine dQ/dp, and ...
5
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1answer
49 views

Trying to track down the earliest usage of rivalry, tangibility, excludability, and durability in economics

I'm interested in a history of these terms, and wondered if anyone knows where I might find such a thing. The first mention I can find for excludability is a 1957 law journal paper referring to a ...
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2answers
258 views

Has anybody seen anything this expression before?

Suppose that $z(\cdot)$ is the demand function of an individual (consumer/investor) and $p$ is the price of the commodity/asset demanded. Does anybody know what is the intuition behind the following ...

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