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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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 ...
Marcos Fabian C's user avatar
6 votes
2 answers
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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 ...
Kitsune Cavalry's user avatar
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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 ...
TomR's user avatar
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Why is market power presumably high when goods are fungible and demand relatively inelastic?

What does the fact that the goods in an industry are fungible add to a market power analysis if you already know demand is relatively inelastic?
papercuts's user avatar
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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 ...
Thomas V.'s user avatar
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15 votes
3 answers
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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 ...
möbius's user avatar
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12 votes
2 answers
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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 ...
An old man in the sea.'s user avatar
6 votes
1 answer
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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 $(-\...
möbius's user avatar
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Computational Bayesian Statistics and Economics

What is there that links computational Bayesian statistics and Economics(preferably macro)? I'm looking for a primer or gentle introduction on the matter. It doesn't need to go into much detail. Any ...
An old man in the sea.'s user avatar
0 votes
1 answer
2k views

What happens to a production possibilities curve whenever there is too much labor? [closed]

If too much labor is added to a country's production, what happens to the production possibilities curve?
Jacob Famvir's user avatar
9 votes
1 answer
3k views

Continuity Axiom in Expected Utility Theory

Take the following definition of continuity. The preference relation $\succsim$ over the space of lotteries $\mathcal L$ is continuous if for any $L,L',L''\in\mathcal L$, the sets $$S_1=\{\...
Herr K.'s user avatar
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6 votes
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Establish demand curve with infrequent sales

I sell variations of an item on eBay. It is an unusual commodity which I purchase in bulk lengths and then cut to various sizes. They come in about 20 types, which I then sell as 10 different lengths, ...
Jodes's user avatar
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3 votes
2 answers
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Why doesn't Costco simply raise prices and nix the membership fee?

I know little about the field of economics. I realize this question may be too rudimentary for this forum but I am sure someone here can explain this. My question concerns Costco, which is a ...
Kyle's user avatar
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2 votes
2 answers
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Intermediate macroeconomics: optimal bundle for quasilinear utility?

How would I go about solving this question: Assuming consumer's utility function is $U(C,L)=c+2l^{0.5}$, consumer earns a wage of 0.5/hour, $h=24$ and there is no real dividend and tax is $T=11$. ...
Nikitau's user avatar
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A few clarifications on Utility equations and indifference curves?

I have the utility equation $U(a,b) = a^{2}b^{3}$ How can I tell if the indifference curves are convex? I was under the impression that if: $U_{a} > 0$ and $U_{b} < 0$ then the curve would ...
sehrbreit's user avatar
5 votes
2 answers
243 views

Is a strong foundation in advanced microeconomic theory essential to study environmental economics at the graduate level?

Advanced theory of individual economic behaviour in production, consumption, and general equilibrium. Are these topics useful to study environmental economics a the graduate level, or is there not a ...
Hexatonic's user avatar
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2 answers
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Why do companies push users to use inferior software?

Sometimes, companies influence users in order to make them use inferior software and other services. For example, Microsoft makes it difficult to use anything other than Bing for Cortana, even though ...
Kelmikra's user avatar
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3 votes
1 answer
371 views

Slutsky matrix computed from budget shares

In Haag et al. 2009 Testing and imposing Slutsky symmetry in nonparametric demand systems, the authors claim that the Slutsky matrix can be computed from share functions expressed in terms of logged ...
user157623's user avatar
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7 votes
2 answers
12k views

Consumer surplus in case of perfectly inelastic demand

How do we define consumer surplus in the case of perfectly inelastic demand? This question was inspired by the comments following this answer. For a graph of inelastic demand please also see the ...
Giskard's user avatar
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Real world example of using difference quotient vs. derivative

When would you use the difference quotient in an economic model rather than the derivative to assess the change in some endogenous variable? Real world examples seem to be lacking in textbooks on ...
Hexatonic's user avatar
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3 votes
1 answer
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Monotone transformation of utility

We have learned that any "strictly positive monotonous transformation" of utility functions is okay, as long as they preserve the ranking of choices implied by the underlying preferences. Consider $U(...
FooBar's user avatar
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1 vote
1 answer
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Production function and isoquant slope

Given the company's production function $f(L,K)=L^{1/3}K^{3/4}$, find slope of the isoquant passing through $(L,K)=(20,40)$ is equal to $-4/5$ (K is on the vertical axis). I need to state whether ...
mkropkowski's user avatar
1 vote
0 answers
36 views

Question about nested input requirements

In Michael Carter's "Foundation of Mathematical Economics" we have the following exercise: Prove that the input requirement sets are nested. That is, prove that $V(y') \supseteq V(y)$ $ \forall $ $y'...
snufalufagus's user avatar
1 vote
2 answers
110 views

Find Price elasticity of demand in this example [closed]

ln(Q) = 10-0.7ln(P), where P is price and Q is demand. What is the price elasticity of demand?
UnusualSkill's user avatar
2 votes
2 answers
402 views

Help trying to find Economic Profit for a Monopoly

I'm given a demand function ( $p = 60-.002q$), Marginal Cost (\$10) and Fixed Costs (\$300,000) for a monopoly. I've figured the profit maximizing output and price: Marginal revenue function $MR = ...
Romaion's user avatar
  • 165
1 vote
1 answer
375 views

Does the hoarding of perishable goods such as pulses and cereals make economic sense?

I was thinking about the idea of hoarding and the kind of news it is making in India. What strikes me is that hoarding of pulses and cereals does not happen the way people thinks because they are a ...
manish's user avatar
  • 131
5 votes
1 answer
1k views

Is the contract curve orthogonal to the priceline?

Consider an exchange economy with two consumers A and B, two goods x, y. Consumers have identical preferences $U=xy$. Total available endowment are $E_x$ and $E_y$. This is the background of a ...
Bob's user avatar
  • 263
3 votes
1 answer
1k views

Price ratio determined by endowments only?

Am I right to say in an Exchange Economy with two consumers with identical preferences, the equilibrium price (WEA) of the two goods would be determined by availability of two goods, i.e, total ...
Bob's user avatar
  • 263
3 votes
2 answers
2k views

Why is instantaneous utility of current period discounted?

Consider a two period model of consumption. I'm confused by the fact that in the optimum condition it is the marginal utility of the current period that is discounted, not the marginal utility of the ...
lyuboslaw's user avatar
2 votes
0 answers
245 views

How are price and quantity demanded going to be affected?

The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime and that more people will use these ...
Daniel Smith's user avatar
5 votes
0 answers
228 views

How do supply chains form?

I am trying to put forth a theory for endogenous supply chain formation. A set of $K$ complementary tasks need to be performed to manufacture a good $G$. If manufactured, there exists a demand ...
Bravo's user avatar
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2 votes
1 answer
61 views

Comparing two groups of individuals

I am trying to show that 2 groups of individuals are intrinsically the same. I have various characteristics to measure for both group A and group B, such as height, weight, age, etc. I have taken the ...
Groupsimilarity's user avatar
5 votes
1 answer
215 views

What term/theory describes more efficient utilization of a resource?

I may be asking the wrong question here, but I wonder if there is a term/theory that describes/studies the evolution of an economy that continually improves the utilization and allocation of certain ...
skyork's user avatar
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1 vote
0 answers
1k views

Semi Annual Deposit that earns 5% Compounded Quarterly

I was asked: A man planned to endow 1000000 USD to his son on his son's 21'st birthday. How much is his semi-annual deposit in a special account that earns 5% compounded quarterly if the first ...
james's user avatar
  • 111
0 votes
0 answers
574 views

Interpreting coefficient in the disutility function as disutility tolerance?

I am studying a model that relates incentives (money) and a set of actions. Let $f(x) = k\frac{x^2}{2}$ be the disutility function of the agent, where $x$ is the level of effort that the agent is ...
Khan's user avatar
  • 231
3 votes
2 answers
2k views

Marginal Utility with Supply and Demand Curves

Can someone explain how the equilibrium points in the image below (source: The Foundations of Econometric Analysis) represent marginal utilities. I have read about the relationship between the ...
Amaziah's user avatar
  • 43
4 votes
2 answers
2k views

Why do lump sum transfers affect prices?

Let's suppose that I want to maximize total welfare (Social Planner Problem) using lump sum transfers to individuals. It's known then that the price ratio changes relative to when there are no lump ...
Aeson's user avatar
  • 41
10 votes
3 answers
4k views

Is scalping tickets harmful?

IMHO, scalping tickets is no different from legitimate arbitrage unless manipulative. Iirc, arbitrage increases surplus and hindering scalping is setting a price ceiling which leads to deadweight ...
BCLC's user avatar
  • 360
7 votes
2 answers
165 views

Can't Derive Expectation in Second Price Auction

I'm working on a SPA where we solve: $\max_{\beta \ge 0} Pr\{Winning\}[v - \mathbb{E}(b^{[2]} \ | \ b^{[2]} \le \beta)]$ We assume all beliefs on bids are independently and identically distributed ...
hipHopMetropolisHastings's user avatar
4 votes
1 answer
258 views

Sequential games and Perfect Bayesian Equilibrium

Reading the paper http://www.sciencedirect.com/science/article/pii/002205319190155W I came up with the following question. Given that this paper deals with games in which players move simultaneously,...
Rnst's user avatar
  • 41
1 vote
2 answers
795 views

Why is airbnb more expensive than priceline?

Some might say I have an addiction to Priceline Name Your Own Price, however, what I can tell you is that NYOP rates for 2.5* and 3* hotels are always better than the room options offered through ...
cnst's user avatar
  • 137
4 votes
1 answer
3k views

Best resources to self-educate myself in economics

I want to learn Economics by myself and I'm looking to build a path with people who're in this field to how and in what order should I learn Economics, I did some research and I've found many ...
Space_Monkey's user avatar
2 votes
1 answer
50 views

Competition between utilities like ports

I was reading about the frequent congestion in US ports and the resulting effect on the US economy. I feel there are unique features to this setting. When ports face congestion, they levy charges, and ...
Bravo's user avatar
  • 1,699
4 votes
1 answer
457 views

Maximisation problem in a multiproduct firm

I am currently reading the book "Microeconomics: Principles and Analysis" by Cowell on my own. I'm interested in the section of the multiproduct firm, but i'm confused with the use of the profit ...
Héctor Garrido's user avatar
1 vote
1 answer
58 views

Economic Overview of Pacific Island Nations

What are the key drivers of growth for these small pacific island nations? I would expect tourism and natural resources to be pretty central to these economies. Is there anything else? What are the ...
Jamzy's user avatar
  • 3,751
-1 votes
1 answer
1k views

Estimate total variable cost function (TVC) and average variable cost function (AVP) from marginal cost function (MC)

I need to estimate the function expressions for $TVC$ and $AVC$ from the $MC$ function for different amounts of quantity $(Q)$ From the solutions I have, that For $Q \leq 50$ $MC1(Q) = -Q + 100$ $...
lala_12's user avatar
1 vote
0 answers
29 views

Impact of Economic Crisis on Supermarkets And Chemists?

In the undergoing Greek financial crisis, I’ve heard more than once that the three prime sufferers in any economic crisis are the 'bankers', 'supermarkets 'and 'chemists'. I do understand why the ...
Sampark Sharma's user avatar
0 votes
1 answer
216 views

Marginal rate of technical substitution for multi-dimension inputs? [closed]

Suppose I have a vector x = ($x_1,x_2,x_3,x_4,x_5$) of inputs. How it is the MRTS($x_1,x_2,x_3,x_4,x_5$) ? And which is the relation with the marginal products of inputs 1-5 ?
sparkle's user avatar
  • 177
5 votes
3 answers
751 views

Are there two different meanings of the discount rate?

Today I suddenly became aware of how the term "discount rate" are frequently used in two different contexts: When people prefer to have something now rather than in the future. The reason is ...
Heisenberg's user avatar
4 votes
1 answer
78 views

How long are consumers willing to wait in order to find a bargain?

I have (what I believe to be) a microeconomics question that I'd like to explore: How long are consumers willing to wait to find a bargain on an item they'd like to purchase? I believe the ...
daOnlyBG's user avatar
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