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
1 vote
1 answer
2k views

Relationship between short-run marginal cost(SRMC) and long-run marginal cost(LRMC)

While reading Intermediate Microeconomics from Hal Varian, I fell short in understanding the relationship between SRMC and LRMC. I can see how in SR, when fixed factor is chosen at LR optimizing ...
Dhruv Goel's user avatar
1 vote
0 answers
80 views

Implementing Coasian bargaining to achieve social welfare

In this excellent answer, Ubiquitous elaborates on the Coasian solution as an alternative to Pigouvian subsidies. I wanted to explore and understand the solution a bit further. Consider the setting ...
Bravo's user avatar
  • 1,699
2 votes
1 answer
111 views

Is it possible to calculate how long it will take to reach Break Even Point if the information provided is only an ROI (Return On Investment) of 10%?

Is it possible to calculate how long it will take to reach Break Even Point if the information provided is only an ROI (Return On Investment) of 10%? Only ROI is provided. If there is a way to ...
kalapadago's user avatar
2 votes
0 answers
185 views

undergrad Producer theory problem [closed]

Two commodities, X and Y, are produced with identical technology and are sold in competitive markets. One unit of labour can produce one unit of each of the two commodities. Labour is the only ...
saubhik's user avatar
  • 248
3 votes
1 answer
291 views

Is there an economic term for decreased demand due to expected decrease in price due to a product's value lasting for a finite amount of time

So, at work we are doing a charity bake sale. Lunch hour is long gone. An email was sent out offering everything at half price. I imagine decreased demand as everyone knows they have to get rid of ...
ZZ9's user avatar
  • 133
7 votes
2 answers
541 views

Is elasticity purely an aggregate concept or can it be individualized

First question here. I am not an economist by training, but I do quite a bit of econometric analysis in my job (my background is maths). I often get asked about elasticity, and I am familiar with ...
Paul's user avatar
  • 171
10 votes
7 answers
6k views

Mathematical Micro/Macro Economics Textbook Recommendation

I was formerly an economics major and now also majoring in mathematics. I want a textbook that is rigorously based on mathematics; not just using mathematics whenever the author wants, but in a more ...
Taxxi's user avatar
  • 203
8 votes
2 answers
274 views

Example of an economy where Equilibria may not be efficient, where one agent is altruistic

I'm looking for a theoretic example of an economy where one agent is altruistic, while the others are not, that would make a walrasian equilibrium not efficient.
An old man in the sea.'s user avatar
1 vote
0 answers
460 views

Altruism and locally non-satiated preferences

Is there an altruistic utility function that cannot represent a locally non-satiated preference? As an example of an altruistic utility function: $U^1(x^1,...,x^H)=u^1(x^1)+\sum^H_{j=2}U^j(x^j)$, ...
An old man in the sea.'s user avatar
-1 votes
1 answer
98 views

Proving government expenditure crowds out private consumption [closed]

Please help as I am not able to solve either parts.
saubhik's user avatar
  • 248
4 votes
3 answers
576 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 ...
tattedjoe's user avatar
8 votes
1 answer
453 views

Muth exposition of the rational expectations hypothesis

I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that ...
Xiaoeu's user avatar
  • 83
3 votes
1 answer
2k views

Indirect utility from expenditure function

I have the expenditure function: $$e(p,u)=\left(p_1^{\rho/{\rho-1}}+p_2^{\rho/{\rho-1}}\right)^{{\rho-1}/\rho}u$$ where $u$ is the utility, $p_1,p_2$ prices and $\rho$ a parameter. How do I derive the ...
Guilherme Salomé's user avatar
6 votes
4 answers
1k views

Are billboards beneficial for the economy? Why?

Billboards cost money to make and don't really seem to significantly benefit anyone other than billboard-makers. A company c putting up billboards presumably increases profits from the resulting ...
Kelmikra's user avatar
  • 195
2 votes
2 answers
10k views

Find the optimal demand functions for capital and labour for this firm

I'm trying to solve this question which states: Suppose that a profit maximizing producer has a production function described by Q = K^3/4 L^1/4 and faces the general isocost line (TC = rK + wL). ...
JDH's user avatar
  • 23
19 votes
4 answers
1k views

Is net neutrality not important in a competitive market of internet providers?

In my understanding, allowing ISP to throttle sites that use a lot of traffic is just price discrimination. The ISP will charge sites like Netflix, which will then pass the cost to Netflix consumers. ...
Heisenberg's user avatar
2 votes
2 answers
246 views

Find quantity from price elasticity

I have $P_1 = 24$, $Q_1 = 800000$, $P_2 = 32$ and price elasticity $e = -8$ and need to find the function $P(Q)$. I guess I need to find $Q_2$ by $$ \frac{(Q_2-Q_1)/Q_1}{-(P_2-P_1)/P_1} = -8 \...
Jamgreen's user avatar
  • 303
2 votes
2 answers
7k 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 ...
user avatar
5 votes
4 answers
20k 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 ...
user avatar
2 votes
1 answer
2k views

How does Perfect Elasticity imply infinite quantity for any higher price?

I reference Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw. The graph above is from p 100. [p 99:] ...supply is perfectly elastic. This occurs as the price elasticity of supply approaches ...
user avatar
3 votes
1 answer
76 views

Delegation with Discreteness

Consider a game of delegation. An uninformed principal must delegate some task to an informed agent with preferences imperfectly aligned. I'm aware of plenty of literature that studies these kinds of ...
Pburg's user avatar
  • 2,208
2 votes
1 answer
388 views

Estimate function expression for TC and MC

I have this Labor (L) 0 1 2 3 4 5 6 7 8 9 10 11 Output 0 32 72 114 161 204 242 272 292 304 302 288 and I need to estimate function expressions for $TC$, $AVC$, and $...
Jamgreen's user avatar
  • 303
4 votes
2 answers
23k views

Deriving Equation for Engel Curve

I have a utility function of $U = B^{.67}Z^{.33}$ with Income $Y$, Price of Good B is $P_b$ and price of Z is $P_z$ I now need to derive an engel curve for this. I have no idea where to start.
All About Groups's user avatar
3 votes
3 answers
10k 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 ...
user avatar
3 votes
0 answers
223 views

Optimal commodity taxation - solving for the optimal tax rates?

I need to solve for optimal tax rates for two products. In my model there are N identical households that maximize their utility function subject to a budget ...
Amaranta's user avatar
3 votes
2 answers
4k 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 { ...
user avatar
8 votes
3 answers
20k views

Intuition - Why does elasticity vary along a curve?

Source: p 96, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw Even though the slope of a linear demand curve is constant, the elasticity is not. This is true because the slope is ...
user avatar
3 votes
1 answer
850 views

Intuition: Difference in price elasticities of demand due to different bases

Source: pp 91-92, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw If you try calculating the price elasticity of demand between two points on a demand curve, you will quickly ...
user avatar
1 vote
3 answers
1k views

What is an example of a choice which is not necessitated by scarcity?

I am first year economics student and for the past month we have had it constantly drilled into us that all choices have an opportunity cost and thus they are all necessitated by scarcity. Thus when I ...
entropy's user avatar
  • 143
2 votes
1 answer
1k views

When a relevant variable unnamed on either axis changes, can the curve NOT shift?

Source: pp 40-41, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw her demand curve would shift to the left (to curve D3). In economics, it is important to distinguish between ...
user avatar
2 votes
1 answer
2k views

Why do firms bother to produce at equilibrium quantities if at equilibrium quantity, MR < MC?

For almost all demand curves, the resulting marginal revenue curve is often to the left of and steeper than the demand curve. The marginal cost curve has its distinctive U-shape, and a particular ...
abhishek's user avatar
  • 121
4 votes
3 answers
3k views

Can people lack a comparative advantage and a comparative disadvantage?

Source: Question 9b, p 61, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 8b in Principles of Microeconomics, 4 Ed, 2008 9. Are the following statements true or false? ...
user avatar
1 vote
1 answer
97 views

How to determine demand without the price of a good?

If I have the utility function of an individual that exhibits perfect substitutes, think (U=ax+by), and I'm given the price of good x and the budget M, then how am I supposed to determine the demand ...
KawaiiExpert's user avatar
6 votes
3 answers
1k views

Intuition behind Comparative Advantange

I already read and ask NOT about pp 52-54, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I understand such numerical examples that corroborate Comparative Advantage, but how can I ...
user avatar
5 votes
2 answers
1k views

Why are we taking the logarithm for risk-averse decision-makers?

I'm a mathematics student learning a bit of Game theory. Many examples are given within a very economic setting and up to know I could follow most of it because they were very basic and I learnt some ...
Huy's user avatar
  • 151
0 votes
2 answers
50 views

Do capital goods have to be valued so that (discounted) real expected return on capital goods equal current present value of capital goods?

Let $P_k$ be the value of 1 quantity of a capital good. If one does not sell the capital good and keep it, the good provides interests. In such a case, does standard macro say that all expected ...
cams's user avatar
  • 3
2 votes
1 answer
805 views

Impact of government subsidy on labour supply

If the government pays a certain amount $b>0$ to every person who is not working, what is the impact of this subsidy on labour supply? How does it alter the reservation wage? Is your answer ...
saubhik's user avatar
  • 248
2 votes
2 answers
11k views

Income Offer Curve In Basic Microeconomics

Can anybody explain to me the income offer curve? Is it a relationship between $x_1$ and $m$? If the budget equation is $p_1x_1+p_2x_2=m$? With income being the variable $m$?
Ethan Mark's user avatar
4 votes
1 answer
4k views

Solving for optimal consumption bundle

Consider a consumer who can consume either A or B, with the quantities being denoted by $a$ and $b$ respectively. If the utility function of the consumer is given by $$-[(10-a)^2+(10-b)^2]$$(suppose ...
saubhik's user avatar
  • 248
3 votes
0 answers
153 views

How to find walrasian asignations? [closed]

In a economy Arrow Debreau of pure exchange with two agents and two goods. With utility function of Leontief for agent B, where $U_b(x_b,y_b)=\min(x_b,y_b)$; and for agent A a simple Cobb-Douglas $U_a(...
Laura Canon's user avatar
4 votes
2 answers
3k views

Perfect competition: Finding short run equilibrium price?

I am trying to self teach myself some Economics, I am using an old textbook given to me by a friend, which does not contain an answer key. I have run into the following problem and I was wondering if ...
Question's user avatar
1 vote
0 answers
26 views

Where can I find quarterly/monthly medicare/medicaid state level drug utilization data

I read a paper titled 'State generic substitution laws can lower drug outlays under medicaid'. It uses quarterly state level medicaid drug utilization data. However, I could only find yearly data at ...
Yan Song's user avatar
7 votes
1 answer
884 views

What does Hayek mean at the end of the first paragraph of The Use of Knowledge?

I reproduce here the first paragraph of Hayek's well-known essay The Use of Knowledge in Society: What is the problem we wish to solve when we try to construct a rational economic order? On certain ...
Gregory Higley's user avatar
2 votes
0 answers
847 views

Consumer Theory - Relationship between compensating variation (CV) and the equivalent variation (EV)

John consumes two products – X and Y and his preferences are represented by an unknown utility function – u(x,y) (we may assume his indifference curves are well-behaved). His income is m, while the ...
yonatan's user avatar
  • 37
3 votes
2 answers
2k views

Suitable terminology for the inverse elasticity?

In many microeconomic applications (e.g. monopoly price-setting) the inverse elasticity appears. Explaining such relations to laymen is often awkward because inverse proportionality is not as ...
TemplateRex's user avatar
3 votes
1 answer
2k views

Basic microeconomics: supply, demand and substitutes in production

The question is: explain the change in the market for skim milk, if demand for ice cream rises. I'd say these two are unrelated in consumption (saying they're substitutes is kind of stretching it), ...
Jason's user avatar
  • 31
2 votes
1 answer
192 views

Impact of working capital constraints onto output

I'm looking for empirical evidence (optimally from natural experiments, as described below) of the impact of working capital constraints onto firm output, and the differentials of firm size. I ...
FooBar's user avatar
  • 10.7k
5 votes
1 answer
540 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 ...
Stan Shunpike's user avatar
25 votes
4 answers
146k views

What are FOCs and SOCs?

I keep seeing the terms first-order conditions and second-order conditions used in my undergrad economics class on production functions, monopolies, etc but I have no idea what these terms mean. It ...
Stan Shunpike's user avatar
10 votes
2 answers
4k views

Intuition behind risk premium

In Lecture 20 of MIT's Microeconomics course, a situation is proposed where a 50/50 bet will either result in losing \$100 or gaining \$125 with a starting wealth of \$100. It is stated that a person ...
Nick's user avatar
  • 125