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
0
votes
1answer
149 views

Question about Locally non-satiated preferences

If a consumer has locally non-satiated preferences, which of these 2 bundles is preferred and why? Bundle A: (1,3) Bundle B: (4,2) This is what I've reasoned from my very limited understanding of ...
0
votes
1answer
55 views

Optimal choice for a weird leontief function

Compute the optimal choice for a consumer with the following utility function: $$u(x_1, x_2) =\max \{\min(2x_1, x_2), \min(x_1, 2x_2)\}$$ I'm familiar with computing optimal choice for perfect ...
1
vote
1answer
46 views

Effect of Promotional Sales on a Demand Curve

If there is news that shops are having a sale on dress shoes (beginning right now), will it shift the demand curve for this good? I initially said yes, as a sale should increase the quantity demanded ...
1
vote
1answer
225 views

Giffen Goods & Complementary Goods

Consider that good X and good Y are complements and good X is a Giffen good. If I increase the price of good X, what affect does this have on the price and quantity demanded of good Y? My reasoning ...
2
votes
1answer
175 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 ...
1
vote
0answers
35 views

Take It Or Leave It Strategy: Social Optimum

Here is what I understood Using Backward Induction, I inferred that buyer offers a price, say, $P$ and the seller will sell only if $P \geq c(I)$. Setting the lowest possible Price that will ensure ...
0
votes
0answers
21 views

Net Present Value with investments in multiple phases

I am trying to calculate the Net Present Value for a theoretical project in which, unlike most examples in textbooks and on internet tutorials, investments do not only happen in t=0, but they also ...
1
vote
1answer
58 views

Strict preference and utility function

If strict preferences over three outcomes x, y and z, do not satisfy transitivity, so that $x \succ y \succ z \succ x$, then these preferences cannot be represented by a utility function. Is this ...
2
votes
1answer
38 views

The impact of news in the stock market?

I am currently working on a large sample of textual data from news articles. I was just wondering whether there exists any studies which tries to explain the market anomaly known as "The-Day-Of-The-...
4
votes
1answer
449 views

Quasi-Linear Functions

I understand that quasi-linear functions have a general form $U(x_1,x_2,...,x_n,y) = f(x_1,x_2,...,x_n) + y$ and that for a quasi-linear function, the income effect with respect to the other ...
3
votes
1answer
112 views

3rd Degree Price Discrimination

I came across a True/False question in my economics problem set: Is the following statement true or false? "A monopolist can practice third-degree price discrimination in the two markets it ...
-2
votes
1answer
114 views

How to find the optimal consumption basket? [closed]

A consumer has the following utility function and income. 𝑈(𝑥, 𝑦) =1/2 * ln 𝑥 + 1/2 * ln y Price of 𝑥 = Price of 𝑦 = 100. Income = 1000 Suppose that the consumer gets 2 redeemable coupons for ...
0
votes
0answers
237 views

Equivalence of definitions of upper contour sets

Mas-Collel, Winston and Green's Microeconomic Theory (3rd editions) offers two definitions of the upper contour set: How can the equivalence between the two definitions be proved?
2
votes
1answer
104 views

Insurance and Hirshleifer effect

I am trying to understand the statmement that 'public information kills insurance opportunity' -- referred to as Hirshleifer effect. Does it (in general) lead to some undesirable outcomes? Could you ...
0
votes
0answers
44 views

Calculating Demand curve function from Elasticity of demand, price per quantity and quantity purchased?

For an assignment I have to model the demand function and find consumer surplus based upon elasticity of demand, price per quantity and quantity purchased. Ill copy and paste the assignment below and ...
1
vote
1answer
52 views

Constructing a Production Possibility Curve (PPC)

I am trying to create a PPC, in which there are two goods (e.g. apples and oranges). My question is, does it matter which goods are plotted on the x or y-axes? The opportunity cost per good remains ...
0
votes
0answers
25 views

Supply/Demand Shift (Find New Equilibrium)

Starting: supply curve $y=x+10$ and demand curve $y = -x+30$ with equilibrium at (10, 20). The problem states that DEMAND shifts leftwards by 3 units and to find the new equilibrium. My professor did ...
0
votes
1answer
54 views

Guess 2/3 of the average with integers - mixed strategy equilibria?

The "Guess 2/3 of the average" game (Wikipedia) is a game in which n people guess what 2/3 of the average of their guesses will be, and where the numbers are restricted to the integer (in this case) ...
2
votes
2answers
73 views

Matchstick Game

Consider the following $2$ player finite extensive game. Player $1$ moves first. She must choose an integer from $1$ to $10$, and place that number of matchsticks on the table. Next, Player $2$ must ...
2
votes
1answer
960 views

Imperfect Substitutes and Utility Funcitions

The utility function for perfect substitutes is defined as U(X,Y) = aX + bY. If the two goods X&Y are imperfect substitutes what would be their utility function?
-1
votes
2answers
54 views

What's the market equilibrium price for the used good?

On a perfectly competitive market, a buyer wants to buy a used good. He is willing to pay $30$ for a badly used good, and $60$ for a nicely used good. The seller is willing to sell a badly used good ...
0
votes
0answers
196 views

What is the difference between ordinary income effect and endowment income effect?

As far as I understand: Ordinary income effect: A change in the price of good 1 will affect my future behaviour (the quantities that I will buy of good 1 and good 2). But it doesn't really affect my ...
0
votes
0answers
94 views

Will an increase in a complementary good with price unchanged move demand curve right and quantity demanded right, as well?

This graph shows the quantity of electricity that consumers demand at a regulated price set by the government. Adjust the graph by dragging the dot or the demand curve (or both) to show the effect of ...
0
votes
0answers
46 views

Strategy sets and SPNE

I need to find the startegy sets for the two players in this game. I understand that the game has only one subgame, that is, the entire game. I cannot seem to understand the strategy sets of the ...
1
vote
1answer
731 views

What are general equilibrium effects?

Im reading alot on public finance and have been seeing alot of mention of measuring "general equilibrium effects". I know what general equilibrium is, but i dont know what general equilibrium ...
1
vote
1answer
299 views

MRS of good X for good Y

I'm having some confusion with using the terminology of MRS. For example, let's take up this question: If good 1 is a “neutral,” what is its marginal rate of substitution for good 2? The answer is:...
0
votes
0answers
96 views

Profit Maximization and Returns to Scale

Assume a labor-intensive production function: $Q(L)=L^\beta$ Find demand of labor that maximizes profits (unconditional demand $L(p,w,r)$), the demand of labor that minimizes costs (unconditional ...
2
votes
1answer
42 views

Have I found the correct Emission Price

Let's say that there is a hotel owner $(H)$ and a woodworker $(W)$ working in close proximity to one another. The woodworker produces $x$ units to sell at market at $p_{x}=6,5$. From the woodworking ...
0
votes
1answer
81 views

How Does Production Possibility Curve Shift (Partially)?

Textbook: "Suppose that a new pizza assembly line improves the pizza production process and that the development of the new assembly line does not require the use of more of society's resources. ...
1
vote
2answers
46 views

Can I make this assumption about the utility function?

My question concerns a household's utility function U(c,l). We're told that the partial derivatives dU/dc and dU/dl > 0, and the second order partial derivatives are negative. Now, can I assume ...
0
votes
0answers
47 views

Book recommendation: first year economics course

Can anyone help me find a nice introduction (possibly popular economics) into the field of black market economics.
1
vote
0answers
26 views

supply-demand imbalance

I have a basic question What are the different means/mechanisms available to address supply-demand imbalance? The answers that come to my mind are : Using pricing (when demand > supply) Using ...
0
votes
1answer
31 views

What is the reason behind the demand function of a perfect complement good?

so I know that usually the income curve is equal to: $$x_1p_1 + x_2p_2 = m$$ if we rearrange this equation we get that the demand for good one ($x_1$) is equal to: $$x_1 = \frac{m-x_2p_2}{p_1}$$ None ...
2
votes
0answers
23 views

Why is underpayment so prevalent? (23% of those who are 25 and are entitled to the UK's National Living Wage are underpaid!)?

Context: https://www.theguardian.com/uk-news/2018/nov/27/one-in-four-uk-workers-covered-national-living-wage-underpaid-low-pay-commission Why is it that employers can seemingly get away without ...
0
votes
0answers
33 views

Supply/Demand Curve Equation (beginner) [duplicate]

The linear demand function is $Q_D = a + b(P)$. I understand from this thread that it can be thought of as a simplification/magnification of the overall demand curve. Is there an equation that ...
1
vote
1answer
125 views

Constant absolute risk aversion and certainty equivalent

I need to prove that Constant Absolute Risk Aversion (CARA) is equivalent to \begin{gather} \int u'(x)dF(x) = u'(c(F,u)) \end{gather} where $u(x)$ is a Bernoulli utility function, $F$ is the ...
0
votes
1answer
155 views

If a weak preference relation is complete and transitive, why is the strict preference relation negatively transitive?

My textbook says that "if a weak preference relation is complete and transitive, the strict preference relation MUST be asymmetric and negatively transitive". Now, I think I understand why it must be ...
0
votes
0answers
22 views

What does it mean when marginal profit is the same due to the “competitive principle”?

I am reading "Economic Development with Unlimited Supplies of Labor" by W.A. Lewis and he states that Though the capitalised sector can be subdivided into islands, it remains a single sector ...
0
votes
1answer
38 views

Why do we have to normalize the income of consumers when working with an Edgeworth Box in a simple trade model with Pareto optima?

I was studying microeconomics and I confess I am not the brightest person for maths and sorry if this is very dumb but I get that we CAN normalize the income and I get where it comes from and how it ...
1
vote
2answers
179 views

indifference curve slope from utility function

in the economics book that I'm reading right now it is written that this utility function: $$u(x_1,x_2) = 2x_1 + x_2$$ yields indifference curves with a slope of $−2$. Could someone please explain me ...
0
votes
1answer
21 views

What does the sun product of price times quantity divided by average price

I have a very simple question, what is the meaning, if any, of this? I.e. Economically what does the following calculation mean? $$ \left(\frac{(Q1\cdot P1)+(Q2\cdot P2)+(Q3\cdot P3)}{Q1 + Q2 + Q3}\...
0
votes
1answer
45 views

Microeconomics, deriving demand equations from utility unction

Utility function: U=X+XY and I=XPx+YPy Good Y is a composite good, so Py= 1 What would be the demand function for good X? I got Mux=1+y and Muy=x and since Mux/Px=Muy/Py 1+y/Px=x/py so that I=XPx+(...
-1
votes
1answer
315 views

Marginal rate of substitution(yx) question

For utility function U= ln(x)+Y How do I determine if MRS(yx) is diminishing or not for this question? I got Mu(x)=1/x and Mu(y)= 1 MRS(yx)=Mu(y)/Mu(x)= 1/1/x = x Does this mean that MRS(yx) is ...
4
votes
2answers
203 views

Purpose of a monotonic transformations in utility functions

Based on my economics book, monotonic transformations for a utility function can look something like this: $f(u) = u + 17 $ or even like this: $f(u) = u^3$ That being said what it purpose in the ...
4
votes
2answers
132 views

Why is there so little automation at McDonald's?

I'm currently at a McDonald's in Norway (so, not a country where labour is dirt cheap, even for relatively unqualified jobs), and I'm struck by how manual every process is, from cooking the meat to ...
1
vote
2answers
54 views

Net present value of studying?

Suppose I attend college with 10k tuition fee per year meanwhile I have a part time job for 5k annually. After 3 years, I get a job for 45 years and earn 40k each year. What is my net present value in ...
1
vote
0answers
113 views

By continuity, the upper and lower contour sets of a bundle are closed [duplicate]

Mas-Collel, Winston and Green's Microeconomic Theory (3rd edition), states that the continuity of a preference relation implies the upper and lower contour sets of a bundle are closed. I would like to ...
0
votes
1answer
55 views

Should Company B enter the market in the following cases

Say Company A has a monopoly producing product E, at a constant marginal cost of $3$ USD. Say the ideal number of units produced is $1$ unit which produces a profit of $2$ USD (=$P_{A}$). Next, ...
0
votes
0answers
49 views

Is there a possibility to have an inferior good (x) in a utility function where x & y have 0 cross elasticity?

A question I got on an exam that I think I messed up on: If we have cross elasticity of 0 (x & y are independent), can x be an inferior good? I answered with a yes. Am I wrong?
1
vote
0answers
34 views

Understanding the proof using the mean value theorem

This is from Hopkins and Kornienko (2004) : Running to keep in the same place. The above proof is for the proposition 1 in this paper. I don't understand how the mean value theorem is applied in this ...