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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Why wouldn't other firms follow suit if an individual firm decides to cut its price?

Why doesn't the demand curve an individual firm faces in a perfectly competitive market have the same elasticity as it does in a oligopolistic market? Under perfect competition, if a firm increases ...
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Is there a name for goods/services/rights/etc. for which the “direction” of payment in a transaction could vary based on circumstances?

For example, consider Amazon Hub Lockers, order pick-up boxes usually located in 3rd party retail venues such as drug/convenience stores, etc. Amazon benefits by reducing last mile delivery costs and ...
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Imputing # of unemployed from Labor Force Survey

I am working on state-level data, where one state has recently stopped publishing the absolute figures for the number of the unemployed. Instead, it currently only releases U and LFP rates. ...
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graph of dependent income

I would need help with the following problem about consumer theory. Let us say that $X$ is the amount of days at the sea and $Y$ is the amount of days on the cottage. We have some utility function $u(...
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Educating workers (micro model)

Would someone be able to check my solutions to this basic problem? This is a practice test with no solutions provided, and I have no idea if I am going in the right direction. Problem: https://ibb.co/...
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Price equilibria with transfers

I am pretty new to Microeconomics so please bear with me if I am missing something obvious. I am solving the following problem: The question is in the setting of pure exchange economy with two ...
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How to explain the flattening of the SRAC curve?

I discovered that there is a way that Short-run average cost curve could become 'flatter' instead of shifting. Yet I cannot find an explanation of why and how it can become flatter. For example, in ...
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Airline competition and econometrics

If I wish to understand the competitive constraints of airline A on airline B, what sort of econometric relationship should I investigate ?. Immediately what comes to mind is to look at the impact of ...
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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 ...
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unit iso-quant curve and unit iso-value line

This question is about international trade theory. For the labor L and capital K, I know the theory of iso-quant and iso-cost. The price will be determined where iso-cost line touches iso-quant curve. ...
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How is equilibrium reached in CAPM such that the tangency portfolio = market portfolio?

From my research online, when learning CAPM with $n$ risky assets and a risk free asset with return $r_f$, I always see the conclusion that in equilibrium, the market portfolio = tangency portfolio ...
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What are the mathematical prerequisites to understand Whinston and Green's “Microeconomic Thoery”?

I've completed my under graduation in economics where I used micro books like Nicholson and Snyder's Microeconomic Theory and Hal Varian's Intermediate Microeconomics. I am comfortable with topics ...
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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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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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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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How do I figure out whether the ICs are convex or concave?

Question: Randy Ratpack hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an ...
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1answer
113 views

Generalizing demand for perfect substitutes utility function

I have the utility function: $U(x_1,...,x_n)=a_0+\sum_{i=1}^{n}a_ix_i\;\;\;\;\;\;\;\;\;a_j\in\mathbb{R}_+ \;\;\forall j=\{0,...,n\}$ (maybe $a_0$ could be zero) $\sum_{i=1}^{n}a_i\in (0,K)\;\;\;$ ...
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How do soda bottler costs break down?

I am curious what the typical breakdown of costs is for a soda bottler in the United States. I realize there are variations depending on region and brand. I am looking for ballpark estimates based on ...
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1answer
44 views

What kind of tax diagram can show the full consumer tax burden?

If a government increases a purchase tax on an apartment, the tax will be fully burdened by the consumer, as the "producer" will simply be the owner of the house. But in a diagram, should ...
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Capital in terms of labor

I have a question that asks to find $\frac{\partial K}{\partial L} $ from $Q=cL^aK^b$, when $Q$ and $c$ are constants. It lists 4 answer choices but I’m just not sure how to approach it. Implicit ...
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Lerner Index Interpretation?

How do you interpret the Lerner Index? I ask because at Uni. we have been told that, for monopoly, when the producer max. his profit, he sets the price such as the demand is elastic and the lerner ...
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74 views

Deadweight Loss Due to Taxes Represented on a Graph of the Market?

Let's say a market is operating at equilibrium, with MSB=MSC, and a tax is imposed on the market. This would shift the supply curve to the left and cause a deadweight loss represented by the triangle ...
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34 views

Opportunity cost of goods provided free of cost

If the government of a country decides to provide certain good free of cost to its citizens, what can one say about the opportunity cost? Government is certainly using the revenues raised from the ...
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Is there a standard term for this tradeoff when subsidizing: inducing dependence vs providing support?

I've often heard it informally argued "people will become lazy if you give them handouts". Although I doubt the economic sophistication of most such assertions, I do think they have a real point: you ...
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making a utility model for CO2 compensating travel demand

I'm trying to make a model which is build around the idea of carbon offsetting fuel (the consumer pays an extra fee per litre fuel for the compensation of the emitted CO2). The goal here is to make a ...
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Time-dependent market-clearing equilibrium price

I'm working my way through Chiang and Wainwright's Fundamental Methods of Mathematical Economics (4th ed) while holed up at home. On p. 532, in exercise 16.4 2. (b), the authors ask you to find the ...
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Is it possible and logical to have an upwards sloping budget line?

The question I have is, for example, say Garry has two goods, cookies he pays 1 to consume a cookie and a maximum of 10 can be consumed, whilst he gets PAID 2 to consume vegetables. Garry is also ...
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A question about homothetic function

What class of homothetic functions $y=f(x_1,x_2,...,x_n)$ is also homothetic in any $n-1$ factors, with the $n$-th factor held fixed at some level?
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What are Frisch Demands useful for?

Frisch demands are demand equations found usually in an intermediate step of the standard utility maximization problem. By example for the basic two-good case of a consumer with quasilinear ...
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Constant Elasticity of Substitution- profit maximization vs cost minimization

Consider the following production function: $$ Y=A\left[\alpha K^{\rho}+\left(1-\alpha\right)L^{\rho}\right]^{\frac{1}{\rho}} $$ In the above, $\rho$ is the substitution parameter, and $\sigma=\frac{1}...
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Pareto Set with strictly convex preferences

Suppose the agents A and B have the following utility functions $x_A y_A+12x_A+3y_A $ and $x_By_B +8x_B+9y_B$ respectively with endowments (8,30) and (10,10). The contract curve's equation turns out ...
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Can I use the released data on AER and JPE in my own research without permission?

I don't think JPE has suggested a specific license. However, the journal did say that the data policy is adopted from American Economic Review (AER). AER did suggest a license of Creative Commons ...
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What does the elasticity say about the fraction of total cost used on input 1?

A firm have the following production function $$ y=x_{1}^{\alpha} x_{2}^{1-\alpha}, \quad 0< \alpha < 1 $$ $w_1>0$ is the cost of input 1 and $w_2 > 0$ is the cost of input 2. (1.1) ...
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Efficiency-related reason for net social benefits from income taxation

Found a question that I cannot really find an answer to. I am being asked to consider an economy with many households and assume that the government can only generate revenue by taxing households' ...
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Determine if goods are substitutes or Complements based on demand function

So I have a consumer with a utility function of the Cobb-Douglas form $v(x_1,x_2)=x^{\frac{1}{2}}_1x^{\frac{1}{2}}_2$. From that I constructed the demand function for good 1 and good 2: $x_1=\frac{1}{...
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Market mechanism design and decision rule based on a graph

I am doing a micro course right now. I came upon this question while studying and I was hoping for help/hints on how to solve it or what resources to consult to better understand the topic. the ...
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Two different definitions for a Complete Relation

Many sources show this definition for completeness of a relation $$ \forall a, b \in A, a \neq b, (aRb) \text{ or } (bRa) \tag{1} $$ Others show only $$ \forall a, b \in A, (aRb) \text{ or } (bRa) \...
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The centralized shift from barter to currency economy

Suppose some ancient king of small bronze age city-state wants to introduce universal currency instead of barter that is currently in overwhelming practice in his kingdom. In order to smooth the shift,...
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Perturbation Constraints for Excess Demand

It is my understanding that for regular economies, equilibrium indices and number are preserved under perturbations, typically conceived as some point-wise translation. Does this hold under any ...
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Elasticity of substitution

So, this is an economics question but the problem I have is a pure math problem I guess. So I have the following equation:f(x,y) this function have the elasticity of substitution(EOS): 1/(1-beta). a,...
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Has contest theory ever been used to design real-world contests?

Contest theory, very much like auction theory, studies how people act in a contest and the properties of such a competition. There is a large literature that investigates different aspects of the ...
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Quasilinear utility: if $x \succeq y - ae_1$, does it mean $x + ae_1 \succeq y$?

Quasilinear preference is defined to be: $x \sim y \Rightarrow x+ae_1 \sim y+ae_1$ and $x + ae_1 \succ x$ with $e_1 = (1,0,0,...)$, Given a quasilinear preference, if f $x \succeq y - ae_1$, does ...
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Difficulty Understanding CPI (Consumer Price Index)

Here's a question about CPI in my microeconomics text (Pindyck), which I don't seem to understand: The price of computers has fallen substantially over the past two decades. Use this drop in price ...
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Is expensive private school a rational investment?

In Australia, successive conservative Federal governments have increased the share of public funding for non-government schools, and for the top schools the amounts of annual funding are many millions ...
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What is the trade-off between? Consumption and Leisure or Income and Leisure?

When first presenting the utility function and its arguments, textbooks typically start by stating that utility is a function of consumption and leisure. See for example https://sites.hks.harvard.edu/...
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Index of an Excess Demand Vector

Mas-Colell, Whinston and Green, in Microeconomic Theory (third edition), postulate the concept of an index for an excess demand vector, which is later used in the Index Theorem: A regular equilibrium ...
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Rotation of Quasilinear Utility

Let $u(x,y)=f(x)+y$ be a quasilinear utility. Now we rotate it by 45 degrees, (such that the $x-$axis becomes the direction of $(1,1)$) $v(x,y)=f(x-y)+x+y$. Is $v$ also a quasilinear utility? What is ...
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Integrability of Demand

I wondered if someone would be willing to provide an intuitive presentation of the so-called integrability of demand/integrability conditions. My own knowledge of these conditions is that they're ...
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On complements and substitutes with a CES function

Define the CES function $q : \mathbb R_+^n \to [0,1]$ by \begin{align} q(x) = \left[\frac{1}{n}\sum_{j=1}^n{x_j^\frac{\sigma-1}{\sigma}}\right]^\frac{\sigma}{\sigma-1} \end{align} where $x \in \mathbb ...
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Have any economics papers used unified cure models?

Does anyone know if there are unified cure models (aka split population models) in time-until-employment studies that combine the mixture cure approach with the promotion time approach as described in ...

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