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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questions with no upvoted or accepted answers
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Is there a simple way to write a model with firms/sectors with different demand elasticities?
I would like to write down a model where there are firms with different demand elasticities: For some firm's total profits increase and decrease a lot with increases and decreases in demand for their ...
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233 views
Robinson Crusoe economy with saving and borrowing
I am working with a Robinson Crusoe economy, i.e. an economy in which there is no production and only consumption is possible: there are only two goods, $x_1$ and $x_2$.
There is just one individual ...
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128 views
Existence of a Competitive Equilibrium
My professor gives us these conditions for the existence of a Competitive Equilibrium (CE) in a pure exchange economy:
$U^i$ is continuous, strictly increasing and strictly concave for all $i$ and $\...
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346 views
Calculating a cross price substitution/income effect
I am given a utility function $U(x,y)$, income $I$ and prices $p_x,p_y$. Then the price of $y$ rises to $p_y' = 3 \cdot p_y$. How are we supposed to calculate the substitution effect and income effect ...
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51 views
Stiglitz 1976 on irrelevance of corporate financial policy
In this paper, Stiglitz gives a verbal argument as follows:
Let us consider verbally what actions of the individuals are required to offset various actions by the firm. Assume the ...
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73 views
A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?
To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
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58 views
Market with substitutes: Response of prices and quantities
The demand function for theater tickets is $D_t(p_t,p_c)$, where $p_t$ stands for the price of theater tickets and $p_c$ stands for the price of cinema tickets. Supply of theater tickets is described ...
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53 views
Separate optimization problem versus one big Lagrangean
I am a bit confused about when to consider a separate optimization problem and when to combine different problems into a single optimization problem.
Consider an individual who derives utility from ...
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160 views
Microeconomic Model of Knowledge and Technology
Can you point me to any microeconomic models of knowledge and technology?
It is intended to be used for simulation.
The problem that arises is that you need to simulate the effects of technology on ...
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243 views
Convex consumer preferences
Man has blue and red marbles. If he has more red marbles then blue one he wants to exchange one red for two blue($1R:2B$). If otherwise (more blue then red)he wants to exchange one blue for two red($...
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1k views
A stable equilibrium with demand and supply?
My doubt pertains to something that is mentioned in the book by Koutsoyiannis for microeconomics (in the chapter for general equilibrium).
http://www.upload.ee/image/5306829/1.jpg
http://www.upload....
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465 views
Short Run vs Long Run Cost Functions
Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run.
Now let's suppose that the price of one of the inputs in ...
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275 views
Curvature of Cost and Production Function
I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct;
If the cost function $C(w,q)$ is convex in $q$, the ...
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86 views
how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth
how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth.
I was reading through a textbook and saw that the devaluation of a nation's ...
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32 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'...
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203 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 ...
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28 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 ...
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277 views
Given Cobb-Douglas production functions for 2 factories (same owner), how will the owner produce $y$?
So my question is this:
A company owns two factories, A and B, each with the following production functions:
$f_A(x_1,x_2)=x_1^{\alpha}x_2^{1-\alpha}$
$f_B(x_1,x_2)=x_1^{\beta}x_2^{1-\beta}$
Now ...
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73 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 ...
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419 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:
$U^1(x^1,...,x^H)=u^1(x^1)+\sum^H_{j=2}U^j(x^j)$, ...
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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 ...
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3answers
105 views
Perfectly competitive firms. Economies of scale
My textbook says the following:
"Perfectly competitive markets only achieve productive efficiency if you assume that there are no economies of scale in the industry."
Why is this the case? And by "...
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1answer
52 views
Elasticity of subsitution: a redundant calculation?
Elasticity of subsitution is a measure of the curvature of an isoquant1 and can provide us information regarding the nature of the production functions we are dealing with. this is visualized in ...
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1answer
136 views
Do you get economies of scope from horizontal or vertical integration?
Economies of scope: make it cheaper to produce a range of products together than produce each one on its own as company can share inputs (e.g marketing and finance) removing cost redundancy
Would ...
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1answer
40 views
Necessary conditions for the existence of a competitive equilibirum
I got that in an exchange economy, conditions as preferences being continuous, strictly convex and strongly monotone and $\sum_i \omega_i\gg 0$ are sufficient conditions for the existence of a ...
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1answer
57 views
Scarcity in Relation to Free Goods
This is a basic economics question about scarcity in relation to free goods. The hypothetical question is that if iTunes decided to have free streaming for all their songs, would there still be ...
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2answers
29 views
Can i check monotonicity with the marginal utility?
For example I have a Cobb-Douglas utility function $U(x,y)$ and I want to check the monotonicity property.
Can I use the marginal utility functions to see that they are always positive to conclude ...
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24 views
Game theory classic literature and specific topics
I am starting this conversation because I am searching some book in game theory for the classic problems that the literature encounnters. More precisely, I would like to know if there is some book ...
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0answers
19 views
Modeling risk aversion. Expected utility function
I want to model an Expected Utility Function for risk aversion but my problem is uncertainty in itself.
I want a function(a special case) $$f(x, y) =\left\{\begin{matrix} h(bx^{1-C}+ay^{1-C}),C\neq 1\...
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9 views
How to determine the first bid for a Double-Bounded Dichotomous-Choice Contingent Valuation model?
I'm very new to the survey format of double-bounded dichotomous-choice for contingent valuation, so I apologize for my naive question. Could you please let me know how a researcher decides the initial ...
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1answer
31 views
Most profitable conversion of stock into money
When Forbes-lists of top billionaires are published we are usually aghast of their riches and statements such as "the 8 richest people own as much as the poorer half" are disseminated.
I was ...
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25 views
How to show that a leontief utility function is homothetic?
usually what i do to show that a utility function is homothetic is by either showing that the function is homogeneous or if the MRS is homogeneous of degree 0.
However the MRS is not defined. So im ...
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41 views
Why are prices made available to the public?
Price in micro is the point at which demand and supply meet. But in real world no one knows about the actual demand curve or supply curve. yet prices are set, so in a way there is a lot of costs being ...
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32 views
Moral hazard, bubbles, and economies of scale in limited companies and organizations
http://eprints.lse.ac.uk/100058/1/Goodhart_CEPR_DP13494.pdf
What would be the disadvantage of limiting the liability to the product of the proportion of the company and the debt(a person with 2% of a ...
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21 views
Is a proft tax not distorting unless we know the opportunity cost?
A Profit tax where we actually know the Entire Cost Function Including the Opportunity cost(Time, Incommodation, best alternative for the easily monetized resources etc) is not distorting.
But the ...
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10 views
If the government introduces import quota will prices change for imported goods
I am currently going through an introductory course to microeconomics. We are discussing how government interventions result in inefficiencies and dead-weight losses.
One of the questions in concern ...
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34 views
Calculating equilibrium in a cobb-douglas long run, perfect competition scenario
Supposed there are a fixed number of 1000 identical firms in a PC industry, with each producing the same fraction with the same production function
$$q_{i} = \sqrt{K \cdot L}$$
And market demand is ...
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1answer
49 views
Mathematical framework for modelling the relationship between price and sales of a product
In my job as a data scientist, I am required to model the relationship between the price of a product and the sales or number of unit sold. I am trying to build a simplistic model, the assumptions of ...
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32 views
Are marginal utilities or utilities compared?
Consider decision making in an economic model. Suppose that there is some utility and it is a function of consumption and leisure where leisure is full-time work, part-time work, or full-time ...
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31 views
Equilibrium price determination in a 2 commodity framework
Following are the set of equations describing the demand and supply of two goods X and Y:
Demand functions:
$$X_d = a_1 - b_1P_x + c_1P_y$$
$$Y_d = a_2 - b_2P_y +c_2P_x$$
$a_1,~ a_2,~ b_1,~ b_2,~ ...
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18 views
Are there examples of Cost Benefit Analysis using diminishing marginal utility of income?
In Cost Benefit Analysis (CBA) constant Marginal Utility of Income (MUI) is usually assumed. This implies that a dollar received/earned is the same at low and high levels of income. In Social CBA, ...
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8 views
What factor to use with Salvage Value in rate of return questions?
I am trying to solve a rate of return question from the book Engineering Economics by R. Paneerselvam. In that particular problem I am given a salvage value along with other factors. following are the ...
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0answers
12 views
How do Pension Fund capital flows operate?
I'm trying to figure out a method for calculating the impact to markets of outflows from pension plans. More specifically, if we imagine a theoretical huge and underfunded pension plan that is ...
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0answers
36 views
Minimum observations for an econometric SEM
Good day for all:
I have an econometric SEM with three equations similar to:
$$
A = \beta_0 + \beta_1 B + \beta_2 G + \beta_3 H + u_1 \\
B = \beta_4 + \beta_5 C_{-1} + \beta_6 D_{-1} + \beta_7 E_{-1}...
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1answer
58 views
Everyone has the same marginal rate of substitution
I'm currently reading Varian's Intermediate Microeconomics and what struck me, is this statement on page 89 of the 8th edition.
If everyone faces the same prices for the two goods, then everyone ...
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27 views
Why should houses have the same price for a given supply
So I'm reading Varian intermediate microeconomics and in chapter one it's about housing. Suppose we have a inner ring and a outer ring in a city where there is a university. In the inner ring supply ...
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optimization problem for two individuals
Two flat mates 1 and 2, rent a flat and play their own music on the only CD player owned by flat-owner. They both like their own music, but dislike the music played by the other. Given the timing ...
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two period consumption problem
Ms. A earns 25,000 dollars in period 1 and 15,000 dollars in period 2. Mr. B earns 15,000 dollars in period 1 and 30,000 dollars in period 2. they can borrow money at an interest rate of 200% and can ...
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1answer
51 views
The law of supply and demand - How does it work?
I've learned what the principle of supply and demand says, and would paraphrase it like this:
The price of a good is at equilibrium when supply and demand are
equal.
Or with other words:
The ...
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32 views
Finding the optimal consumption bundle given the strictly concave utility function $v(x,y) = U(x) +y$?
I am also finding it difficult to understand what are the fundamental differences between analysing optimal bundles between concave and convex functions ?
Does it also happen that the optimal bundle ...
