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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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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257 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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137 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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420 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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58 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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80 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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61 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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55 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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162 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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269 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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293 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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29 views

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 ...
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34 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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378 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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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 ...
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304 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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74 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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429 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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1answer
64 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
273 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
73 views

Is a lack of “rules” dangerous for cryptocurrency

An issue/disadvantage that the gold standard had was a lack of mechanisms that forced economies to abide by the rules of the game. As a result, they could at any time de-monetize gold and therefore ...
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2answers
52 views

Sequential price setting SPNE

Firms A and B are in an oligopoly. They both face the linear market demand curve $X=A-\alpha P$, where $X$ is total market demand, and $P$ is price. Assume constant marginal costs $C_{A}$ and $C_{B}$, ...
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1answer
46 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
59 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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14 views

Triple Difference model using Repeated cross-sectional data

I have a repeated cross-sectional data from the Demographic and Health Surveys. And I want to run a triple difference model, along the lines of Yelowitz (1995). My identification strategy is such that ...
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36 views

Monopolies in Large Firms

Consider a situation when, all monopolies and large firms were broken up into a bigger number of small competing firms, the most possible result would be: A) Higher prices in industries which have ...
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28 views

Proof of certainty equivalence

The questions say two lotteries are denoted L1 = (0.3,0.7,0.0) and L2= (0.9,0.0,0.1) and denote c(L1) and c(L2) the certainty equivalents of those two lotteries. Then prove L1 ≻ L2 if and only if c(L1)...
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35 views

Question about deadweight social burden triangle. Error in the test?

I have been trying to answer the following question for the past two hours. I've looked at textbook examples, online resources and lecture notes. There seem to be two correct answers but I may be ...
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20 views

How can I distinguish between those factors that affect supply elasticity and those that shift it?

How can I distinguish between those factors that affect supply elasticity and those that shift it? I am trying to make two regressions, one with the determinants that affect its elasticity and the ...
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21 views

Prodest package in R for TFP estimation, gives different results

I have the following issue: each time I run the estimation of the TFP by using prodest package in R 4.0.3, I obtain different coefficients before the variables as well as omega variable is different: ...
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Walrasian Equilibrium

Need help solving last two parts of this problem. We’ve solved for the general equilibrium but not sure how to go from there. The endowments of two consumers are given by $w_1 = (40,80)$ and $w_2 = (...
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44 views

Unique competitive equilibrium in an exchange economy

I was working on the following excercise: In an exchange economy $\varepsilon$ with two goods and strictly monotone, continous and strict concave utility functions, suppose all demand functions are ...
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1answer
36 views

How can I know whether a good is inferior or normal? I can't determine elasticity with this?

I just need to make sense out of elasticities and how to determine if a good is normal or inferior. I have determined by $X_1$ which is in the form $m/p_1 - p_1/p_2$, that I should just take the ...
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32 views

Neutral good and quasi linear

if my good y is neutral and x is essential. My indifference curves look like vertical, but I want to ask that How does my utility function look like and can I say that this is quasi linear because mrs ...
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44 views

Binary relation on the set $X = \{v, w, x, y , z\}$ that is asymmetric and transitive but not negatively transitive

So I am trying to find a binary relation on the set $X = \{v, w, x, y, z\}$ that is asymmetric and transitive but not negatively transitive, and is quite tricky. Will $R = (v, w)$ be asymmetric and ...
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25 views

Calculating cross price elasticity of demand

$Q=0.3L^{-1}M^{\frac{1}{3}}R^\frac{2}{3}Y^{\frac{1}{2}}$ I'm asked to find both the cross-price elasticity of demand for $R$ wrt $Q$ ($1$) at current prices and cross-price elasticity of demand for $L$...
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Demand curve:log Quantity, logprice,logprice of N substitute goods,log income, need something else?

Imagine the following situation: a seller of a company has the price and quantity sold for a certain good, that seller can simply make a regression like: ln(Quantity) = ln(Price) ~ ln(price of ...
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18 views

What is the relationship between Marshallian demand and Two-Stage Least Squares Estimation Procedure

I was reading Varian, and he gives an example of how to find the quantities demanded using a CobbDouglas utility function with observable data, and a question arose: what is the relationship between ...
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23 views

law of diminishing marginal returns and regression on the factors of production

Does it make any sense to create an equation with Profit ~ Production factor1 + Production factor1 ^ 2 + Production factor2 + Production factor2 ^ 2 to explain how much the increase of 1 in a company'...
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39 views

Quasi-linear utility. Deriving demand

I was trying to derive a general demand for the good $x$ for this quasi-linear function $u(x,y) = y + 2\sqrt{x}$ subject to standard budget constraint $p_x x + p_y y \leq M$ Using Kuhn-Tucker ...
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54 views

Marginal rate of substitution interpretation

I am trying to interpret the marginal rate of substitution stidied in an article. The article in question is Burbidge, J. B., Robb, A. L., 1980. Pensions and retirement behaviour. The Canadian Journal ...
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31 views

How do I analyze an economic model with no variable costs?

I'm somewhat new to economics, and I'm working on a strange model: It involves webmasters of web pages acting as producers of clicks that can be consumed by other webmasters, who pay per click. I'm ...
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33 views

Why don't we give social security in such a way that previous optimal bundle is once agin the optimal budle?

In this the budget line has shifted inwards due to increase in the price of goods. And then we provide social security such that the past optimal bundle becomes affordable but is not optimal. So why ...
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38 views

Absolute and Comparative Advantage Help

I started studying microeconomics and I am having trouble figuring our how can I find the "?" values in this table? If someone could help me I would be really grateful. ...
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23 views

Estimating multi-output production technologies

For a given firm, is it ever appropriate to estimate an independent production function for each output? For example, a university produces journal articles $A$ and services a number of students $S$ ...
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72 views

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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2answers
112 views

How do I solve the Envelope Theorem condition in Microeconomics?

I am preparing myself for a MSc in Economics and don't understand why, according to the Envelope Theorem, when deriving a utility function $ u(θ, q(θ), r(θ)) = B(q-r) - C(\frac{q}{θ})$, its derivative ...

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