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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Types of Economies of Scale

Context: Delegation informed prime Minister that textile sector is working at fullest capacity due to government policies. They further said the energy package, timely refunds and other facilities had ...
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Can a horizontal merger in a highly concentrated market be beneficial to consumers if the cost synergy of the 2 merging firms is large enough?

There are three firms in a market and they compete in quantities ( a la Cournot).Two of the three firms merge (horizontal merger). The two merging firms will be able to reduce marginal costs ...
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Mixed Strategy Nash Equilibrium for this particular 3x3 matrix

Suppose I am given the following matrix: I would like to find all MSNE I started by doing the double underline method to find any PSNE. I discovered that none exist. I then looked at which strategies ...
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35 views

Differentiated or uniform tax

Suppose Person 1 is working in Denmark and has the utility function, $$u(c,l)=c-\frac{\eta}{\eta+1}(24-l)^{\frac{\eta+1}{\eta}}$$ His wage after tax is $w(1-t)$, where tax, t, $0<t<1$. A second ...
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64 views

General Equilibrium: Two Consumers with Perfect Substitutes and Perfect Complements Utility Functions

I am attempting to solve a general equilibrium in pure exchange economy problem where the first consumer has an endowment of $(3, 4)$ and a utility function of $U(x) = 3x + 5y$. The second consumer ...
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22 views

Cartel and pricing

If it is revealed that a group of 8 soft drink manufacturers ( from an industry of 10 soft drink manufacturers) had engaged in a cartel between 2005-2010, how do I estimate the impact that their ...
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18 views

Similarities between microeconomic and macroeconomic failure. And, how microeconomic failures affect the economy at the macro level?

I can't make a relation between microeconomic and macroeconomic failures? I know they have differences. However, I want to know the effect of these two economic breakdowns on each other. I am meaning ...
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19 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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34 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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36 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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22 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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29 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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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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38 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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49 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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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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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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18 views

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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20 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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24 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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48 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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55 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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35 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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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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114 views

how to calculate Leontief demand functions from first order conditions of a CES function when sigma tends to 0?

This question is NOT about how to approximate a CES function to a leontief function. Knowing that: $i= good (\begin{array}{*{20}{c}} {1}&{or}&{2} \end{array})$ $j= firm (\begin{array}{*{20}{c}}...
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If the Yield (Y) of the cosnumers change, does the $Q_{D}$ remain parallel?

Because we have a change in Yield (Y) which is a factor of demand, we have a move in the $Q_D$. However, not all changes in the Yield affect the $Q_D$ the same way right? For example, if we know that $...
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29 views

Auction Makrets and delearship markets

The largest difference is that the NYSE is an auction market and the Nasdaq is a dealer market. In the former, the highest bid for a stock is matched with the lowest asking price. In the latter, ...
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79 views

How is the defintion of the mean preserving spread (MPS) not too general?

The mean preserving spread is defined as follows: Consider two lotteries g and h. Let $x_g$ und $x_h$ denote the corresponding random variables. Then h is a mean preserving spread (MPS) of g, if: $...
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Grab the dollar Bayesian game

$\epsilon_i$ is distributed uniformly on $[-\phi, \phi] $ where $\phi>1$. My working so far is as follows: $$\mathbb{E}U_1[I]=1+\epsilon_1\\\mathbb{E}U[N]=0\\$$ Therefore, the optimal strategy for ...
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62 views

Farmer and owner Bayesian game

A farmer has talent $\theta$ uniformly distributed on $[0,1]$. His payoff from farming his land is $\theta.$ Before setting up his farm, he chooses some $w\geq0$, which a plant owner can either accept ...
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What would we say on the utility of risk and its consequences?

Anything has its risks and anything has its utility or desutility. The risk aversion causes a looking for safer alternatives in the market which maximizes utility in a trading off between risk and ...
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Is there a case where the demand of a consumer with monotonic preferences, does not fall on the budget line?

In other words, apart from (weakly) monotonic preferences are there any other necessary conditions for Walras's Law? Does monotonicity imply completeness and transitivity?
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Why is the demand, supply and Engel curves plotted with the dependant variable in the X axis and the independent variable in the Y axis?

I am new to economics and have read the first 7 chapters in Intermediate microeconomics by Hal R Varian. Throughout the text, graphs are drawn with the dependent variable (Quantity) in X and ...
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Can there be elasticity for income in an inferior good, when the price is out of its limits?

(Skip to 3. for the actual problem I am facing. Everything else is just to help you understand it better up to that point) Two goods $X$ and $Y$ are substitutionals. For $P_X=20$ consumers ask for $Q_{...
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Is there a definition for ROAS that is not dimensionless?

The most common definitions for ROAS are revenue/cost and (revenue - cost)/cost or ...
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Returns to Scale off a figure

This is the table given for levels of output for different levels of inputs. \begin{pmatrix} Q & K & L\\ 100 & 3 & 6\\ 200 & 5 & 10\\ 300 & 7.5 & 15 \\ 400 & 10 &...
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Elasticity of substitution of a general production function with labor-augmenting technological progress

I am following and trying to fully understand a famous and interesting work of Bentolila and Saint-paul (2003). They try to explain movements of the factor's share in terms of a relationship between ...
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Can we consider a supermarket as a market?

Good morning, I have been reading a book in which the author said that "the supermarket is not a market, because despit the large number of buyers, the seller is unique". So, I've been wondering ...
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Grouping students by teacher in PISA microdata

I'm looking to group the data on the individual students that participated in PISA 2018 according to their respective class or teacher. The data files are available for SPSS and SAS on this page, ...
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Given a demand curve determine the optimal total amount and price of $q_1$ and $q_2$

Given a demand curve for a monopolist $$ P(Q) = 120 - 3Q $$ where $Q = q_1 + q_2$ with two fabrics with the following marginal cost $$ MC_1(q_1) = 10 + 20q_1 \\ MC_2(q_2) = 60 + 5q_2 $$ I have to ...
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How does interest rates impact investment

How does a decrease in interest rates decrease investment rates? This is how I believe a liquidity trap works, not sure if it is correct. Thank you
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Taking the partial derivative of the demand function

Define the demand function which maximizes x -> U(x) as: $\sum_{i=1}^n$$p_i$$\zeta_i$(p, I) = I According to my textbook if I differentiate this with respect to $p_j$ I will obtain, $\zeta_j$(p, ...
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Math based proof for currency changes (microeconomics)

This isn't part of my homework but I am genuinely interested in the mathematical proof behind this question (this is my line of work currently). I tried to work through it but after 2 hours gave up. ...
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If the payroll tax were eliminated on incomes below $30000 what would happen?

If you canceled all payroll taxes below $30000 / $60000 single / married what would happen? I know that this could increase firm profits, or increase wages, or the number of jobs, or decrease prices ...
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'Constrained optimisation' for mutually exclusive goods?

Taking the standard approach to constrained optimisation, where we maximise utility subject to a budget constraint with some allocation on the consumption of two goods, does it make apply the same ...
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32 views

Production Possibility Frontier with 3 Goods

I want to make PPF Curve with 3 goods. Assumption : Economy that can produce three goods, Cloth $(C)$, Food $(F)$, Wine $(W)$. Two factors of production Capital $(K)$ and Labor $(L)$ So the ...
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5 views

Reason for the increase in aggregate demand due to the existence of black money

How can existence of black money amd black assets due to corruption, tax evasion etc., increase the aggregate demand? Can anyone explain this with an example?

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