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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Monthly price elasticity and possibility of using daily values

I am calculating the price elasticity as a starting point to find a theoretical optimal price that would maximize our revenue. I am looking at 2 years data and to use the price elasticity formula, I ...
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272 views

Assumptions for the existence of a Walrasian equilibrium

I have a problem set stating that a competitive equilibrium does exist under a series of assumptions on the economy. The question is "Show that the following six assumptions are needed for existence ...
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1answer
122 views

Does Preference have a Hierarchy? A Silly Question

I have what is probably a very silly question, but I have gone down the rabbit hole and can’t get back out..... Is there is a hierarchy of preference, and within each level of choice do we reset the ...
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113 views

Monopsony diagram curves

Why is the marginal cost curve not the same as the supply curve? My personal explanation is that since the marginal cost curve is cost of producing each new product, the supply curve just represents ...
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437 views

intertemporal utility maximisation

Adam's consumption period 1 and 2 are denoted by $c_1$ and $c_2$ respectively. His utility function is $U(c_1,c_2)=4c_1^{0.5} + c_2$ Ben earns an income of \$3 in period 1 and \$3 in period 2, ...
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How to estimate loss of customers due to customer support inefficiency?

I have a data about customers and their activity on a website for a two-year period. Also, I have a customer support work evaluation data for a shorter period of that two-year period. The question is: ...
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27 views

When is the pegged price equal to the market price

Suppose the government pegs an exhaustible resource, at a price $P^*$. I found out that the shadow price (initial price of the resource if government didn't peg) would be $$Q_t = ( \sigma i S_t )^\...
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29 views

Some issues with HRS (Health and Retirement Study) data

I am using the 1992 HRS (Health and Retirement Study) dataset. The codebook is available at http://hrsonline.isr.umich.edu/modules/meta/1992/core/codebook/14_h1.htm I am trying to construct the share ...
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120 views

Graphing Volunteer labour Supply

I'm wondering if there is a method by which we can visualize a firms decision to rely on volunteer labour. I have an idea but I'm unsure if it is correct, please tell me if there is an issue with my ...
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893 views

Binding and slack constraints in adverse selection problem

When I am dealing with a constrained maximization, once I face constraints with inequality sign, I have to understand which one are binding and which others are slack. If I find that a constraint is ...
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213 views

Finding Pareto efficiency from competitive equilibrium

So to my knowledge, the competitve equilibrium would be Marginal cost= Marginal private benefit. My question is, how would you determine what the pareto efficiency is from the Marginal social benefit ...
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530 views

Interpreting coefficient in the disutility function as disutility tolerance?

I am studying a model that relates incentives (money) and a set of actions. Let $f(x) = k\frac{x^2}{2}$ be the disutility function of the agent, where $x$ is the level of effort that the agent is ...
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115 views

Anything written on the process behind “multiplicative” production function?

Intuitively, one might make a naive first guess that the production function of the economy, or of a firm, should be a "leontief" production function: "for example, you need both a factory and a ...
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50 views

Minimizing consumption in a single market( Partial Equilibrium)

Let there be a good X where the optimal consumption is 0; i.e the social costs for any unit provided would always be greater than the utility surplus of the market. We know that prohibiting it( ...
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2answers
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How to derive substitution and income effect using Slutsky equation if we don't know which of the prices change?

We have the utility function $$U(x,y)=x + y$$ and we have to derive the substitution and income effects using Slutsky equation. But after I derive the Hicksian demand functions for e.g. x: $$h_x= \...
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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 ...
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1answer
714 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 ...
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1answer
35 views

Imperfect Price Discrimination profit per group

During imperfect price discrimination is it possible to determine profit per group. For example: Aggregated Cost function: C(Q) = 18*Q + 5; where Q = q1 + q2 Aggregated Demand (AD) for group 1: q1(...
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1answer
73 views

Anti Piketty Confusing Movement Along Demand Curve with Shift

In Anti-Piketty, the author's claim that the statement "If the supply of any good is insufficient and it's price is too high, then demand for that good should decrease which should lead to a decline ...
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2k views

Inferior and normal good and the change in price of those goods

In general, We know that if a good is normal, then as your income increases, then demand of that good increases as well as price is fixed. Similarly, if a good is inferior, then as your income ...
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1answer
73 views

Categorical variable as explanatory variable (right hand side)

In a linear probability model, or any sort of regression, one can use fixed effect estimation by simply adding in a STATA code i.something. This "something" can be either a village, a county or a ...
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2answers
60 views

How much of an assets price change is due to speculators and functional buys/sellers

If (for example) a heavily traded asset like crude oil has a price move of x, how much of that is influenced by functional buyers/sellers and how much by speculators? Let's say x is +100, there are 8 ...
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2k views

Advanced Microeconomics: Deriving Slutsky Equation

I am not sure how to derive the demand for consumption of today's bread; the first thing the problem asks for. I think it might be a piecewise function based on the interest rate that gets you from ...
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1answer
30 views

How do non-price determinants of supply and demand affect the price of a product?

I am currently doing my IB economics homework about demand and supply, and this question just has me very confused The teacher then specifies that they must be non-price determinants. To my ...
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1answer
33 views

Meaning of the sentence

I am having trouble understanding this economic concept: Consumer can obtain maximum utility only if he/she incurs expenditure on various commodities in such a manner as to equalise marginal ...
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1answer
311 views

Maximizing a Cobb-Douglas Function

Suppose that a competitive firm receives a price of $P$ for its output, and pays prices of w, r and v for its labor $(L)$, capital $(K)$ and natural resources $(R)$ inputs, respectively. The firm ...
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1answer
5k views

Income effect for complements

Suppose u(x,y)=min(x,2y) and the price of X is 1, the price of Y is 1 and income is $12. If the price of X increases to 2, the income effect is supposed to be -1. I keep getting zero for some reason. ...
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397 views

How to calculate income and substitution effect when equal marginal principle is violated

I am trying to calculate substitution and income effect for 2 goods, $x$ and $y$. Given that marginal utility $\mathrm{MU}_x = 1$, marginal utility $\mathrm{MU}_y = -a$ (unknown number), price of $...
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145 views

Where to begin with solving this table on Total Cost analysis?

I've been working on solving a table for the past hour or so, I'm completely lost as it appears the values aren't quite correct, this is what we've been given to solve: We've been given that the ...

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