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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22 views

Change of demand curve

I am supposed to solve the following problem: The price of coal oil is increasing more than 1%, due to the annoucment about decreasing the supply of coal oil on the market. How it will effect curve ...
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Under what conditions should I use a Social Accounting Matrix Model vs. Multimarket Model vs Computable General Equilibrium Models?

What are the differences between the SAM, multimarket and CGE models. When should I use one over the others?
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How can I model the impacts of improved agriculture technologies and food aid in a multimarket model?

Given a multimarket model for staple agricultural commodities wheat, rice, maize and sorghum, in a low-income economy, Im trying to figure out how I can use the multimarket framework to look at the ...
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101 views

Derive demand function $x(p,w)$ from utility function $u(x) = \min\{x1, x2\} + x3$

I know how to solve the two-good case with $u(x) = \min\{x1, x2\}$, but the addition of $x3$ confuses me. Problem Derive the demand function $x(p,w)$ from $u(x) = \min\{x1, x2\} + x3$ What I did ...
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Is oil supply really inelastic in the short term

Is oil supply really inelastic in the short run? Though it remains evident that in the short run, the known capacities of oil can't be increased and hence we can assume that there remains a upper cap ...
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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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CPI Bias with consumers using computers extensively

I was studying Microeconomics from Microeconomics by Pindyck and Rubinfeld where it was written that CPI calculated on Laspeyres index has overstated the cost of living for consumers who use computers ...
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23 views

Returns to Scale

Consider a firm with the production function $y=CL^{a}K^{b}$, where $C>1$, $a>0$, $b>0$. Write down the conditions under which this production function exhibits: i) increasing returns to ...
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Is this utility function continuous?

$u(x_1,x_2)=|x_1 −2|+x_2$ Is this function continuous? PS: The continuity theorem I use is this: Whenever for any $x^n$, $n \in N$ with $x^n \to x$ (i.e. $\lim_{n \to \infty} x^n = x$) and for any $...
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Notation: is it correct to write $x \succsim y \succsim z$ before using transitivity?

Let $\succsim$ complete and $x, y, z \in X$. Suppose $x \succsim y$ and $y \succsim z$. Is it OK to write $x \succsim y \succsim z$ just knowing this? Or, on the contrary, such expression ...
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Study whether $\succsim$ represented by $u(x)=\lfloor x \rfloor$ is continuous

Using the following definition of continuity: $\succsim$ is continuous if for any bundles $x,y,z$ such that x$\succ$y$\succ$z, there exists $\alpha \in (0,1)$ such that $\alpha x + (1-\alpha)z \sim y$....
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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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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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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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40 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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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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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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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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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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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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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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51 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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24 views

Market Clearing with Dividend and Investment

In pure exchange GE models, a typical goods market clearing condition for good $n$ looks like: $$\sum\limits_{i=1}^Ic_n^i=\sum\limits_{i=1}^Ie_n^i.$$ Consider a model with production where firms can ...
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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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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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43 views

Change in the marginal utility of leisure with respect to a change in consumption

I am reading a paper that derives a theoretical retirement model. There is a utility function and a budget constraint forming an optimal control problem. The solution to this problem states that \...
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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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38 views

is there a difference between E[e|x]=0 and E[e|d=1]-E[e|d=0] in continuous vs discrete case in regressions?

in the discrete case, if assignemt is random, then i can express E[y|d=1]-E[y|d=0] = B + E[e|d=1]-E[e|d=0], where the expectation of the errors are the same for both groups and become zero. Where I am ...
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39 views

Proof: Risk averse; Certainty Equivalent smaller than expected value

I would like to show for a randomly distributed variable $x$ with CDF $F(\cdot)$ , given a Bernoulli utility function $u(x)$ the following property holds: The certainty equivalent, $CE(\cdot)$, is ...
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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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41 views

Industrial Economics

I am currently struggling trying to find the short-run equilibrium price, output per firm, and profit per firm if $190$ firms supply the market. I am given $p=102-1/2Q$ and $C(q)=5q-6q^2+3q^3$. ...
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49 views

What are the economics of bike sharing companies?

Bike sharing seems to have originated in China. And it has spread to the UK. And at least a decade on it continues to spread into the provinces. So it has longevity. So what are the economics of ...
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38 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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71 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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62 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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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 ...
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Optimal pareto in two-person game

For what values $x$, $y$ the profile $(D,L)$ is Pareto optimal? \begin{array}{c|ccc} & L & R \\ \hline U & x,5 & x+2,y \\ D& 1,-1 & x,0 \\ \end{array} Is correct $x<1$ ? ...
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Compound lottery preference implies simple lottery preference

Suppose $\alpha>\beta$ and for two lotteries $L, L'$ $\alpha L + (1 - \alpha)L' \succ \beta L + (1- \beta) L'$ where $\succ$ implies preference. If the independence theorem holds, how do you ...
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Condition for a Nash equilibrium

Consider two people have a mutually advantageous relationship. That is, if both dedicate more effort to the relationship both improve. Specifically, each individual chooses a level of effort $x_{i}\...
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Credible Threat in the Perfect Bayesian Equilibrium

Consider a simple game between P1 and P2 shown in Figure 1. We consider a Perfect Bayesian Equilibrium. P1 uses a cutoff strategy based on his $c_1$ that has the Cumulative Distribution Function of $...
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2answers
141 views

robinson economy with production

Facing a little bit of a problem with this questions, did a similar one BUT the utility function was not linear and got MRS dependent on goods (was not just a number) - here I am at a loss. The ...
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52 views

Decreasing and increasing returns to scale question

Hi, I have deduced that this function exhibit increasing returns to scale but I am not sure how to verify part d. My answer doesn't show that there is decreasing returns to scale but I can't be sure d ...
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8 views

wage/productivity, what does it show

I just confused about the fact that does wage/productivity show the wage gap? So if wage/productivity is the wage gap then by the increase in productivity the wage gap should decrease as the ...
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46 views

Homogeneity in Marshallian demand function

I have worked out the expenditure function for a Marshallian demand function, R represents a fixed cost and the questions asks about why the expenditure function is unusual. The answer explains it is ...
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19 views

How are preferences related to relative prices?

For instance, across regions of a country or between countries. Is that different preferences for food lead to distinct relative prices in different regions or countries? Or is it the other way ...
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72 views

Numerical Question on a subsidized monopoly

Suppose a government agency has a monopoly in the provision of internet connections. The marginal cost of providing internet connections is $ \frac12$, whereas the inverse demand function is given by: ...