# 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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### What is the term for requiring taxes/regulatory changes to be above a certain threshold to overcome organisational communication barriers

Help remembering the specific term for the following would be very much appreciated! The following: When a government implements a tax/regulation that is too low in stringency, the new policy may not ...
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### Where can I find research on the impact of informal/unregulated suppliers on prices and externalities?

I am looking for research and papers on the impact of informal/unregulated suppliers on market prices and negative externalities. I am particularly interested in the manufacturing sector.
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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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### Proving that Marshallian demand is of the form: $x_i^*(p,I) = \hat{x}_i^*(p)I$ with certain conditions

Can I please have some feedback/help proving the following. My proof is below but I am quite uncertain as to whether my solution is efficient. Thank you. If $u(x)$ is a homothetic utility, then show ...
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### profit maximization intuition capital(K) and labor (L)

$$\underset{K,L}{\text{max}}\;\;{F(K,L)−rK−wL}$$ What is the difference between maximizing profit using this process above, or simply increasing each factor of production by 1 when the existing number ...
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### Generalizing demand for perfect substitutes utility function

I have the utility function: $U(x_1,...,x_n)=a_0+\sum_{i=1}^{n}a_ix_i\;\;\;\;\;\;\;\;\;a_j\in\mathbb{R}_+ \;\;\forall j=\{0,...,n\}$ (maybe $a_0$ could be zero) $\sum_{i=1}^{n}a_i\in (0,K)\;\;\;$ ...
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### How do soda bottler costs break down?

I am curious what the typical breakdown of costs is for a soda bottler in the United States. I realize there are variations depending on region and brand. I am looking for ballpark estimates based on ...
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### Private signals [closed]

Following the literature of information asymmetry (see in Kyle among others), we have seen that many papers introduce a private signal, that is $$S=\tilde{v}+\tilde{e}$$ where, $(\tilde{v},\tilde{e})$...
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### Lerner Index Interpretation?

How do you interpret the Lerner Index? I ask because at Uni. we have been told that, for monopoly, when the producer max. his profit, he sets the price such as the demand is elastic and the lerner ...
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### Deadweight Loss Due to Taxes Represented on a Graph of the Market?

Let's say a market is operating at equilibrium, with MSB=MSC, and a tax is imposed on the market. This would shift the supply curve to the left and cause a deadweight loss represented by the triangle ...
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### Opportunity cost of goods provided free of cost

If the government of a country decides to provide certain good free of cost to its citizens, what can one say about the opportunity cost? Government is certainly using the revenues raised from the ...
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### Is there a standard term for this tradeoff when subsidizing: inducing dependence vs providing support?

I've often heard it informally argued "people will become lazy if you give them handouts". Although I doubt the economic sophistication of most such assertions, I do think they have a real point: you ...
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### making a utility model for CO2 compensating travel demand

I'm trying to make a model which is build around the idea of carbon offsetting fuel (the consumer pays an extra fee per litre fuel for the compensation of the emitted CO2). The goal here is to make a ...
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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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### Time-dependent market-clearing equilibrium price

I'm working my way through Chiang and Wainwright's Fundamental Methods of Mathematical Economics (4th ed) while holed up at home. On p. 532, in exercise 16.4 2. (b), the authors ask you to find the ...
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### $a\geq 0$, $x\succsim y$ implies $x+a\succsim y+a$ so the preference is linear?

$\succsim$ is a continuous and local non-satiate weak order. $x,y,a$ are vectors in $\mathbb R^n$ We say $a\geq0$ if all directions of the vector $a$ is greater or equal to zero. We want to prove (...
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### Is it possible and logical to have an upwards sloping budget line?

The question I have is, for example, say Garry has two goods, cookies he pays 1 to consume a cookie and a maximum of 10 can be consumed, whilst he gets PAID 2 to consume vegetables. Garry is also ...
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### What are Frisch Demands useful for?

Frisch demands are demand equations found usually in an intermediate step of the standard utility maximization problem. By example for the basic two-good case of a consumer with quasilinear ...
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### Market mechanism design and decision rule based on a graph

I am doing a micro course right now. I came upon this question while studying and I was hoping for help/hints on how to solve it or what resources to consult to better understand the topic. the ...
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### How to calculate the degree of risk aversion of a consumer in a lottery?

To give an example, say we start with 100 dollars and we enter a lottery. With probability $\pi$, this 100 dollars is reduced by 2 dollars. Otherwise our endowed 100 dollars does not change. Let's say ...
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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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### Elasticity of substitution

So, this is an economics question but the problem I have is a pure math problem I guess. So I have the following equation:f(x,y) this function have the elasticity of substitution(EOS): 1/(1-beta). a,...
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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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### Quasilinear utility: if $x \succeq y - ae_1$, does it mean $x + ae_1 \succeq y$?

Quasilinear preference is defined to be: $x \sim y \Rightarrow x+ae_1 \sim y+ae_1$ and $x + ae_1 \succ x$ with $e_1 = (1,0,0,...)$, Given a quasilinear preference, if f $x \succeq y - ae_1$, does ...
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### Is there an externality if someone buys all stock of some merchandise?

Is there an externality if someone buys all stock of some merchandise? On one hand, if they buy all of everything and there's still demand then they've taken it away from other people. On the other ...
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### Difficulty Understanding CPI (Consumer Price Index)

Here's a question about CPI in my microeconomics text (Pindyck), which I don't seem to understand: The price of computers has fallen substantially over the past two decades. Use this drop in price ...
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### Is expensive private school a rational investment?

In Australia, successive conservative Federal governments have increased the share of public funding for non-government schools, and for the top schools the amounts of annual funding are many millions ...
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### What is the trade-off between? Consumption and Leisure or Income and Leisure?

When first presenting the utility function and its arguments, textbooks typically start by stating that utility is a function of consumption and leisure. See for example https://sites.hks.harvard.edu/...
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### Index of an Excess Demand Vector

Mas-Colell, Whinston and Green, in Microeconomic Theory (third edition), postulate the concept of an index for an excess demand vector, which is later used in the Index Theorem: A regular equilibrium ...
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### Rotation of Quasilinear Utility

Let $u(x,y)=f(x)+y$ be a quasilinear utility. Now we rotate it by 45 degrees, (such that the $x-$axis becomes the direction of $(1,1)$) $v(x,y)=f(x-y)+x+y$. Is $v$ also a quasilinear utility? What is ...
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### I can not answer f) Pareto efficiency [closed]

Consider a society of individuals who receive an income of \$10, 000 pesos if they are healthy and \$100 pesos if they are sick. There are two types of individuals: some who get sick with a ...
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### Integrability of Demand

I wondered if someone would be willing to provide an intuitive presentation of the so-called integrability of demand/integrability conditions. My own knowledge of these conditions is that they're ...
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### What is the Walras law vs first welfare theorem

As far as I know, both of the first welfare theorem and the Walras law are closely tied to the invisible hand. what is the difference between them? thank you very much for your help