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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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26 views

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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26 views

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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1answer
35 views

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
146 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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1answer
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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47 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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73 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: ...
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2answers
146 views

Finding Optimal Bundle and Change in Satisfaction after Changes in Budget Constraint

I am looking at the following exercise and struggling with the solution proposed by my microeconomics book. A consumer spends all his income on two goods, X and Y. The prices he paid and the ...
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17 views

How to evaluate customer lifetime value

I am learning about calculating Customer Lifetime Value (CLV). So far I have learned that there are many ways to calculate it, like stated here, which I understand, different industries will also need ...
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19 views

Net Present Value with investments in multiple phases

I am trying to calculate the Net Present Value for a theoretical project in which, unlike most examples in textbooks and on internet tutorials, investments do not only happen in t=0, but they also ...
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177 views

Equivalence of definitions of upper contour sets

Mas-Collel, Winston and Green's Microeconomic Theory (3rd editions) offers two definitions of the upper contour set: How can the equivalence between the two definitions be proved?
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36 views

Calculating Demand curve function from Elasticity of demand, price per quantity and quantity purchased?

For an assignment I have to model the demand function and find consumer surplus based upon elasticity of demand, price per quantity and quantity purchased. Ill copy and paste the assignment below and ...
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21 views

Supply/Demand Shift (Find New Equilibrium)

Starting: supply curve $y=x+10$ and demand curve $y = -x+30$ with equilibrium at (10, 20). The problem states that DEMAND shifts leftwards by 3 units and to find the new equilibrium. My professor did ...
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Guess 2/3 of the average with integers - mixed strategy equilibria?

The "Guess 2/3 of the average" game (Wikipedia) is a game in which n people guess what 2/3 of the average of their guesses will be, and where the numbers are restricted to the integer (in this case) ...
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111 views

What is the difference between ordinary income effect and endowment income effect?

As far as I understand: Ordinary income effect: A change in the price of good 1 will affect my future behaviour (the quantities that I will buy of good 1 and good 2). But it doesn't really affect my ...
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57 views

Will an increase in a complementary good with price unchanged move demand curve right and quantity demanded right, as well?

This graph shows the quantity of electricity that consumers demand at a regulated price set by the government. Adjust the graph by dragging the dot or the demand curve (or both) to show the effect of ...
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39 views

Strategy sets and SPNE

I need to find the startegy sets for the two players in this game. I understand that the game has only one subgame, that is, the entire game. I cannot seem to understand the strategy sets of the ...
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65 views

Profit Maximization and Returns to Scale

Assume a labor-intensive production function: $Q(L)=L^\beta$ Find demand of labor that maximizes profits (unconditional demand $L(p,w,r)$), the demand of labor that minimizes costs (unconditional ...
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45 views

Book recommendation: first year economics course

Can anyone help me find a nice introduction (possibly popular economics) into the field of black market economics.
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33 views

Supply/Demand Curve Equation (beginner) [duplicate]

The linear demand function is $Q_D = a + b(P)$. I understand from this thread that it can be thought of as a simplification/magnification of the overall demand curve. Is there an equation that ...
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19 views

What does it mean when marginal profit is the same due to the “competitive principle”?

I am reading "Economic Development with Unlimited Supplies of Labor" by W.A. Lewis and he states that Though the capitalised sector can be subdivided into islands, it remains a single sector ...
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41 views

Is there a possibility to have an inferior good (x) in a utility function where x & y have 0 cross elasticity?

A question I got on an exam that I think I messed up on: If we have cross elasticity of 0 (x & y are independent), can x be an inferior good? I answered with a yes. Am I wrong?
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Question on Finding the Correct Emission Tax $t$

Let there be two companies $U_{1}$ and $U_{2}$ where, initially $U_{1}$ produces and sells $x$ units at $p=18$. Production costs are $C_{U_{1}}(x)=\frac{1}{6}x^3$ and in the process $a$ units of ...
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22 views

Logs and percentage change in equation

Suppose I have the following relationship between output $y$, capital stock $k$ and total factor productivity $tfp$, $$\frac{\partial y}{\partial t}=\frac{\partial k}{\partial tfp}*\frac{\partial tfp}...
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43 views

Estimation of a Non-linear production function with Non-linear least squares

Suppose that you have to estimate a Non-linear production function (for instance a Cobb-Douglas or a CES) by using Non-linear LS (and hence without log-linearization). You have just aggregate time ...
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24 views

Market price, output that maximize the price and level of firm profit after applying a license fee

I'm currently working on a problem that says the following : At first we had a number N of firms in perfectly competitive industry,the exercice gives us the total cost and the Market Demand with p as ...
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55 views

Economic interpretation of a CES production function

I am following a paper where a production function of this type is used. $$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$ It is a ...
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1answer
66 views

Elasticity of substitution between leisure in two periods

This is a basic question, but I am new to macro models. The question is from Romer's text. Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
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2answers
67 views

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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1answer
28 views

What data/factors/attributes do the professionals monitor in a top-down analysis on the macroeconomics?

I am learning to do top-down analysis on a number of sectors in the US equity markets. I have never done it before and I would appreciate it if some professionals can share their experiences with me. ...
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92 views

General Equilibrium Involving Production

I need a little conceptual clarification. For a standard $N*K*M$ general equilibrium model, would an allocation, say, $y^k$ be Pareto Optimal if it does not solve $max(py^k)$? I understand that the ...
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178 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
79 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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1answer
81 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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1answer
159 views

Slutsky Decomposition from Indirect Utility Function [closed]

Given the indirect utility function: V={M^2}/{4P1P2}, how do we establish the Slutsky Decomposition? I used Roy's Identity to get the Demand, but I'm stuck with the other components of the Slutsky ...
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1answer
306 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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1answer
274 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 x = 1, marginal utility y = -a (unknown number), price of x = 16, price of y = 20, how ...
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2answers
407 views

preference relations

Can anybody give an intuitively explanation for the following problem? Let $\succeq$ be a preference relation on a set X. Define I(x) to be the set of all y ∈ X for which y ∼ x. Show that the ...
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1answer
47 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
87 views

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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1answer
2k views

Why would a natural monopoly lose money when MC=P, but a competitive firm would get positive accounting profit?

I assume that the natural monopoly is required by law to have maximum price=MC. According to this video such regulation would require constant subsidies for monopoly, because otherwise it would go ...
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1answer
162 views

Why wasn't the wage of the entrepreneur included in explicit costs?

I was solving an economic problem (I was calculating explicit and implicit costs) and noticed one interesting thing: In the said problem, the entrepreneur set himself the wage of 10 000 rubles AND in ...
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1answer
82 views

Trying to show result of prisoners dilemma simulation through supply/demand graph

I made up this situation where candidate $A$ and $B$ are vying for a job. They can accept wage $x$ or undercut this to agree to work for $x-k$ where $0<k<x$. My point was that eventually they ...
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1answer
207 views

Empty edgeworth box [closed]

Can a empty edgeworth box be a pareto set? What kind of economy would be describe in this situation?
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1answer
93 views

Interpretation: Elasticitity of Substitution [closed]

I have this production function: $$P(x_1,x_2)=x_1+x_1*x_2$$ I am trying to find the elasticity of substitution, and I found this: $$\sigma = -\frac{d \ln (\frac{x_2}{x_1})}{d \ln(\frac{x_1}{1+x_2})}...
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1answer
80 views

Economics Masters Courses? [closed]

I want to do an economics masters course (not a PHD) in the UK or US preferably with a focus on game theory, auction theory, mechanism design and contract theory though I understand I'll probably have ...
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26 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 )^\...