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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Meaning of Additively Separable, Linear in X

Often I see both in micro and macro two common terminology : Additively separable. Linear in price or linear in probability. I understand exactly as they sound by looking at the functional form ...
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Do discontinuous preferences imply no continuous utility function?

I am trying to think of a preference relation that can be represented by a utility function but such that there does not exist a continuous utility function. I know that you can represent continuous ...
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Is a strong foundation in advanced microeconomic theory essential to study environmental economics at the graduate level?

Advanced theory of individual economic behaviour in production, consumption, and general equilibrium. Are these topics useful to study environmental economics a the graduate level, or is there not a ...
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What is a homothetic function?

Suppose we have the following equations for the MRS of a utility function. $$U(x, y)$$ Which of the following corresponds to a homothetic utility function? $$MRS (x, y) = \frac{x^2+y^2}{xy}$$...
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Use of Slutsky equation

I know that the Slutsky equation is defined as: $\frac{\partial x_1^s}{\partial p_1} = \frac{\partial x_1^m}{\partial p_1} + x_1^o \frac{\partial x_1^m}{\partial m}$ My problem is right now is ...
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Which think-tanks on economics do you use to keep up with the news?

Whenever I have spare time, I like to go to Bruegel site and check their section on publications in macroeconomics. Here I usually find small publications of 20 something pages. The size is just about ...
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Are there two different meanings of the discount rate?

Today I suddenly became aware of how the term "discount rate" are frequently used in two different contexts: When people prefer to have something now rather than in the future. The reason is ...
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Are there any examples for $u(x_1, x_2) = \max\{x_1, x_2\}$ in real word?

I know how its graph looks like, and it's like when you want to choose between 2 inferior goods you choose the cheaper one so you can have more, but is there another examples?
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Explanation Rational Expectations

I am struggling understanding the concept of rational expectations. Can someone explain in simple words the concept of rational expectations? Does someone know a good (online) source explaining ...
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If the (direct) utility is concave in all goods, is the indirect utility necessarily concave in wealth?

Suppose that the direct utility $u(x_1,...,x_n)$ is concave in each of its arguments. Does this imply that the indirect utility $U(w,p)$ is concave with respect to $w$? If all goods are normal than ...
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Is there an economically sound way to decide between buying media or a streaming subscription?

How can a consumer (like myself) decide on whether they should pay for a music streaming service based on economic reasoning? Assumptions: The budget allows paying for a ā¬ 10/Month music ...
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What is the difference between a free market and a perfectly competitive market?

I am trying to find the distinction between a free market and a perfectly competitive market, and I can't find the right definition on what makes them different. Can someone give me a clearly ...
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What are the textbook-like obvious advantages and disadvantages of tipping?

I just came from a coffee place with tipping and now I'm in one without tipping... prices are higher, but there is not tipping. It's not obvious why some places get rid of tipping and others don't. I ...
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What is the difference between Herfindahl Index and the Concentration Ratio

I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead ...
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Question about the Ellsberg Paradox in Expected Utility Theory

The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility function,...
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What does it mean if a economic model is internally consistent?

What does it mean if a economic model is internally consistent? What happens if it is not? Is it not closed anymore? Can it still be solved? Does it still have an equilibrium?
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General mathematical model of incomplete contracts?

I have read various articles about incomplete contracts, like Hart's papers and Milgrom's papers. But I have not found a paper that defines mathematically, in the most general way possible, what an ...
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Research at the county-level: Macro or Micro?

Is research at the county-level considered applied micro or applied micro? The standard undergrad definitions ("micro" = "individual", "macro" = "nation") are of no help with units of measurement ...
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Intertemporal Utility Maximization

Suppose an economic agentās life is divided into two periods, the first period constitutes her youth and the second her old age. There is a single consumption good, C, available in both periods. The ...
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Indifference curve - Does $dU = 0$ hold in higher dimensions? / Problem of integrability

In two dimensions, we have on an indifference curve that $dU=0$. Does this apply to indifference objects in higher dimensions? I was thinking that if $dU > 0$, then one is moving to a higher ...
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Is consumer surplus subjective?

The producer surplus is objective because the it is the total revenue minus the total variable cost. For example, if the producer sold 100 goods at 5 each, and the total variable cost was 300, then ...
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Estimating the second derivative of function from optimizers

Consider the following optimization $$x^*(s) = \max_{x\in X} \big(\,f(x)-sx\,\big)$$ where $f$ is assumed to be a strictly concave function and $X$ is an interval constraint, e.g $X = [0,b]$. We do ...
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Clarification about Market Structure Oligopoly or Monopoly

As per the definition i found in the internet, Oligopoly, in which a market is run by a small number of firms that together control the majority of the market share. Monopoly, where there is only ...
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Tests of rational inattention

Can you provide a reference regarding a revealed preference test(s) of rational inattention models, as proposed by Sims, ergo, using a mutual information measure as the cost of putting attention. And ...
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Is there some kind of consensus on the determinant factors of education achievement?

There is quite a bit of literature on the economics of education. One of the most debated aspects of it arises when estimating the achievement of the student (usually in the form of standardized test ...
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How would you call a market for kidney donors and recipients?

I was wondering how you would call a market for kidney donors and recipients, where you have many 'buyers' and many 'sellers'. However, the 'seller' can only 'sell' his/her 'product' once. Since it's ...
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What types of 'market mechanisms' are said to exist besides auctions?

The book Understanding Auctions states: The term auction covers a wide range of market mechanisms that are used to exchange products and services by determining who receives an item and how much is ...
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List of theoretical models of learning

What are the most advanced theoretical models about "learning" such as learning-by-doing or learning from others? Overall, learning in economics spans different areas. Here there is a largely ...
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When the convexity assumptions fail

We constantly assume convexity in economics. Convexity of production sets, convexity of preferences etc. Is there literature that addresses when convexities fail? For example, is there any ...
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Economics: inductive or deductive? Verificationism or falsificationism?

Question 1: Are economic theories and models developed using induction or deduction? My view: If we gather historical evidence and figure "so, people tend to be like this and that so let's call this ...
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Does the Marshallian demand function always include prices and income?

I have the following utility function: $$U(x_i)=x_1x_2+x_3$$ with budget constraint: $$p_1x_1+p_2x_2+p_3x_3\leq I$$ I use the Kuhn-Tucker method to find the optimal choices of the Utility ...
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Is the contract curve orthogonal to the priceline?

Consider an exchange economy with two consumers A and B, two goods x, y. Consumers have identical preferences $U=xy$. Total available endowment are $E_x$ and $E_y$. This is the background of a ...
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Converting word definitions of Pareto-Optimal into math symbols

I'd like to have a mathematical version of the following two definitions just because I remember symbols better than words. But I lack the math prowess to convert them from words to symbols. Can ...
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Oligopolistic producers and retail price wars

Consider an industry with few producers selling differentiated products. The products must be sold through retailers of whom also there are a few and who therefore possess some degree of market power. ...
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Higher order beliefs and coherency in game theory

I am reading about the higher order beliefs. Before getting into the formal definitions, I will define some common terminology which I will need for the formal definitions. If $X$ and $Y$ are two ...
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The utility function for goods can be modeled using something like the exponential utility: $$B(x)=\frac{1-\exp(-ax)}{a}$$ with $a>0$. So that marginal benefits are modeled as being within $[0,1]$...
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Linear Expenditure System of Demands, Derivation Help

This problem I am working on comes out of--surprise--the Mas-Colell book for graduate micro (3.D.6). I think I have correctly used the FOC of the Lagrangian of the utility maximization problem to ...
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Trying to track down the earliest usage of rivalry, tangibility, excludability, and durability in economics

I'm interested in a history of these terms, and wondered if anyone knows where I might find such a thing. The first mention I can find for excludability is a 1957 law journal paper referring to a ...