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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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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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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1answer
234 views

Pareto-optimal allocations in the Edgeworth box

If agent A has utility function $u(x_1, x_2)$ and agent B has utility function $v(x_1, x_2)$, what are the equation(s) that characterize the Pareto-efficient allocation of goods in the Edgeworth box? ...
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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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72 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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1answer
43 views

Will a consumer be more, or less willing to give up a commodity (for the other) for which they have been substituting another? [closed]

Statement: "Indifference curve analysis is based on the assumption of diminishing marginal rate of substitutiins. This means that as the consumer substitutes more and more of one commodity (say X) for ...
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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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1answer
50 views

Finding out an optional consumption without calculation [closed]

I need help with this task. The utility function is U(a;b)=3a+2b. The prices for the goods a and b are equal. Explain what an optional consumption of the consumer would be without calculating. ...
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607 views

What is optimal profit for this company? [closed]

I am really struggling with the following question: Question: A company produces a product that they sell in two different countries. Because of transport costs, customs etc. it is not profitable ...
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1answer
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
457 views

Finding an exchange rate and competitive equilibrium given an initial allocation and utility function [closed]

I am attempting to solve the following question. "Smith and Jones are stranded on a desert island. Each has in his possession some slices of ham (H) and cheese (C). Smith is a choosy eater and will ...
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1answer
73 views

Microeconomics for demand [closed]

Oscar’s demand for movies is given by Q = 10−2P. (a) What is the price elasticity of demand at a price of 2? Is Oscar’s demand elastic or inelastic at a price of 2? (b) Assume that the price is 3. ...
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29 views

Does transitivity qualify as a reason for Indifference curves intersecting each other?

Transitivity in preferences seems as a flawed concept because there might be a situation where A>B, B>C but A<C. Going by this analogy it seems that it does not qualify as a reason for ...
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1answer
58 views

Marginal Profit Derivation [closed]

Find the marginal profit of a firm with a profit function: $$P(q) = -192q + 88q^2 - 16q^3$$ I got $$\frac{dP}{dq} = -192 + 176q - 48q^2$$ However, the solution reads $$ \frac{dP}{dq}= -4(q-2)(q-...
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713 views

Is this answer correct for opportunity cost? [closed]

Shouldn't the answer the question be $0. Because you arent really giving up anything?
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1answer
47 views

finding optimal values of quantities through utility function when MRS is 1 and price ratio is 1:2 [closed]

so this is a somewhat simple question but im stumped, here's why: given the utility U=2$X_1$+2$X_2$ where $P_1$$X_1$+$P_2$$X_2$=20 and $P_1$=0.5$P_2$ the question asks to find optimal values of $...
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904 views

Intuitively, why is Profit = (Price $-$ Average Cost) $\times$ Quantity?

Sources: p 289, Principles of Microeconomics (7 Ed, 2014) by N G Mankiw p 259, Modern Principles of Economics (2 ed, 2011) by Tyler Cowen, Alex Tabarrok Definitions: Profit $:=$ Total Revenue $−$ ...
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mortgage rate in 2008 [closed]

if banks and finanfial entity paniced, which cause people to stop lending which leads to higher interest rate, how did the mortage rate stayed the same in 2008? it barely dropped. It's kind of ...
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1answer
79 views

Microeconomics undergraduate ELASTICITY help (differentiating log-linear demand curve) [closed]

How do you show that the price elasticity of demand is a constant if the demand function is log-linear? To show this, how do you differentiate the log-linear demand curve to determine dQ/dp, and ...
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1answer
95 views

Cobb-Douglas function homotheticity

I've been given the Cobb-Douglas utility function: $\ u(q_1, q_2)=a\ln q_1+b\ln q_2=q_1^aq_2^b \ $ If I want to prove homothetic preferences, I use the following condition: $\ u(\lambda q_1, \...
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2answers
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Microeconomy, monopoly, maximum profit - two different answers when solving exercise in two different ways

Suppose that monopoly produces product $X$. Let $MC = 20$, Quantity demanded function is given by equation $Q_d = 600 - 2P$ (where $Q_d$ - demand curve, $P$ - price). Calculate the amount of ...
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2answers
1k views

Find Engel Curve with a Cobb-Douglas [closed]

I have $U(x,y)=xy$, $p_1=4$ and $p_2=1$. Income is unknown. Where do I start?
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1answer
243 views

What does this formula stand for? [closed]

W/Vmp = ? I think it is the marginal product....but I have really no clue....any help on this?
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1answer
338 views

Are these preferences convex? [closed]

$Let$ the utility function defined to be : $$U(x,y)=-x^2-y^2$$ I believe they are convex, the set which is preferred to a specific indifference curve is convex, but the answer sheet says that it is ...
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1answer
202 views

Question on monopolist (involves simple calculus)

QUESTION: Consider the problem of a monopolist that sells its product in two different markets $m$, with $m=1,2$. Each market has an aggregate demand function given by $1200−α_m\cdot p_m$, where $p_m$ ...
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1answer
37 views

What is a substitution pattern?

I know what substitution effect is but I am not sure what substitution patterns are. To give some context the author says the following: "I analyze the substitution patterns between exchange ...
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1answer
135 views

Changing Constant Factor Demands

I’ve been given this true false question: Consider the minimization of wL + rK given F(K, L) $\geq$ Q with F(K, L) strictly increasing in K and L. The conditional factor demands K*(Q, w, r) and L*(Q, ...
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1answer
291 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
295 views

Question on consumer theory

The story of my question is I have multiple question. (1) when John doesn’t work in the underground economy at all , t=0, how can I find the optimal value of $l$ and consumption bundle and his ...
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1answer
4k 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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1answer
94 views

Please solve this question [closed]

If the cross elasticity of demand of X commodity for changes in the price of Y commodity is positive, the commodities X and Y are (a) complement (b)subsitutes (c) giffen (d) infirior goods
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Is this a violation of the law of demand? [closed]

Beach resorts typically raise their prices during the summer months and yet more people book rooms at those times. Is this a violation of the law of demand? If so, why? If not, how would you be able ...
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1answer
388 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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2answers
253 views

How do find elasticity of substitution for this function

The motive of my post is in search of some help in order to understand the correct way to find the elasticity of substitution by means of calculating the following function. $$f(K, L)=\frac{K^{2}L^{...
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2answers
148 views

Why can't direct taxes be passed on to the consumer? [duplicate]

What stops firms increasing prices of goods in the case of an increase of a direct tax such as corporation tax?
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1answer
373 views

What is the most successful economic prediction? [closed]

The question above is closed and unanswered. Stop dodging the question. I am asking for one example. Successful defined as: Has been consistently correct for the longest number of years Has been ...
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1answer
36 views

How do you calculate the price of a good or service adjusted for scarcity?

For example, Widget A is worth \$100 when there are 50 of them available in the market, but the price goes up to $110 when there are only 40 of them left. Widget B is worth \$100 when there are 50 ...
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1answer
40 views

Is the expected utility the inverse of the utility function?

Can somebody explain to me if that it's true and also graphically explain it?
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1answer
59 views

NASH equilibrium [closed]

How to approach questions like these: In a two player static game with a discrete strategic space that permits each player to chose one of the four possible strategies what is the maximum number of ...
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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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2answers
146 views

Effects of giving everyone in the US \$4.33 million dollars each? [closed]

This image has been doing the rounds on facebook: Funny arithmetic error aside, what would be some of the effects of giving everyone in the United States \$4.33 million dollars each?
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2answers
130 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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1answer
67 views

Advance Microeconomics [closed]

Show that u=a+bM-yM^2 represents a risk averter's utility function who is interested only in the mean and the variance of the state distribution of Income M. Can anybody send me the full solution. ...
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2answers
53 views

Is there no equivalent exchange? [closed]

There is no equivalent exchange. I think it doesn't exist. The so-called equivalent exchange is imaginary. In exchange, one side always makes money while the other side loses money. For example, if ...
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1answer
524 views

Question about budget constraint and utility maximization [closed]

I have also following budget set $$B=\{x=(x_1,x_2)\in R^2_+ \mid 2\sqrt{x_1}+x_2\le y\}$$ where y is income. Assume that there are two stories. The agent can shop in both of them. The first store ...
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0answers
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A monopolist has a cost function c(y)=y so that its marginal cost is constant at Re. 1 per unit. It faces the following demand curve [closed]

D(p)= 0, if p>20 100/p, if p<=20 1)Find the absolute value of elasticity of demand at p=2 2)Find the profit maximizing level of price ∗p and output ∗y set by the monopolist. I cannot understand ...
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1answer
147 views

Has anyone made a successful economic prediction more than once? [closed]

See title. Specifically it would be good to see something that proves some type of market economics and not just a simple monopoly model. This is not too broad because I am asking for literally one ...

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