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0
votes
2answers
175 views

Can value be defined as any increase in consumer or producer surplus?

I know that the term Economic Value Added is an internal measure that executives use to measure the financial performance of a company, say, executing a project. However, I'm doing some research in ...
2
votes
0answers
98 views

Taking limit of a sequence

I am given a following dynamic programming problem; $$ \sup_{k_{t+1}}\sum_{t=0}^{t=\infty}\delta^t(ak_t-\frac{b}{2}k_t^2-\frac{c}{2}(k_{t+1}-k_t)^2) $$ where $f(k_t) = ak_t-\frac{b}{2}k_t^2$ is the ...
2
votes
2answers
4k views

Does unit elasticity has to be at exactly the middle of the demand curve?

Can unit elasticity be anywhere else on the demand curve other than the midpoint?
3
votes
2answers
87 views

Why is the Supply of Labour More Elastic in a Single Province/State then it is in the Country as a Whole?

Apparently, the federal government has a greater ability than provincial government to increase tax revenues by raising tax rates because the supply of labour is more elastic in a single province than ...
1
vote
1answer
108 views

When a demand function is split, how do we algebraically change function

For example, in tacit collusion for a Bertrand situation, demand would be split between the two colluding firms. How would the reflect upon the demand function? For example D = 100 - 2Q, and for ...
5
votes
3answers
291 views

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 ...
7
votes
2answers
1k views

Relationship between strong and weak axioms of revealed preference

I keep seeing these following facts just asserted while reading: Let W = weak axiom of revealed preference Let S = strong axiom of revealed preference Let C = the commodity vector $W \iff S$ ...
8
votes
1answer
1k views

Why would a cash-rich company borrow money?

I have read that Apple Computer issues corporate bonds. Considering that it has $200 billion in cash, and the company complains it has been unable to spend its enormous amount of cash, why would they ...
3
votes
1answer
75 views

Is it possible to reconstitute a labor theory of value?

I am not an economist, so highly technical answers may escape me. I know that since Jevons, Marshall, and the "marginal revolution" the classical labor theory of value has been largely abandoned. And ...
1
vote
2answers
228 views

Independence of price and wealth in Walras' Law [closed]

The following theorem from Mas-Collel, Whinston and Green's Microeconomic Theory (3rd Edition) assumes $\frac {\partial {w}}{\partial {p}}$ to be zero. I would to like to know the reason behind such ...
3
votes
1answer
260 views

How to solve a pricing competition for complementary goods

I am preparing for an exam and I have come across this question in my textbook but I am not quite sure how to solve it so would really appreciate some help! Suppose that company L produces left ...
5
votes
1answer
274 views

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 ...
2
votes
1answer
115 views

Empirical set-up for measuring elasticity with respect to quality in an environment without price

I want to answer the broad question: In the absence of prices, how are decisions made? I have data on the determinants of market share in an environment without prices. So, imagine, person A chooses ...
2
votes
2answers
5k views

What textbook can I use to really understand microeconomics, macroeconomics and mathematical economics [closed]

What textbook can I use to really understand microeconomics, macroeconomics and mathematical economics. It can be different textbooks. I'm in first year college taking introductory courses in ...
6
votes
4answers
13k views

Nash equilibrium of a Bertrand game with different marginal costs

Consider the following game of Bertrand (price competition): There are two players, $1$ and $2$. Each has a publicly known marginal cost, $c_i$. A strategy is a price, $p_i\in\mathbb{R}$. Player $i$'...
0
votes
2answers
123 views

Having trouble solving system of equations through matrix approach

So I have this system of reaction functions: $$s_1 = 2 + \frac{1}{3} s_2$$ $$s_2 = 7 + \frac{1}{8} s_1$$ I have to solve this through inverse matrix and confirm the result through Cramer's rule. The ...
2
votes
1answer
172 views

Any information on a toy economy with 3 types of agents in it

I was thinking about a theoretical economy where there are 3 types of roles for the agents. They can be : workers : produce good A criminals : steal good A cops : protects good A without going into ...
-3
votes
1answer
68 views

The reasons I believe the bimetallic dilemma was never possible

During the bimetallic era, there was always a dilemma where the mint ratio differs from the market ratio of their metallic value. I state this is impossible. Suppose the mint&market ratio of ...
8
votes
4answers
11k views

Why does savings equal investment (scenario)?

Scenario 1: There's an economy of two people (Joe and Amanda). Joe buys a 500 dollar car from Amanda (which she made herself from raw materials in her back yard). Amanda takes the 500 dollars and ...
-1
votes
2answers
3k views

We know that an equal and simultaneous increase in G and T will cause…?

My textbook says GDP will increase because all of the tax money will go into G, whereas only part of income goes into C. However, since savings = investment, wouldn't an increase in taxes (and ...
10
votes
1answer
769 views

Examples of Applied Micro Paper with R (!) Code and Data in Public Repository

Can anyone suggest examples of relatively simple applied micro papers (e.g. an RCT or straightforward regression model) of possible interest to a general audience, that have their data and code, ...
1
vote
0answers
105 views

Johansen cointegration analysis, cointegrating vectors and identification

I want to analyse the long run relation between, let's say 5 variables. Scenario 1. Below is the output from a Johansen test on the five variables: ...
1
vote
1answer
278 views

What is the relationship between indirect utility function and the expenditure function? [closed]

What is the relationship between indirect utility function and the expenditure function? Explain what accounts for this relationship.
1
vote
0answers
484 views

Short Run vs Long Run Cost Functions

Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run. Now let's suppose that the price of one of the inputs in ...
0
votes
2answers
4k views

How to derive the reaction function from these provided variables?

This is the question. I cant seem to reach a concrete solution because of the scarce information. Firm 1 spends 2 million, plus 33.33% on advertising what firm 2 spends on and firm 2 spends $7 ...
6
votes
1answer
1k views

Usefulness of the Convexity Axiom

I'm asked to write an essay supporting the statement which says the convexity axiom has little economic content and should be eliminated from the economic models of consumer theory. I'm supposed to ...
3
votes
2answers
111 views

Is product opportunity frontier the same as PPF?

In CFA level 1 reading 14, they have this term called Production Opportunity frontier and it is defined as Curve describing the maximum number of units of one good a company can produce, for any ...
1
vote
0answers
288 views

Curvature of Cost and Production Function

I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct; If the cost function $C(w,q)$ is convex in $q$, the ...
1
vote
3answers
2k views

When do trades between two countries not result in gains for either of them?

So are there any circumstances where two countries trade with each other and they both do not gain anything? is it possible? and if you could also explain why that is the case? I have looked around ...
1
vote
1answer
148 views

Why does price drop as a result of increase in supply

According to the Law of Supply, if price increases, there is an incentive for producers to produce more, and therefore the quantity supplied increases. However, for an inelastic good, if there is a ...
1
vote
0answers
47 views

High interest rates=High savings?

My intuition tells me that an increase in interest rates will make saving more attractive and should encourage saving. But if that is the case, why the MPS( marginal propensity of saving )doesn't ...
2
votes
1answer
198 views

Elasticity with perfectly inelastic / elastic demand

When a change in price results in an infinitely large response in quantity demanded, demand is perfectly elastic. The perfectly elastic demand curve is horizontal. At price P, consumers will buy a ...
6
votes
1answer
203 views

Stock pricing with cross ownership

Cross-ownership is a phenomenon where companies own parts of other companies they do business with. An example: Two companies are now involved in the diamond operation, the mining group Anglo-...
2
votes
2answers
61 views

Data for the distribution of US household annual income by year and state

I am looking for data regarding the annual household income distribution filtered by year and state (and finer geographical feature like cities). In other words, I am looking for data with the ...
2
votes
1answer
2k views

Decreasing Costs, Increasing Returns to Scale, & C''(q)

Given a profit-maximizing firm with production function $f(x_1,x_2)$, I understand that we can formulate a firm's cost function $C(q)$ by using the contingent demand functions $x_1^c$ and $x_2^c$. We ...
3
votes
2answers
123 views

Fractional reserve banking and bank insolvency

I am trying to understand the fractional reserve banking system (with say 10 % reserve ratio). If a bank becomes insolvent because 100 % of the loans of a bank go bust, then who really becomes liable ...
1
vote
0answers
2k views

Variance of a dummy variable

I have always thought that variation in regressors are a good thing. In fact, one can show that the precision of the estimated coefficients is increasing in the variance of the regessors. I have also ...
4
votes
1answer
535 views

Subsidies Incidence on Producers and Consumers

When calculating the incidence on producers and consumers using a demand and supply curve is dead weight loss a part of the incidence? I know that for example the producer's incidence is a rectangle ...
3
votes
1answer
195 views

Confusion on Strategy Sets in a simultaneous move game

I have a confusion on how to define strategy sets; I understand that in dynamic games strategy sets are defined as $\textbf{sets of functions}$ - see for example my previous post, link below: ...
4
votes
1answer
1k views

Separating and supporting hyperplane theorems

I am having trouble understanding the separating and supporting hyperplane theorems. I've read what I can online but am just not able to develop any intuition. Can someone please give a basic outline ...
0
votes
1answer
64 views

What is the interpretation of the output matrix of pivoting?

I have the following matrix: $$A= \begin{bmatrix} 1 & 2 & 3 \\ 2 & 3 & 4 \end{bmatrix}$$ After pivoting, I got this matrix: $$B= \begin{bmatrix} 1 & 2 & 3 \\ ...
2
votes
1answer
285 views

Decision Theory Question: Existence and uniqueness of the certainty equivalent of p

Let $X = (x_*,x^*)$ be an interval in the real line and denote by $\Delta(X)$ the set of simple probability distributions on $X$. Consider a preference relation $\succcurlyeq$ on $\Delta(X)$ that ...
10
votes
3answers
1k views

CES Production Function with $\rho>1$

In using CES production functions of the form $f(x_1,x_2)=(x_1^\rho+x_2^\rho)^{1/\rho} $, we always assume that $\rho\leq1$. Why do we make that assumption? I understand that if $\rho>1$, the ...
1
vote
0answers
646 views

Monotonic Transformation

How does positive monotonic transformation of production function effect the resulting profit function? For example if we had production function $f(x) $ and that gave profit function $\pi(p,w)$. Now ...
1
vote
1answer
42 views

Alternative normalisation to triangular restriction on cointegrating vectors

Johansen recommends that cointegrating vectors must be normalised for inference making purposes. All software packages use triangular normalisation of the cointegrating vectors i.e. the top $r$ by $r$ ...
6
votes
3answers
6k views

Robust Standard Errors in Fixed Effects Model (using Stata)

I'm trying to figure out the commands necessary to replicate the following table in Stata. This table is taken from Chapter 11, p. 357 of Econometric Analysis of Cross Section and Panel Data, Second ...
3
votes
1answer
102 views

Homothetic Production Technologies

Can someone suggest a good resource on homothetic technologies and what properties they imply about cost function, profit function, input demands, output supply etc? Also is it possible to have ...
3
votes
1answer
681 views

Homothetic production function and Profit Function

I know that homothetic production function implies that cost function is multiplicatively separable in input prices and output, and it can be written as C(w,y)=h(y)C(w,1). Can some one help me derive ...
1
vote
2answers
124 views

What's the actual relationship between deflation, spending and saving?

I am pretty confused with this concept. Since deflation is a result of decreasing prices, it means that the demand for goods and services rise therefore stimulating more spending. But on the other ...
5
votes
2answers
332 views

Define and characterize equilibria of the following game

Consider the following game between a monopolist firm and a consumer. Consumer's income is $1$, and he needs to allocate it between period 1 and period 2 consumption to maximize his utility $u(c_1,c_2)...

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