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Results tagged with microeconomics
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user 1601
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).
1
vote
Non-viable Industry with demand curve above supply curve
If we consider that no one wants an infinite number of any material thing other people can supply and that there are only a finite number of people/firms, the demand function should be bounded. That m …
- 29.7k
3
votes
Slope of the Budget Line
They do consider it. The precise mathematical formulation is usually
$$
-\frac{p_1}{p_2} = \text{MRS}(x_1,x_2)
$$
or
$$
\frac{p_1}{p_2} = \left| \text{MRS}(x_1,x_2) \right|
$$
in the basic cases, when …
- 29.7k
3
votes
Can the Income Consumption Curve have a non smooth shape?
An easy example:
When the utility function is
$$
U(x,y) = \ln x + y
$$
and the prices are
$p_x = p_y = 1$, the IOC is kinked at income level $I=1$:
$$
(x,y) = \left\{
\begin{array}{ll}
\left( I, 0 \ri …
- 29.7k
2
votes
Marginal rate of substitution
There is more than one indifference curve. There is one belonging to every utility level. So for any utility level $c$, the points $(x,y)$ that satisfy
$$2\cdot \sqrt{x} + y = c$$ are an indifference …
- 29.7k
2
votes
What's the role of initial endowments in an edgeworth box?
In the budget constraints of the competitive equilibrium.
- 29.7k
1
vote
Accepted
How does this company gain from economies of scale?
The story (and Jo) have basically nothing to do with the benefits Pepper plc will get from economies of scale. As you have stated economies of scale means that the average cost (cost per unit) is less …
- 29.7k
2
votes
Accepted
Is product opportunity frontier the same as PPF?
Yes. The "curved line" clearly fits your definition as well. The PPF is curved if (but not only if) there are diminishing returns to inputs such as labor and capital. See also
https://en.wikipedia.org …
- 29.7k
2
votes
Independence of price and wealth in Walras' Law
The demand function $x(p,w)$ is defined for all parameters $p,w$. For example by nonnegativity of demand and the budget constraint $x(p,0) = 0$. The price and wealth parameters can be changed independ …
- 29.7k
6
votes
Destruction in Exchange Economies
Consider an exchange economy with two goods $x$ and $y$ and two agents $A$ and $B$. The utility functions are
$$
U_A(x_A,y_A) = x_A \cdot y_A, \hskip 20pt U_B(x_B,y_B) = \min(x_B,y_B).
$$
Let the init …
- 29.7k
1
vote
Accepted
Uses of loans during recession
Because of the recession some members of the household may have lost their jobs. So maybe they don't have enough money to pay a utility bill? To pay for urgent repairs? To buy a Christmas present? The …
- 29.7k
1
vote
Showing the Utility Possibilities Frontier is downward sloping
The first statement does not seem to be true. The UPF exists in the space of utilities whereas the other curves (production, indifference) exist in the product space. As a result, the slope of the UPF …
- 29.7k
1
vote
Accepted
WAPM and CRS across all production plans
Sure it can, because the maximal profit is 0, and that level is attained at all output levels.
A similar problem is a profit maximizing firm with constant returns to scale. If such a firm has a maxim …
- 29.7k
6
votes
Accepted
What is the difference between budget constraint and budget line?
One is an algebraic formula, the other is the geometric representation of that formula.
They are the same as much as a straight line and the equation describing said line are the same.
- 29.7k
3
votes
Accepted
Utility function that generates a demand curve which will have an U shaped MR curve
Let $v(x) = \int 1 − x + 3x^2 − 3x^3 \text{d}x$.
The quasi linear utility function
$$
U(x,y) = v(x) + y
$$
generates the inverse demand curve given by Ubiquitous if income $I$ is large enough and $p_ …
- 29.7k
1
vote
what is the marginal cost divided by the average cost
$MC/AC$ is not a quantity, it is a function. More precisely it would be written as $MC(y)/AC(y)$.
It is true that in a competitive setting in the long-run equilibrium $MC(y^*) = AC(y^*)$.
However, t …
- 29.7k