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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).
29
votes
Does a store suffering increased theft generally cause higher prices?
prices should have already been set to maximize the trade off between profit-per-sale and volume sold
But profit-per-sale depends on costs, which depends on the theft numbers, so if theft increases, …
- 29.7k
11
votes
Accepted
Why companies choose to make zero economic profits in the long-term when it can maximize it ...
I read that companies in the monopolistic competition make zero economic profit in the long term. Why would a company do that when it can maximize the profit instead?
Please give sources when you wr …
- 29.7k
11
votes
How to show that a homothetic utility function has demand functions which are linear in income
I think what you need is that if $U(x,y)$ is homothetic then
$$
\forall \alpha \in \mathbb{R}_{++}, \forall (x,y) : \hskip 6pt
\frac{\frac{\partial U(x,y)}{\partial x}}{\frac{\partial U(x,y)}{\partial …
- 29.7k
10
votes
Accepted
Fixed cost of a firm
It is the first one, $TC(0) = FC$. This is the definition.
Also consider that it is not clear what is "transformed by $q$ in some way". In case of
$$
\frac{5q}{q+1} + \frac{5}{q+1}
$$
are the two fr …
- 29.7k
10
votes
Accepted
Elasticity of demand equals -1 but income decreases!
We discourage numeric questions as they are unlikely to be useful for future visitors but this is a very good example of why using non-marginal quantities can be misleading.
The exact definition of th …
- 29.7k
9
votes
1
answer
262
views
Weakly monotone preferences with singleton indifference curves: do any of them admit a utili...
Inspired by this question. The original question was answered by Amit with some nice examples. I would like to know the generalized answer:
Suppose we have a preference ordering $\succeq$, which is w …
- 29.7k
8
votes
Accepted
Do the three ways of measuring producer’s surplus give the same result?
Ask your teacher what he meant, because there is either a misunderstanding or he is mistaken.
Producer's surplus will come down to $y \cdot p - VC(y)$.
In the first graph, by definition of $AVC$ we …
- 29.7k
8
votes
1
answer
373
views
Pure exchange economy: Set of multiple equilibria endowments
Initial endowments which can result in multiple equilibria in a pure exchange economy are explained here. Given a pure exchange economy, that is given the utility functions (which fulfil the usual pro …
- 29.7k
7
votes
Accepted
Can the Certainty Equivalent be negative?
If you start out with €0, then the certainty equivalent of losing €2.5 with probability 1 is -€2.5.
Your exercise basically asks you to calculate what difference winning the lottery with a small proba …
- 29.7k
7
votes
Accepted
Why labour, capital, and output levels cannot be pinned down in perfect competition?
Thus, the furthest we can go in terms of characterising the equilibrium in this economy/firm relates to the optimal capital-labour ratio. In effect, nothing can be said about the level of inputs an …
- 29.7k
7
votes
How exactly does elasticity relate to slope?
The two demand functions $D_1(p),D_2(p)$ cross at the point $(Q,p)$. Their respective elasticities at price $p$ are
\begin{align*}
\epsilon_1(p) & = \frac{\text{d}D_1(p)}{\text{d}p}\frac{p}{D_1(p)} \\ …
- 29.7k
7
votes
2
answers
13k
views
Consumer surplus in case of perfectly inelastic demand
How do we define consumer surplus in the case of perfectly inelastic demand?
This question was inspired by the comments following this answer. For a graph of inelastic demand please also see the link …
- 29.7k
7
votes
Indifference curve - Does $dU = 0$ hold in higher dimensions? / Problem of integrability
Seems to me $dU = 0$ is true by definition unless $dU$ is not defined
because the function $U$ is not differentiable in some variable.
E.g. $$U(x,y) = |x| + y$$
because there are a countably infinite …
- 29.7k
7
votes
Accepted
Profit Function: Just revenue maximization subject to constraint? if so where is $\lambda$?
The problem
$$\max py(x) $$
$$s.t. wx \leq \bar{C} $$
could be interpreted as revenue maximization subject to an operational budget contraint. However the solution of this can differ from the solution …
- 29.7k
7
votes
2
answers
2k
views
Pure exchange economy: Given an initial endowment are multiple equilibria possible?
Consider a pure exchange economy with two goods ($x_1,x_2$) and two consumers $A,B$. Both users have an initial endowment, $(\omega_1^A,\omega_2^A)$ and $(\omega_1^B,\omega_2^B)$ respectively. A price …
- 29.7k