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Results tagged with microeconomics
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user 4445
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).
2
votes
1
answer
67
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Aggregate efficient production and division of labour
How to resolve the following seeming contradiction? Mas-Colell, Whinston, Green p. 148 Prop. 5.E.1 says that the efficient aggregate (coordinated) production is just the sum of individually optimal pr …
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2
votes
Accepted
For a certain good, if there is a one-time fixed cost for a consumer to switch to a differen...
The good has a switching cost / is subject to a switching cost. Rarely used: it is a Diamond good. (Referring to the Diamond 1971 paper.)
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3
votes
Accepted
Indirect utility from expenditure function
Mas-Colell, Whinston, Green chapter 3, especially p. 75 explains this. One possible way is $v(p,w)=e(p,v(p,w))$ where $v$ is the indirect utility function, $p$ the price vector and $w$ the wealth.
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0
votes
Sign of substitution and income effect of a price change
You are correct on the main point. The effect is the derivative of the demand with respect to its argument (price or income), the sign of which does not depend on what the size or sign of the change i …
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2
votes
Accepted
What is an equilibrium generated by replication?
For each agent in the economy, create n agents with the same endowment and preferences. The result is the replication economy. Sometimes n is taken to infinity in proofs.
Chapter 17.I in Mas-Colell e …
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1
vote
eBay economics - total revenue impact from expanding ecosystem by 1 seller
eBay seems to think that additional sellers increase its profit (not just revenue), because it advertises the option to sell on its website and tries to recruit more sellers. That's the empirical answ …
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1
vote
What is the difference between solving for utility maximization separately or aggregately?
Under what constraints is $u_1+u_2$ maximized? The exercise may be about the First Welfare Theorem: a competitive equilibrium is Pareto efficient. In this case, maximizing the sum may be designed to h …
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4
votes
Accepted
For what demand function is a monopoly most harmful?
An arbitrarily large ratio should occur with demand curve
$P=\begin{cases}
\frac{1}{Q} & \text{if } Q>1 \\
2-Q & \text{if } Q\leq 1 \\
\end{cases}$.
The monopolist prices at $P=1$, but the consumer …
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3
votes
on economic growth and Second Welfare theorem
This does not contradict welfare theorems (1st or 2nd), because income tax is a distortionary tax just like consumption taxes. Income tax is a subsidy on the consumption of leisure.
Endowment tax wou …
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5
votes
Does risk aversion cause diminishing marginal utility, or vice versa?
The utility function is a representation of preferences, which are traditionally inferred from choices. Preferences come before utility. I would not call the connection between utility and preferences …
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