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41 votes

Economics term for those who benefit even though they didn't contribute

I think the economic term is free-riders.
tdm's user avatar
  • 12.5k
13 votes

Is the market price objective?

The market price is the current price at which something may be bought or sold. If a good is not sold or bought at a particular price, then that is not the market price. Whether or not any particular ...
Nuclear Hoagie's user avatar
12 votes
Accepted

Can someone explain graphically why MRS is invariant under monotonic transformation?

You're right that it's a bit counterintuitive that the shape of the indifference curves shouldn't change when you transform the utility function. The reason is that you are transforming along an axis ...
Frederic Schneider's user avatar
10 votes
Accepted

Explaining why Hicksian demand is more inelastic to intermediate micro student

Here's a "no maths" explanation (including the inferior goods case, because I think it helps to understand what's going on): Suppose we have a normal good, $x$, and we increase its price. Marshallian ...
Ubiquitous's user avatar
9 votes
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What is the difference between Impression Management and Signaling Theory?

I don't believe those two terms are used in the same spheres. To me, an economic theorist, signaling plays a role in models with asymmetric information when the informed party moves first and the ...
Bayesian's user avatar
  • 5,291
9 votes

Is the market price objective?

The vast majority of economists subscribe today to the subjective theory of value that was in economics introduced by Jevons, Walras, and Menger. Subjective theory of value posits that value is ...
1muflon1's user avatar
  • 57.2k
8 votes

Piracy/File sharing - Why aren't songs, movies or ebooks given for free (+ads) like TV?

What I don't see here is an economic model, however rudimentary, that will allow us not to definitely answer the question but to clarify what are the critical issues. So here's one (totally ...
Alecos Papadopoulos's user avatar
8 votes
Accepted

(Preference Relation/Set) Continuous $\succsim$ imply closedness of upper and lower contour sets

Looking more closely at your question, I think things should not be overly complicated. From Mas-Colell et.al. Definition 3.C.1: The preference relation $\succsim$ on X is continuous if it is ...
Kitsune Cavalry's user avatar
  • 6,648
8 votes

Meaning of Additively Separable, Linear in X

A utility function is additively separable if it can be written as: $U(x,y) = u(x) + v(y)$ Examples: *$U(x,y) =ax + by$ is additively separable by inspection. *$U(x,y) = ax + bx2 + cy$ is also. *$...
123's user avatar
  • 2,911
8 votes
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Meaning of Additively Separable, Linear in X

A function is additively separable in its arguments if it has the form $$f(x,y) = g(x) + h(y)$$ This means that the cross partials are zero, and so there is no "cross" effect of the one argument ...
Alecos Papadopoulos's user avatar
8 votes
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Why do we need Complementary Slackness Condition for Karush-Kuhn-Tucker Conditions

Solving a non-linear programming (with inequality constraints) is about trial and error. You don't know a priori if a constraint is active. You consider all the possible cases satisfying your ...
Tony's user avatar
  • 1,262
7 votes
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How do I represent this indifference curve graphically?

The problem is that there are no indifference "curves" but indifference "areas". Consider the following graph: For a reference bundle $A$ (equivalent to $\{2,3\}$), the gray regions indicate the ...
luchonacho's user avatar
  • 8,591
7 votes

Differences between Slope of budget line and MRS?

Not really, you're right in that (loosely speaking) the MRS is the amount of one good someone is willing to give up in order to get an additional unit of another good. However, the slope of the budget ...
Patricio's user avatar
  • 721
7 votes

Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?

I am unsure whether this qualifies as economics, but it would be something that might be discussed in business school. Furthermore, the answer is almost entirely engineering. As such, I will do this ...
Brian Romanchuk's user avatar
7 votes

Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy?

Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy? That depends on your definition of MMT, because it is not generally agreed on what it even is. You will find ...
1muflon1's user avatar
  • 57.2k
7 votes

Convex Preference and utility function

Let $X$ be the convex set of alternatives, let $\succeq$ be a preference relation and let $u(.)$ be a utility function that reflects these preferences, which means that $u(x) \ge u(y)$ if and only if $...
tdm's user avatar
  • 12.5k
6 votes
Accepted

If the Engel Curve of a Cobb-Douglas utility function is positive and linear, than does that mean it is neither a necessity nor a luxury good?

Recall the following equivalent definitions for luxury goods and necessities: A good $x$ is considered a necessity if $e_{(x,I)}<1$. A good $x$ is considered a luxury good if $e_{(x,I)}>1$. As ...
galoosh33's user avatar
  • 231
6 votes

How to derive utility possibility frontier?

Given that $u_A(x_A, y_A) = \sqrt{x_Ay_A}$, $u_B(x_B, y_B) = \sqrt{x_By_B}$ are the utility functions of A and B, and total endowment of X and Y in this pure exchange economy is $\omega_X$ and $\...
Amit's user avatar
  • 9,196
6 votes

Thin indifference curves

To begin with, I think the question is wrongly stated. For if the defininition of a thin indifference curve is such that continuity of a consumer's preferences implies thin indifference curves, then, ...
Elias's user avatar
  • 983
6 votes
Accepted

Thin indifference curves

I don't think continuity alone is enough to guarantee thin indifference curves. Consider preferences such that, for any $x$ and $y$ in the choice set, the consumer is indifferent between $x$ and $y$. ...
Ubiquitous's user avatar
6 votes
Accepted

Calculus and Indifference Curves in an Urban Economics Example

The utility function under consideration is $v(c,q)$ and then $$MRS(c,q) = \frac{\partial v/\partial q}{\partial v/\partial c} = v_2/v_1$$ make the functional denpendency of on $u$ explicit then you ...
Jesper Hybel's user avatar
  • 3,531
6 votes
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what is consumer surplus practically?

It is better to think of it as a "saving" rather than as a"surplus". Also, it is better understood if we imagine heterogeneous consumers for whom a threshold price exists, a "maximum willingness to ...
Alecos Papadopoulos's user avatar
6 votes
Accepted

modelling disutility from over consumption

Varian's Intermediate Microeconomics covers a concept called the bliss point. If the consumed amount of a certain good is under the quantity specified by the bliss point, then the consumer would ...
Giskard's user avatar
  • 29.4k
6 votes
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Whats the difference between local non-satiation and monotonicity?

Monotonicity of preferences is a stronger condition than local nonsatiation. Monotonicity implies local nonsatiation, but not the other way around. To see this: Claim: Let $\succsim$ be a monotonic ...
Kenneth Rios's user avatar
  • 1,259
6 votes
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Finding demand functions for an unusual utility function

I assume you know how does $\min\{x,y\}$ look like? In order to draw utility function of interest, you need to consider cases: $u(x,y)=x+\min\{x,y\}=\begin{cases}2x, \;\; \mathrm{for} \;\; x \leq y \\ ...
bajun65537's user avatar
6 votes

Proving local non-satiation in arbitrary metric space

First, you need a vector space in order for convex combinations to be well-defined. However, not every metric on a vector space works. Indeed, under the discrete metric, the result will trivially fail ...
Michael Greinecker's user avatar
6 votes

Violation of Monotonicity of preferences

In general, it will not represent the same preferences. There seems to be confusion on what "monotonic transformation" means in this context. It does not have much to do with monotonic ...
Michael Greinecker's user avatar
6 votes
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For any small perturbation dx, utility cannot change, or else, x* would not be optimal

It is basically a restatement of the first order condition - at an extrema (maxima or minima) of a well-behaved function its first derivative is equal to zero. If you are at the point of maximization, ...
LudwigNagasena's user avatar
6 votes
Accepted

Is Varian's definition of continuity of preference equivalent to standard definitions?

What Varian (Microeconomic Analysis, p 95) says is that: If $x$ is strictly preferred to $y$ and if $z$ is a bundle that is close enough to $x$ then $z$ must be strictly preferred to $y$. This is a ...
tdm's user avatar
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