# Tag Info

8

It's called a Principal-Agent Conflict. The RIAA/MPAA act as agents on behalf of the people who actually produce content (and consequently end-consumer value). To maintain relevance to their principals', the RIAA/MPAA must signal value to them (i.e. claim loudly and repeatedly that they do something good for them [regardless of the validity of that claim])...

6

The simple answer is that they don't think they would make as much money. In many countries illegally downloading music or movies is getting harder and harder. The recording industry has achieved this by persuading governments to instruct the ISPs to block torrent sites, torrent proxy sites and sites that list proxy sites completely so no one can access ...

6

Partly your question relates to more general questions like "buy versus rent a house", or "buy versus lease a machine". Under neoclassical assumptions of competition, full information, etc, you can imagine that arbitrage would make these options equivalent for the average of the population (or the representative agent). In practice, ...

5

Heuristically, you can think of the integral as just a sum: $$\bar{C} = \left( \sum_{i=1}^n C_i^{1-\frac{1}{\epsilon}} \right)^{\frac{\epsilon}{\epsilon - 1}}$$ where $\bar{C}$ is an index of aggregate consumption, and utility is given by $u \left( \bar{C} \right)$. It's easy to check that the marginal rate of substitution between goods $j$ and $k$ is ...

5

I think I have found the explenation for this. If you look at the wikipdedia page of the economy of Madagascar, it states the following: The standard of living of the Malagasy population has been declining dramatically over the past 25 years. The country has gone from being a net exporter of agricultural products in the 1960s to a net importer since 1971. ...

4

Such a "planned" and sought-after re-allocation of given income from consumption to saving, is justified only if the savings in an economy are sub-optimal (or we think so), in the sense of hurting the investment rate, which in turns hurts the (human and physical) capital infrastructure. Think about the extremes: consume all that you produce, save nothing (...

4

tl,dr: I don't see an economic argument for GN marriage, or marriage in general what-so-ever. Frictionless environment All spending on marriage, are nothing more than consumption goods. There is no reason to believe that marriage-related spending have a higher Keynesian multiplier than other consumption categories. As long as this is the case, as @denesp ...

4

"Durable goods" are a form of utility-generating capital. But they are capital, and what is actually generating utility is the flow of services from them, not them directly. So when we buy a durable good, this is not consumption, it is investment. The phenomenon of uneven intertemporal allocation of purchasing expenses in durable goods is not related to "...

3

This has to do with the form of the utility function. Assume instead that,say, we had $$U(c,l) = c^{1/2} - \frac{1}{2}l^2$$ Does now $R$ affect the labor-supplied decision? Solve it and explore. Check also the link offered in a comment to your question.

3

Firstly there are services like this in Spotify, and even radio and tv, but it sounds like you are talking about downloading the material with ads in. That causes a problem. Revenue from ads relies on giving many ads to many people. Each time you listen to a song the provider needs to be able to provide a new ad. If you download a song or book with ads ...

3

As stated the Government successfully runs a campaign and people stop spending and start saving. Part of the answer depends on how they save, and the other part depends on how manufacturers react. However it´s worth observing that in most countries only a minority of people can do this - the 60-70% of people in the USA for example who live pay cheque to ...

3

The two papers that explored first savings under uncertainty in a two-period setting are Leland, H. E. (1968). Saving and uncertainty: The precautionary demand for saving. The Quarterly Journal of Economics, 82(3), 465-473. and Sandmo, A. (1970). The effect of uncertainty on saving decisions. The Review of Economic Studies, 37(3), 353-360. They both ...

3

The multiplier comes from the solution to the goods market equilibrium. In economics everything is endogenous. Increase in income increases consumption that increases demand, demand increases production and production increases income. However, as an echo in a cave the initial increase in income gets 'weaker' as it cycles through the economy and the result 1/...

2

I don't think they are "sure", but the weights are based on the American Consumer Expenditure Survey which has a big sample size, a carefully chosen sampling frame, professionally executed sample gathering, and a large team of experts crafting questions and collating the data. How is the CPI market basket determined? The CPI market basket is ...

2

Good question. The answer depends on what exactly you mean by an increase in the money supply and how it is implemented. Because standard monetary policy (ie. open market operations) is implemented through banks, it is functionally quite different from a pure infusion of cash to consumers, which is more the realm of fiscal policy, depending on how it is ...

2

There are two major "qualifiers" to the life-cycle hypothesis (LCH). Both put forth by John Maynard Keynes in "The General Theory of Employment, Interest, and Money." The first is the "precautionary effect," that people save more than the LCH would predict because they are uncertain about their future health, life span, medical bills, etc. A second ...

2

Why Save? "In the long run we are all dead!" - K. Your interesting question brings more questions. Because the short answer is: it depends. Part A - Diagnostic What phase of the business cycle are you in? You first need to make a diagnostic of the shape and timing of the economy your are analyzing. The timing of the business cycle is of prime importance. ...

2

The whole point of saving is that you consume less NOW in order to consume more LATER. That is certainly true at a personal level. Moreover, that is true at a national level. More savings this year means less consumption this year. The danger of savings is that if the money goes under the proverbial "mattress," instead of being invested, less consumption ...

2

Definition: The Aggregate Demand curve shows the combinations of the price level and level of output at which the goods market and assets (money) markets are simultaneously in equilibrium. This definition proves option a) incorrect. The correct option is d)

2

Read the economics textbook by Gary Becker. He does not deal with NG marriage but he offers the first economic theory of marriage. Also, read "A Treatise on the Family: Enlarged Edition", 441 pages, Gary S. Becker, Harvard University Press.

2

$p$ represents total production. $Ap$ represents the intermediate goods and services used in production, i.e. intermediate consumption. So $p-Ap=(I-A)p$ represents net production, i.e. output minus input.

2

I would agree that volunteered labor is a utility enhancing activity. Seen as a good, its price could be the opportunity cost, i.e. the wages foregone (for not working for pay). But then this is not really different from the concept of "leisure", since "leisure" in economics does not mean "fun and games", but rather "time spent not working for pay". An ...

2

To simplify matters, let's call the right-hand side of your starting equation $X_t$ Then, I start just like you did with $1 = X_t$ The difference between your solution and Gali's is that you took the Taylor expansion around $\log(1)=0=log(X_t)$ which implies that also the steady state equals 0, so we can simply subtract it to get log-differences, ...

2

I wanted to add this as a reply to denesp's comment, but I do not have enough reps. MRS and a binding BC gives a system of two equations from which we can solve the optimum bundle. In case of income = 10, these two equations have positive solutions, in case of income = 1, these two equations do not have positive solutions. See this: Income = 1 just makes ...

2

The argument relayed in the question as regards consumption smoothing is flawed. Consumption smoothing does not mean consumption equality over periods, but rather, tendency to avoid corner solutions, or near-corner solutions. So it has nothing to do with whether, in the context of this family of models, $\beta (1+r) =1$ or not (after all, in a more ...

2

One needs to go case-by-case and arrive at a utility function with branches. To get you started, if $x_1 < x_2/2 \implies \min(2x_1,x_2) = 2x_1$, but then also $\min(x_1,2x_2) = x_1$. Therefore in this case, $u(x_1,x_2) = 2x_1$. etc There are two other intervals to consider as regards the relation between $x_1$ and $x_2$, so in all you will obtain a ...

2

Those are some good starting points but I would refrain from using them as the end result. There are some fatal logical jumps in your example. Moving house: A good one to use. If I were to guess, I think the ratio should have decreased due to tech. For example, we don't have those huge t.v. nowadays. No desktops for the most part. However, be careful about ...

2

It's very likely that that these major categories in the hierarchy of goods in the market basket differ somewhat by country. The sub-categories within these major groups are even more likely to differ across countries, as the market basket is supposed to reflect the purchases of a typical consumer, and typical purchases are obtained from consumption surveys ...

2

It is implicit in the interpretation: Mas-Collel: the amount that must be given (+) to compensate for a reduction (-). Reny: The rate at which good j can be exchanged (+ & -) for good i. The derivation from total differentiation only requires the utility to be constant, so the derivative must be negative to express that if the quantity of good $i$...

2

The above answer by Regio covers most of the answer Just to emphasize further : Consider a 2 goods case. We define MRS as the opportunity cost of consuming one more unit of good 1. Opportunity cost means "What Am I Giving Up ?". Since you are consuming only two goods, you are giving up some amount of good 2 in order to consume this one more unit of good 1. ...

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