# Tag Info

27

The property of rivalry is a continuous (rather than binary) variable.* A good is rivalrous if my consumption of it reduces the amount that can be consumed by others. So, a particular Big Mac is fully rivalrous, because each bite I take from it reduces (by that exact same amount I've bitten) the amount left for you. The degree to which roads are rivalrous ...

12

The full quote from the cited reference (p. 181) is Marginal cost is not the cost of producing the "last" unit of output. The cost of producing the last unit of output is the same as the cost of producing the first or any other unit of output and is, in fact, the average cost of output. Marginal cost (in the finite sense) is the increase (or decrease) in ...

10

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 fractions transformed by $q$, or should I just sum them up to 5? With your function, one can rearrange it to $$TC(q) = \frac{5}{q+1} + 5 + 5q + q^2 = -\frac{5q}{... 8 Example. Each month, God gives Adam 60 apples and Eve 40 (for a total of 100 apples). Let's write this allocation as X=(60,40). The Devil now comes along and offers to increase their total monthly allotment of apples to 101, but on the condition that the allocation must be Y=(59,42). Observe: X is Pareto efficient but not Kaldor-Hicks ... 7 Sure you can, just that your interpretation of your variables in your analysis changes however. In this case you are analyzing how investment in differing factors of production affect output. I'd recommend that you may want to estimate a more flexible functional form like the Translog Production Function to check if your function is CES instead of just a ... 7 I'm quite surprised nobody has picked the obvious one: I prefer rock over scissors. I prefer scissors over paper. I prefer paper over rock. Complete, definitely not transitive. 7 This looks like constant relative risk aversion (CRRA) utility . Usually CRRA is written like U = \frac{C^{1-\rho}-1}{1-\rho}  (I omitted second part for brevity) in your case a=1-\rho. \rho is the relative risk aversion. By extension a is the function of \rho so as a increases (due to smaller \rho) the person should become less risk averse. 7 It depends actually a non-congested road can be considered non-rivalrous as when you drive there you don’t really reduce the enjoyment or marginal utility of other people driving them. However, once the road is congested it becomes rivalrous. Also note that even though many textbooks include public roads as public goods this is actually not technically ... 7 One of the most important consideration for using CARA utility is tractability. CARA utility and Gaussian errors yield a certainty equivalent completely described by a simple function of the mean and variance of the Gaussian distribution.. It also turns out that maximizing expected utility in this setup is equivalent to maximizing the certainty equivalent -... 6 Gains and losses presuppose a reference point, which is not a feature in standard expected utility theory. In this theory, the only argument in the utility over wealth is w, the absolute level of wealth. A common form of utility function is the constant relative risk aversion (CRRA) form: \begin{equation} u(w)=\frac{w^{1-\rho}}{1-\rho}, \end{equation} ... 6 I used to think that microeconomics was relatively more scientific than macroeconomics. Early macroeconomics, in particular, suffered from a choosing models of agent behavior that made modeling easier but bore little relationship (or at least a highly disputed relationship) with reasonable behavior of individual agents. This led to the microfoundations ... 6 You seem to be talking about (strong) monotonicity rather than non-satiation (which is closely related to but different from monotonicity). (Strong) monotonicity says that we prefer one bundle to another if the first bundle has strictly more of at least one good and no less of any good. A bit more precisely and in a two-good setting, Let B_1=(x_1,y_1) and ... 6 There is a series of papers that address precisely this question. The most famous ones are probably Walker and Wooders (2001) and Chiappori, Levitt, and Groseclose (2002) that deal with penalty kicks and tennis serves. Both papers conclude that the behavior of professional athletes is consistent with them playing g a mixed strategy equilibrium. A more recent ... 5 If prices are constant then quantities are proportional to expenditures. Consider :$$ Y=AK^{\alpha}L^{\beta} = A(\frac{E_{K}}{r})^{\alpha}(\frac{E_{L}}{w})^{\beta}  = (\frac{A}{r^\alpha w^\alpha})(E_{K})^{\alpha}(E_{L})^{\beta}  = \tilde{A}(E_{K})^{\alpha}(E_{L})^{\beta} $$If prices don't vary too much this may be an acceptable approximation. ... 5 Convexity can be a very important assumption as much of economic analysis is built on working with convex sets, which makes things easier. Very importantly, convexity of sets allows us to work with the Separating Hyperplane and Supporting Hyperplane theorems, which have applications to many results in economics, as partially discussed here and here. Here ... 5 If the utility is continuous and locally insatiable then the Hicksian demand equals the Walrasian demand. So you'll need to look for a utility function which violates atleast one of these. Lets try a simple violation of non-satiation$$ u(x,y) = \left\{ \begin{array}{ll} x+y & \quad x+y \leq 1 \\ 1 & \quad \text{ ...

5

Remember that utility function only matters ordinally... that is, you only care if $u(A) > u(B)$, and $u(A) = 100$ with $u(B) = 10$ is the same thing as $u(A) = -1000$ and $u(B) = -1000.0001$ (both have $u(A) > u(B)$.)

5

Completeness: given any pair, I have a preference, I can make a choice. If had to choose between marrying Rachel and Monica, I would go for Rachel. Good looks, fun, etc. If had to choose between marrying Chandler and Rachel, I would go for Chandler. Corny sense of humor but aware of it, even temperament, etc. If had to choose between marrying Monica and ...

5

Complete market is a market where every possible asset or good can be assigned a price and where you have perfect information, can make perfect contracts and zero transaction costs. Any market can be complete regardless of its market structure. So you can have complete market dominated by monopoly, or oligopoly or monopolistic competition etc. Perfectly ...

5

One interpretation I can offer. The demand function can be expressed as: $$Q_1 = Q_1(p_1,p_2)$$ Let us take the total differential: $$dQ_1 = \frac{\partial Q_1(p_1,p_2)}{\partial p_1}dp_1+\frac{\partial Q_1(p_1,p_2)}{\partial p_2}dp_2$$ Assume that $Q_1$ remains unchanged with respect to a change in prices. This implies that $dQ_1=0$. Solving the ...

5

Something that may help with the intuition: U <- Goods <- Income Prices The direct utility is derived from the consumption of goods. Said it simply, money, on its own, is almost worthless in terms of utility (setting aside cases where people simply like having money). Goods, on the other hand, generate utility because they can be used or consumed ...

5

To answer the headline question directly: yes, there are. While economists are among the central participants, this is really an interdisciplinary policy-oriented question. The Science of Gun Policy is a fairly recent and comprehensive review of the research overall, published by the Rand Corporation. It's over 400 pages long and I haven't read it. But if ...

5

In theoretical modeling the consistency is applied in the same way as in philosophy/logic. Internal consistency simply means that the argument is consistent with itself and has no contradiction within itself (as opposed to external consistency where its not enough for argument to be valid on its own but it should also not contradict other facts). A simple ...

5

I don't believe it is lower semicontinous. Let $w = (0,\dots,0)$, $p \in \mathbb{R}^n_+$ be any vector such that $p_1 = 0$ (the first coordinate being 0). The allocation $x=(1,0,\dots,0) \in B(p,w)$. Define the sequence $p_n = p + (\frac{1}{n},0,\dots,0)$ and $w_n = (\frac{1}{n},0,\dots,0)$. $w_n \rightarrow w$ and $p_n \rightarrow p$. For any $x^n \in B(... 5 Level-k reasoning in the stag hunt game is analyzed in Gracia-Lázaro, Carlos, Luis Mario Floría, and Yamir Moreno. "Cognitive hierarchy theory and two-person games." Games 8.1 (2017): 1. The idea that playing$s$guarantees its payoff is discussed in Aumann, Robert "Nash equilibria are not self-enforcing, in ‘‘Economic Decision-Making: Games, ... 4 In mechanism design you are free to choose the rules of the game. The designer can determine$(S, g)$, i.e., what players can do and what happens when players played some strategy profile$s \in S := \times S_i$. In a direct mechanism, players are simply asked to report their type. Hence, every player$i$must have a strategy that corresponds to "I am type$...

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Without convexity, we'd lose the convenience of using the first order condition (or the tangency condition) to identify the optimal consumption bundle. As shown in the following figure, where the red-shaded region is a non-convex budget set, the tangency at point $E$ is not the optimal consumption point; rather, the optimum is a corner solution, where only $... 4 That statement is not generally true. It is true of rivalrous goods (e.g. when I take a slice of a pizza, there's that much less left of the pizza for you). It is false of non-rivalrous goods (e.g. when I step into the sunshine, there is usually* no less of the sunshine for you). *Unless of course I somehow also block the sunshine for you. 4 My professor once said, when doing economics, don't get stuck in mathematics. Math is just a tool. You know that the price will always be 24 per piece. For (iii), your cost is$C(q) = 10q$. What's the cost per piece to produce it? Is it more or less than what you could sell? If it's the former, you're guaranteed to make profit for each piece you make. If it'... 4 I assume you know how does$\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 \\ x+y, \;\; \mathrm{for} \;\; x > y\end{cases}$With$x$on horizontal and$y\$ on vertical axis: Not sure about the "usual" perfect complements. It is more ...

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