New answers tagged

1

From your formula for $x$ when $y=0$, you should be able to find $U$ in terms of $M$ and $p_x$ when $y=0$. Similarly, $U$ in terms of $M$ and $p_y$ when $x=0$. The key then is to find the critical price ratio at which, to maximise $U$, the switch needs to occur from $y=0$ to $x=0$. Can you take it from there?


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Here, we need to use the arc income elasticity $$e =percentage change in Qd / percentage change in M$$ =( $Percentage change in Qd$$×$$( M'+M)÷2$) /$ (M'-M)$ = $(0.15×420)/40$ = $1.575 =1.58 $


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A new recession would be caused by the constrains that the Federal and state government has implemented because of the corona-virus (which is understood and justified). In a recent New York times article By Ben Casselman en al. “ Coronavirus Cost to Businesses and Workers: “ https://www.nytimes.com/2020/03/15/business/economy/coronavirus-economy-impact....


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Let me take an example based on the estimation of returns to education, which has been a well-studied problem. The usual result is that researchers find the 2SLS estimate to be larger than the OLS estimate by approximately 25%-50%, e.g. Card (1999, 2001). Three reasons : An omitted variable that could be negatively correlated with the amount of education. ...


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A consumer who likes pizza, orange juice, and apple pie will get more gratification (i.e. "obtain maximum utility") if he spends his money on an optimal combination of these three types of goods rather than by spending all his money on just one type thereof. That optimal combination is determined by how much he enjoys one additional unit of pizza (i.e., ...


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$TC(q)=10+3q+0.5q^2$ is a quadratic cost function and has a shutdown point at $P=3$.


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Hi: They are pretty close to completely different. I don't know the least thing about game theory but a nash equilibrium describes what happens in a game when two or more people have a certain type of expectation. RE is one type of expectation but if you google for RE you'll see that it's a field in itself. It happens to have an application in game theory ...


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Giskard is right lexicographic preferences would make the job being dicsontinuous, but the problem is to find relations with closed contour sets. Maybe an idea would be to start from constructing a preference relation for which the only possible upper and lower contour sets are $X$ and $\emptyset$. In that case, you take the indiscrete topology, and all ...


2

This is not true. Let $n=1$ and define $u(x)=\min{\{x,0\}}$. Let $\succsim$ be the preference relation represented by $u$. This preference relation is continuous and convex. We also have $x\sim y$ implies $x+a\sim y+a$ for any $a\geq0$ and $x,y\in\mathbb R$. But let $x=0$, $y=1$, and $a=-1$. Then $x\sim y$, but $y+a=0\succ -1=x+a$, thus $x+a\nsim y+a$ and $\...


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The answer to your question is that producer surplus - the difference between what the price at which a producer is willing to sell a unit of output and what they are required to sell it at - is greatest in a discriminating monopoly. You can think of the discriminating monopolist as having perfect knowledge of every consumer on the demand curve, and as ...


1

It is not true. Let us consider $\mathbb{R}^2$ so bundles are $x = (x_1,x_2)$. Consider the preference: (i) If $x_1 \leq 0$, preferences are lexicographic, i.e. $$ x \succ y \Leftrightarrow \begin{cases} x_1 > y_1 \\ \text{ or } \\ x_1 = y_1 \text{ and } x_2 > y_2 \end{cases} $$ (ii) If $x_1 \geq 0$, $u(x_1,x_2)=x_1+x_2$. Notice that no ...


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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}{...


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I think the point that the author was trying to make was that opportunity cost refers to the "best alternative use" of something. The measure is used to understand marginal decision making. Suppose you have just purchased an Oven which can either bake cakes or bake bread. Now if you decide to bake cakes, your opportunity cost is the number of loaves of bread ...


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. ...


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 $i$...


1

However, the market could normalize after this as the money earnt by a nation's richest would eventually be more evenly distributed amongst others, hence they would spend more, canceling the downturn. Wage cap is not an redistribution measure. It’s an measure aimed at reducing inequality but without any direct redistribution. For example, suppose you have ...


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Actually, neither demand for Veblen good nor for Giffen good is strictly increasing in price. In case of Giffen good the demand actually looks as shown below in picture 1. The reason for this is that you can only increase demand for the Giffen good up until you consume your entire budget. Once the price gets higher then that you still get normal downward ...


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Account and economic profits are two different things because while one takes into account the explicit costs and other accounts for implicit as well as explicit costs.


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So we have $S_n \thicksim^{iid} \ ?$ $\bar{s} = \frac{1}{n}\sum{s_n}$ Exponential Suppose $S_n$ follows the exponential distribution. $$f(s|\beta) = \frac{1}{\beta} e^{-\frac{s}{\beta}} \quad , \quad 0 \leq s < \infty \quad , \quad \beta > 0$$ Take the simple bivariate case. Say $Z = \frac{S_1 + S_2}{2}$ and $W = S_1$. So $S_2 = 2Z - W$ and $S_1 ...


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From my experience, the results are not always the same. For instance, we have VC = 3Q + Q2, so that the marginal cost is MC = 3 + 2Q and average variable cost is AVC = 3 + Q. Both MC and AVC are linear curves emanating from 0. When price is 9, Q is 3 (because P = MC), and: 1) the first calculation will give us producer surplus PS = Q (P-AVC) = 3.(9 - 6) ...


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