32
votes
Accepted
How can power/electricity prices be negative?
Yes, customers who were exposed to day-ahead wholesale market prices were paid to use electricity.
It is a combination of several different factors that make the day-ahead wholesale electricity ...
- 8,168
27
votes
Accepted
Why do wages not equalize across space?
There are several explanations for this in the literature (the order does not necessarily reflect importance of each explanation).
Different Price Levels: Non-trivial portion of the wage differential ...
- 57.7k
21
votes
Why do wages not equalize across space?
I would add two more, and rather primitive, factors in @1muflon1 long list:
Labor input is not perfectly mobile with respect to the wage. We should never forget that the concept of a utility function ...
- 33.9k
14
votes
In microeconomics : is this the contradiction in the atomicity of firms ?
A price-taking firm takes prices as given, but that does not mean that the firm cannot influence prices; it just means that the firm ignores its own impact on prices.
Now the question is how sensible ...
- 13.5k
14
votes
The supply and demand of Virtual Products
The book Information Rules by Google Chief Economist Hal Varian (with Carl Shapiro) deals with many issues raised by the particular features of the digital economy. In general, he finds you don't need ...
- 16.3k
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 ...
- 718
12
votes
Accepted
Why would a company sabotage its product's ability to be used for a particular purpose?
This topic is explained by market segmentation with price discrimination in monopolies.
This is widely used in, for example, price discounts for senior/retired people.
By targetting different market ...
12
votes
Accepted
Is an "arms race" between wages and inflation inevitable?
How true is the original assertion?
The original assertion is poorly worded and not generally valid even if we ignore the wording. The assertion (at least a corrected version of it) can be true under ...
- 57.7k
11
votes
Why does quantity supplied increase with price in economics?
I believe that I have found the problem in this line:
I don't understand why price has to increase if quantity increases.
The concept is actually the other way around.
Think of it in the same way as ...
- 2,888
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 ...
- 17k
9
votes
Why can't the Land-Value Tax (in some cases) be passed on to tenants?
Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay,
That doesn't make any sense. If more people want to live in a particular place, rents ...
- 1,182
9
votes
Effects of Eliminating Government Controls on Supply (organ donation)
The Iranian organ market
It might be worth looking into the organ market in Iran. Unlike in other countries, it is legal to sell your kidney to patients who need a new one. The process is regulated ...
- 672
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 ...
- 57.7k
8
votes
Accepted
Why does quantity supplied increase with price in economics?
Not all (current and potential) production has the same costs.
Some production has very low additional cost: maybe all the factories and workforce are already in place, they're close to where the ...
- 8,168
8
votes
Accepted
Are there any instances where short run demand/supply is more elastic than long run cases?
It is possible. We normally think demand and supply are more elastic in the long run because consumers/firms have more options in the long run. For example if gas becomes more expensive consumers ...
- 453
8
votes
The supply and demand of Virtual Products
Your broad idea is right. Since the marginal cost of reproducing digital goods is essentially zero, there is a sense in which is appears optimal to give the good to any consumer who has a positive ...
- 17k
8
votes
Why land supply is inelastic?
The claim is that this curve should be a vertical line because no more land can be produced. However, as far as I understand, the supply curve represents the quantity of a product that sellers are ...
- 57.7k
8
votes
Why would a company sabotage its product's ability to be used for a particular purpose?
Disclaimer: I am not at all familiar with the hardware industry; in fact I believe this answer makes most of my points but is better tailored for the specific industry in question.
Market share
A ...
- 29.6k
7
votes
Accepted
In microeconomics : is this the contradiction in the atomicity of firms ?
This does sound a lot like the “contradiction” that Keen tries to derive. The key to resolving it is to remember that firms are small relative to the market, so $$\frac{\mathrm dQ}{\mathrm dq_i} = 0.$$...
- 2,156
7
votes
Accepted
Linear Homothetic Utility
The only utility function that comes to mind is the Stone-Geary utility function. For 2 goods, $x$ and $y$, this takes the form:
$$
u(x,y) = (x - a)^\alpha (y- b)^{1- \alpha}.
$$
This is a Cobb-...
- 12.5k
7
votes
Interpretation of $\frac{\partial }{\partial p_1}Q_1(p_1, p_2)/\frac{\partial}{\partial p_2} Q_1(p_1, p_2)$
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:
$$dQ_1 = \frac{\partial Q_1(p_1,p_2)}{\partial p_1}dp_1+\frac{\...
- 436
7
votes
Theories about how lack of supply can feed into lack of demand
Lack of supply of a network good - a good associated with a network effect - may result in lack of demand for that good. The greater the number of people who have or use such a good, the greater its ...
- 8,584
7
votes
Accepted
What is the best way to estimate a demand curve?
The approach you use has various problems.
Yes you need more than 16 observations. In most parametric models (including OLS) as a rule of thumb you need at least 25-30 observations per independent ...
- 57.7k
7
votes
Why doesn't Nintendo fire up the old factories and re-produce *exact* copies of many of their most popular games, controllers and consoles?
I am unsure whether this qualifies as economics, but it would be something that might be discussed in business school. Furthermore, the answer is almost entirely engineering. As such, I will do this ...
- 9,907
7
votes
Accepted
Deriving aggregate output from labor demand and supply
Use $W_{i}=V \cdot \frac{P_{i}^{\beta}}{Z_{i}}=VQ_i$, then $$L_{i}=\left(\frac{\alpha^{1-\eta} \eta^{\eta}}{R^{\eta}} \cdot \frac{A_{i}}{(V_{i} Q_{i})^{1-\eta}}\right)^{\frac{1}{1-\alpha-\eta}} \cdot ...
- 2,506
7
votes
Accepted
Demand for minimum of $4$ different goods
You can solve it sequentially by noting the nesting structure of the utility function $U$.
So first note that the utility function combines utility functions you are probably already familiar with $U=\...
- 3,798
6
votes
Why is AC = MC in the monopoly?
Suppose the marginal cost is constant and equal to $c$, that fixed costs are $K>0$, and that revenue is $R(q)$. You seem to understand that MR=MC must be true for profits to be maximized: $R'(q)=c$....
- 17k
6
votes
Accepted
Is there an economically sound way to decide between buying media or a streaming subscription?
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 ...
- 8,611
6
votes
How can power/electricity prices be negative?
As many have stated before me, you can't just throw electricity away if you produce too much—it has to go somewhere. If you put more power into the system than the resistant (or consumption) in the ...
- 115
6
votes
Accepted
How to determine which triangle is DWL?
Here's a quick and dirty trick:
DWL is the triangle that points (horizontally) towards the efficient quantity.
If equilibrium quantity is lower than the efficient quantity, DWL should point ...
- 15.8k
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