Discuss Economics Blog » Microeconomics

Principles of Microeconomics Introduction

Ro Econ — Fri, 16 Jul 2010 12:05:43 +0000

DiscussEconomics is about to being a series on introductory principles of microeconomics. This is perfect for beginner economists, those looking to brush up on some basic terms, and first year University students. I'm assuming that you can differentiate between the studies of micro and macro economics so don't expect an explanation here! Introduction to Microeconomics [...]

Principles of Microeconomics Introduction is a post from: Discuss Economics Blog

Question on Product substitutability

Ro Econ — Mon, 05 Apr 2010 12:53:25 +0000

This question was originally penned in our Economics Forum, but we closed that so it's been reposed here. Background: We are located in an economic model where product A has a "high product substitutability" with product B, which means (I think) that products A and B are substitutes. In this same economic model, it has [...]

Question on Product substitutability is a post from: Discuss Economics Blog

Introductory Microeconomics Cost Formulas

Ro Econ — Sun, 03 Jan 2010 13:50:15 +0000

Here is a list of some of the basic microeconomics formulas pertaining to revenues and costs of a firm. Remember when you're using these formulas there are a variety of assumptions, namely, that the the firm is profit-maximizing (making as much money as they can.) Here are the basic formulas (work out your own algebra [...]

Introductory Microeconomics Cost Formulas is a post from: Discuss Economics Blog

Corner Solution – Perfect Substitutes: Demand Theory

Ro Econ — Mon, 24 Aug 2009 12:51:37 +0000

Continuing on with demand theory. Previously we discussed the Cobb Douglas function, now we move into perfect substitutes and the corner solution. Here are some factors to keep in mind. 1. Indifference curves must interest one of the axis (not necessity or essential good) 2. Budget constraint line is such that the slope is greater [...]

Corner Solution – Perfect Substitutes: Demand Theory is a post from: Discuss Economics Blog

Demand Theory Cont – Consumer Choice Problem

Ro Econ — Fri, 21 Aug 2009 12:45:53 +0000

The assumed goal for consumers is to reach the highest attainable indifference curve (or the highest utility) subject to their budget constraint. In an formulaic expression: Keep in mind these assumptions: non-satiation still holds true (that more is better); to reach maximum utility the individual spends all their money (a point on the budget line). [...]

Demand Theory Cont – Consumer Choice Problem is a post from: Discuss Economics Blog

Cobb Douglas Function – Demand Theory

Ro Econ — Wed, 19 Aug 2009 12:39:25 +0000

In the past installments from DiscussEconomics on demand theory, now we're venturing into the graphical and mathematical expressions of the Cobb Douglas demand function. Graphically expressed (utility maximizing) with the assumption well-behaved preferences. The interior solution characterized by two statements (the equals sign is really supposed to be three lines thus 'is equal to): 1. [...]

Cobb Douglas Function – Demand Theory is a post from: Discuss Economics Blog

Intro to Demand Theory – How to Manage Constraints

Ro Econ — Mon, 17 Aug 2009 12:16:03 +0000

Welcome to the next section following a discussion on utility and indifference curves (preferences of consumers). We are now into a discussion on demand theory; the previous posts are linked chronologically at the bottom of this post. Demand theory wants to explore the concept of: given constraints we must make choices among competing alternatives. Budget [...]

Intro to Demand Theory – How to Manage Constraints is a post from: Discuss Economics Blog

Utility Functions (Mathematical Representation of Preference)

Ro Econ — Thu, 13 Aug 2009 18:42:50 +0000

The following section from DiscussEconomics on microeconomics and preferences discusses the mathematical representation of preference using utility functions. Using utility function : U(x) = U (x1, x2, x3.......xn) (Where U is in fact mu.) This assigns a number (utility number to every consumption bundle in a person's preference ordering. 1. Now if someone is indifferent [...]

Utility Functions (Mathematical Representation of Preference) is a post from: Discuss Economics Blog

Shapes of Indifference Curves

Ro Econ — Mon, 10 Aug 2009 12:42:22 +0000

The shapes of indifference curves are smooth with unique tangent at any bundle we have well define marginal rate of substitution (MRS). MRS is undefined if m (slope) = kinked. 1. Strictly convex: Using the example of any 2 bundles on (A & B) the indifference curve and construct a line segment between them. With [...]

Shapes of Indifference Curves is a post from: Discuss Economics Blog

Trade-Offs and the Marginal Rate of Substitution

Ro Econ — Thu, 06 Aug 2009 12:19:37 +0000

Picking up from our last article (linked in the navigation below) on indifference curves and trade offs, here we introduce the marginal rate of substitution. Marginal Rate of Substitution (MRS): The rate of substitution of good 2 (two) associated with a marginal reduction in quantity of good 1 at bundle B. Take a look at [...]

Trade-Offs and the Marginal Rate of Substitution is a post from: Discuss Economics Blog