This Class
! Perfect competition
! Effect of taxes and subsidies
! Monopoly
Example 1
Suppose the firms cost function is C(Q)
=100+Q2. Determine the firms profit
maximizing production choice Q.
! Prof
H 4: E500
Fall 2012
The homework is due on Wednesday, October 3 Each questions is worth 0.8 points. No
partial credits.
For the graphic arguments, use the graphing paper that is attached. For the comp
H 3: E500
Fall, 2012
The homework is due on Wednesday, September 26. Each questions is worth 0.8 points.
No partial credits.
For the graphic arguments, use the graphing paper that is attached.
Questio
H 5: E 500
Fall, 2012
The homework is due on Wednesday, October 17 at 4pm.
0.5 points
x0.6
1
x0.3 .
2
Prices are p1 = 3,
+
Question 1 A utility function is given by u(x1 , x2 ) =
p2 = 3. Determine the
H 6: E500
Fall, 2012
The homework is due on Wednesday, October 24 at 4pm. No partial credits.
Question 1 A persons utility function is given by u(L, c) = L2 c, where L is leisure and c
is consumption.
H 9: E500
Fall, 2012
As usual the homework is due on Wednesday, November 14 at 4pm. Each questions is
worth 0.8 points each.
Question 1 The quality of car can be described by a variable q [0, 1]. Supp
Homework 1, Econ 500
Each questions is worth 0.8 points. The homework is due on Wednesday, September 12
Question 1: Consider a competitive market for which the quantities demanded and supplied per
yea
H 3: E500
Fall, 2012
The homework is due on Wednesday, September 26. Each questions is worth 0.8 points.
No partial credits.
For the graphic arguments, use the graphing paper that is attached.
Questio
H 7: E500
Fall, 2012
The homework is due on Wednesday, October 31 at 4pm. No partial credits.
0.8point
Question 1 A persons Bernoulli utility function is given by u(x) = ln(x). The person
has wealth w
ECON500 General Microeconomic Theory
Fall 2015 - M2
b) Qd' = 31 - (p+6)
Qd' = 25 - p
c) Qs' = 4 + 2(p-6)
Qs' = -8 + 2p
Homework 1 - Question 4
d) In both cases total tax revenue is q * 6.
As q*' = q*'
H 2: E500
Fall, 2012
The homework is due on Wednesday, September 19. Each questions is worth 0.8points.
No partial credits.
For the computer exercises, you need to attach a printout of each Excel work
H 9: E500
Fall, 2011
The homework is due on Wednesday, Deember 5. Each question is worth 0.8 points.
Question 1 There are 400 rms in an industry. Half of the rms use newer technology
resulting in a co
Last Class: Optimal Pricing
This Class
! Pricing strategies of firms with market power
! Second degree price discrimination
! Bundling
Suppose we want to offer 4 units
to low demand costumers (we will
This Class
Objective
! Measuring inflation
! How can we measure the cost to the
consumer of inflation?
! How can we determine the deadweight loss
of taxes?
! Introduce Expenditure Minimization Problem
This Class
Choice Under Uncertainty
! Choice under uncertainty
! Examples: Risky assets, insurance
! Risk aversion
Daniel Bernoulli:
Jan. 29, 1700-March 17, 1782
The St. Petersburg Game
Toss a coin: T
Topics of this Class
Explanation of the Algorithm
! Explanation of Algorithm for Optimization
Linear
Non-Linear (more will be discussed later)
! Preferences
Feasible set
Indifference Curves
Willin
The Budget Set
This Class
Consumption Set:
! Effects on the Budget Set when
Consumption Bundle:
2 goods
! Prices change
! Wealth Changes
n goods
! Optimal Choice
Equation of
the budget
line
p1 x1 + p2
The Capital Asset Pricing Model
This Class
Ri = R f + !i ( Rm ! R f )
! Estimating the CAPM
! Asymmetric Information
Return
Ri
! Used car market
! Quality in production
! Insurance
Theoretically, any
This Class
! Welfare Effects of Price Changes:
! Equivalent Variation
! Compensating Variation
! Income and substitution effect
! Slutzky Equation
Shepards Lemma
!e( p,u)
= h j ( p,u)
!p j
Let x*=h(p*
This Class
! Income and Substitution Effect
! Substitution Matrix
! Slutzky Equation
Example
Let u(x1,x2)=x1x2. We have shown that
x1 ( p1 , p2 , I ) =
I
I
, x2 ( p1 , p2 , I ) =
2 p1
2 p2
Suppose I=1
This Class
!
!
!
!
Cost minimization
Marginal costs and average costs
Short run costs
Perfect competition
Cost Minimization
Cost Minimization
Production function: f(K,L).
Suppose the cost of a unit of
This Class: Asymmetric
Information
! Adverse Selection
! Moral Hazard
! Agency Problems
Solving Adverse Selection
Problems
! Used car market:
! Reputation of a used car dealer
! Warranties
! Firms cho
This Class: Asymmetric
Information
! Adverse Selection
! Moral Hazard
! Agency Problems
Solving Adverse Selection
Problems
! Used car market:
! Reputation of a used car dealer
! Warranties
! Firms cho
This Class
! Risk aversion
! The capital asset pricing model (CAPM)
Concave Functions
Bernoulli
utility
wealth
x
x
u(x) (I.e., the blue curve) is concave if the red
line is always below the blue curve