For questions regarding the mathematical analysis of economic models and problems. This includes questions about the formulation or solution of models from microeconomics or macroeconomics.

learn more… | top users | synonyms

0
votes
0answers
51 views

Find the set of undominated strategies in Cournot duopoly

Consider a version of the Cournot doupoly game, where firms 1 and 2 simultaneously and independently select quantities to produce in a market. The quantity selected by firm $i$ is denoted $q_i$ and ...
0
votes
1answer
38 views

Expectations and Moments Variance

Suppose $E[X|Y=y] = a + by$ and $V[X|Y=y] = C + dy^2$ where $Y$ is normally distributed with mean μ and variance $σ^2$ . What is $V[X]$?
1
vote
1answer
31 views

Economics Application of Rates of Change

The Consumer Price Index ($CPI$) is a statistical estimate of the change of prices of goods and services bought for consumption. It is generally calculated by collecting the prices of a sample of ...
1
vote
0answers
19 views

Quasiconvexity analog for function with an integer domain.

Suppose I have a function that is not quasiconvex, as in the graph below, but would be quasiconvex if we cared only about integer points. That is, $f:X \subset \mathbb{Z}\rightarrow \mathbb{R}$ ...
1
vote
1answer
54 views

In the most basic of terms, what does contraction mapping mean?

So, I have been solving a number of exercises involving contraction mapping. However, I am struggling to understand what exactly contraction mapping is at its most basic. All I really understand from ...
0
votes
1answer
45 views

Microeconomics Tax incident: unit tax imposed to consumer or producer

I come up with a thought that if there is any difference in term of imposing a tax to consumer or producer, I searched for the answer and there is some logic messing up.. let Pd be the consumer price;...
3
votes
1answer
42 views

Under what conditions does a convex objective function have a concave value function?

Suppose that $u:\mathbb{R}^{n} \to \mathbb{R}$ is a continuous, (weakly) convex function. Now define the value function $\phi$ to be: $$\phi(p,w) = \max_{x>>0} u(x)$$$$ \text{ subject to: } p \...
0
votes
0answers
39 views

Mathematical Economics/Environment

Bear with me - this is a long question. But I did do few of the parts, but I'm posting it because it seems necessary that you know what I previously did. Sorry for the "length"! Answers are given in ...
0
votes
0answers
72 views

Value at Risk, Confidence level, infimum

Given an uncertain future loss L which is modelled as a random variable with cdf Fl , the value at risk (VaR) at confidence level α is defined as $VaR_\alpha (L) = \inf\{l \in R | Fl(l) \ge \alpha\}$. ...
1
vote
1answer
49 views

Why is the derivative used to represent marginal cost instead of the difference?

Marginal cost is informally defined as "the change in the total cost that arises when the quantity produced is incremented by one unit." And given a total cost function $C(q)$ that's differentiable, ...
0
votes
2answers
41 views

Utility Maximization with a transformed min function

I was just wondering what the steps one would take to maximize the utility of a function of the form U(X,Y) = min{X,Y} + X subject to income I = $p_x$X + $p_y$Y where $p_x$ is the price of X and $p_y$ ...
0
votes
0answers
21 views

Deriving the formula for Fixed-rate mortgage using z-transform

So, using z-transform, one could easily derive the formula for fixed-rate mortgages. However, when I tries this, I noticed one thing I'm very uncertain of. The relationship for fixed-rate morgages ...
0
votes
0answers
22 views

Marginal Cost confusion, possible error in book.

I'm going through Morris Kline's "Calculus, an Intuitive and Physical Approach". One of the problems is about Maginal Cost, and it states (page 126, ex 11): If the cost C of producing $x$ units of an ...
0
votes
0answers
43 views

Proof on Preference Relations

trying to work out this problem, please find the theorem, the problem and my attempt below. Theorem: Let Z be a finite set and let X be the set of all non-empty subsets of Z. Let $ \ge $ be a ...
2
votes
0answers
40 views

Flat Tax vs. National Income Tax Average

If the national income tax average under a progressive system is 30%, will tax revenue change if the progressive system is changed to a flat tax also at 30%? In other words, if the mean average ...
0
votes
1answer
79 views

Solving a system of equations with Cobb-Douglas production function

I have two equations and two unknowns in the following: $$p \alpha x_{1}^{\alpha-1}x_{2}^{\beta}-w_{1}=0,$$ $$p \beta x_{1}^{\alpha}x_{2}^{\beta-1}-w_{2}=0.$$ After solving I am supposed to get my ...
0
votes
3answers
131 views

What does this notation mean as a production function: f = min [t, 1.05k]

I'm attempting to work on an econ problem, but I'm having trouble understanding the notation that the production functions are given in to even begin to attempt to solve the problem. This is what is ...
-3
votes
1answer
78 views

Marginal products of labor and capital (cobb-douglas) [closed]

Given the cobb-douglas function $Y=1.01*K^{0.25}L^{0.75}$ $Y=$output; $K=$capital; $L=$labor How can I determine the marginal products of labor and capital? Not used in this equation. Thanks for the ...
0
votes
0answers
41 views

Local Non-Satiation Proof for utility functions

I have been having trouble with how to go forward with a proof for about three days now. I know the basic structure of the proof, but can't seem to construct it. Basically, I am trying to do a proof ...
1
vote
1answer
75 views

Net profit involving Capital Recovery Factor

I'm having trouble understanding the last bit of the solution to this problem: An industrial juicer costs \$45 000. It will be used for five years and then sold to a remarketer for $25 000. If ...
0
votes
1answer
31 views

Deriving Preference Relations

I have actors A and B who have a preference relations $\succeq_A$ and $\succeq_B$ on a set $X$. Both are complete and transitive. Actor A will report Actor B's preferences as his own if Actor B ...
1
vote
1answer
23 views
0
votes
0answers
43 views

Dynamic Optimization on Matlab

I have been working on the following (quite long but easy) dynamic optimization problem: $$ \max_{C_1} 2\ \sqrt[]{C_1} + \beta V_T(W_2)$$ Where $W_2$ is defined as follows: $W_2=W-C_1=C_2+C_3+...+C_T$...
0
votes
1answer
48 views

2nd derivative using rule of implicit differentiation (Economics)

This may well be a stupid question. I'm currently trying to find out whether a production function I have has convex isoquants. I'm aware I can find the derivative $\frac{dL}{dK}$ by using the rule ...
0
votes
1answer
39 views

Problem with partial derivative in economic payoff function

I was looking through a paper that described a simple payoff function where there is an outcome variable $Y$ that depends on some causation variable $X$ and the payoff is given as some function of the ...
0
votes
0answers
94 views

How to Prove that a Choice Structure Satisfies WARP?

Would you please help me to prove the following statement? If R is a rational binary relation on a finite set X, then $(B, c_R)$ is a choice structure satisfying WARP. Note: Only for clarification, ...
0
votes
0answers
60 views

If a choice structure satisfies WARP, then the underlying binary relation is rational.

Would you please help me to prove the following proposition: If $(P(X), c_R)$ is a choice structure that satisfies WARP, then $R_c$ is a rational binary relation? Clarification: For any nonempty ...
-1
votes
1answer
73 views

$(P(X), C_R)$ may be a choice structure even if $R$ is not a rational relation.

Would you please give me an example to show that $(P(X), C_R)$ may be a choice structure even if $R$ is not rational (i.e., complete and transitive). Clarification: For any nonempty set $X$, let $P(...
1
vote
1answer
38 views

Equivalency of two definitions of WARP (Weak Axiom of Revealed Preference)

I have two definitions for WARP as follows. How can I prove they are equivalent? First Definition: $C(A) \cap B \neq \emptyset \Rightarrow C(B) \cap A \subset C(A)$ Second definition from "...
2
votes
0answers
44 views

How to differentiate without knowing the function, only the inputs?

Given a function $f(p, \alpha w)$, where $\alpha > 0$, how do I differentiate with respect to $\alpha$ ? The answer is supposedly $ w D_w f(p,w) $ (it says that it differentiated with respect to $\...
0
votes
0answers
25 views

Implicit function theorem in microeconomics

Consider the problem $f(x_1,x_2)-w_1x_1-w_2x_2 -> max$, where the function $f(x_1,x_2)$ is twice continuously differentiable and whose Hessian matrix is negative definite. Show that $x_1$ can be ...
0
votes
0answers
24 views

Calculating the curve traced out by minimum points of short run average cost curve

$C(K,Q) = \alpha K + \beta\dfrac{Q^2}{\sqrt K}$ The Long run average cost curve is calculated by differentiating with respect to K which gives you K at the minimum long run cost, which you plug into ...
0
votes
0answers
24 views

Q Production function w/constant returns (Economics)

I recognise the production function experiences constant returns to scale, however I do not understand how to answer the question without knowing the value of $Y$. I have fiddled around attempting to ...
1
vote
1answer
49 views

Show that a recurrence relation is bounded

I'm studying the following recursive equation as part of my Economics class: $$k_{t+1}={k_t}^\alpha - c_t$$ For $t=0,1,2,...$, $0\leq \alpha<1$, and $k_0>0$ and $c_t\geq 0$ for every $t$. I ...
0
votes
1answer
24 views

Given the utility function $U(F,G)=FG^2$, find the MRS

Intermediate Micro. My understanding for MRS conversions is that you find the derivative of each variable and place the former over the latter. That then in this case yields $\frac{1}{2G}$? Is this ...
1
vote
1answer
40 views

Corollary of the Frisch-Waugh Theorem

Consider the following linear regression model: $$y=X \beta + \epsilon = X_1 \beta_1 + X_2 \beta_2 + \epsilon $$ Where we have $n$ obsevations and $k$ variables, and hence $X$ is a matrix $nk$, and $...
0
votes
1answer
103 views

Is it true that everything that isn't linear is concave or convex (or both)?

In the conclusion of anti-fragile by Taleb, he claims that "everything non-linear is concave or convex, or both". Is the statement general, and if not, what are its limitations? I suppose he is ...
0
votes
0answers
27 views

General equilibrium econmy

I need to solve this problem. Any help there? Consider the economy consists of two and three goods. Consumers A and B have a preference on the consumption of goods 1 and 2 can be represented by the ...
1
vote
1answer
36 views

Is $f(g)$ homogeneous? If so, of what degree?

Given $f$ and $g$ are homogeneous functions of degree $k$. I have to show if $f(g)$ is homogeneous or not, and if so, of what degree. Definition (Homogeneous function). Let $f:\mathbb{R}^{n}\...
1
vote
2answers
56 views

Preference Maximizing Choice Rule

Definition: A Choice Rule is a function $ C: \mathcal{P}(X) \to \mathcal{P}(X) $ such that $ C(B) \subset B, $ $\forall B \in \mathcal{P} (X) $ and $ C(B) \neq \emptyset $ if $ B \neq \emptyset $ The ...
0
votes
1answer
47 views

Using risk aversion

I'm trying to figure out what the non-stochastic equivalent payment is for someone who is risk-averse. Suppose we have a lottery that pays out\$100 with probability one half and \$0 with probability ...
1
vote
1answer
17 views

Maximum maintains order under limit in $\mathbb{R}^2_{+}$

I'm trying to show that if: $$ (a_{1n},a_{2n})\to (a_1,a_2)\\ (b_{1n},b_{2n})\to (b_1,b_2)\\ max\{a_{1n},a_{2n}\}\geq max\{b_{1n},b_{2n}\},\forall n\in\mathbb{N} $$ Then: $$ max\{a_1,a_2\}\geq max\{...
0
votes
2answers
41 views

If $x_i$ is from a random sample is $Var(\bar x \mid x_i)=0$?

If $x_i$ is from a random sample, is the conditional variance of the mean (or the sum of squares, really any statistic based on $x$) just treated as a constant? I saw this in a OLS variance of a ...
1
vote
0answers
34 views

On properties of linear orders

I have a simple question. Let $A=\{a,b,c,...\}$ be a set and $>$ a total strict order on $2^A$. Total strict order means that for any two subsets of $A$, say $S$ and $S'$, either $S>S'$ or $S'&...
1
vote
0answers
26 views

Annunity calculation with and without tax

I'm doing a annunity calculation: payment = 331880*( 0,002458333 /( 1-(1+0,002458333)^-84) ) This will return me the payment per. month of the loan (4.337,...
0
votes
1answer
34 views

Partial Derivative Problem ( Two Variable Function).

Two commodities $Q_1$ and $Q_2$ are said to be substitute commodities if an increase in the demand of either results in a decrease in the demand of the other. Let $D_1(p_1,p_2)$ and $D_2(p_1,p_2)$ be ...
4
votes
2answers
129 views

Is the standard definition of vector wrong?

The definition of a vector is usually something like "a quantity that has both a magnitude and a direction". But, in the context of, say, economics rather than physics, does this definition make ...
0
votes
1answer
66 views

Rate of Return / Standard Deviation / Correlation Coefficient - Mathematical Finance

Consider these two stocks: AT&T Inc. (T) and Verizon Communications Inc. (VZ). Use the daily adjusted closing prices from March 1, 2015 to August 12, 2015 as historical data. Estimate the mean ...
3
votes
1answer
84 views

Is there a concept already for $\frac{f'(x)}{f(x)/x}$?

Given a differentiable real function $y=f(x)$, is there a math concept/terminology already defined for $$\frac{f'(x)}{f(x)/x}?$$ This quantity is inspired from price elasticity of demand. Thanks.
4
votes
2answers
92 views

System of Differential Equations- Asymmetric First-Price Auction

I am working on a problem in my Auction Theory textbook regarding a two-player asymmetric first price auction. Assume the bidders are risk neutral. The problem statement is as follows: ...