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Introduction to Microeconomics Cost Formulas
Let’s carry on from our introduction into microeconomics with a focus now on how firm’s costs vary with output in the short run (6months to 2 years). Let’s Make an Important Assumption: Prices of...
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Utility Functions (Mathematical Representation of Preference)
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,...
View ArticleThe Economics of Property Law – Coase Law
Here is an article that deals with Coase laws and the economics of property law. The lack of defined property rights leads to the abuse of certain activities as a result of a differing perceptions...
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Demand Theory – Consumer Choice Problem
Normal, Inferior, Neutral, Luxury, Necessary Goods There are three fundamental questions about a consumer’s consumption response: 1. How will demand change for a good i change in response to a increase...
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Cobb Douglas Function – Demand Theory
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...
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Intro to Demand Theory – How to Manage Constraints
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...
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Shapes of Indifference Curves
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...
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Trade Offs and Indifference Curves
Before we talk about choices, preferences, trade-offs and indifference curves, we should briefly look over some key terms. We assume people are rational decisions makers and that there is almost...
View ArticleMicroeconomics Cost Formulas
Here is a list of some of 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...
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Microeconomics Profit Maximization: Shutdown Point
Determining the Shutdown Point of a Firm This continues a previous post on profit maximization. The question we want to continue with is when should a firm shutdown? Then answer is when P (price) = AVC...
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Foundations of Economics: The Law of Scarcity
Foundations of Economics: The Law of Scarcity Most of the basic laws of economics focus on ways to efficiently build wealth and prosperity over time. But there are important financial concepts that...
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