Slutsky equation Equation in economics In microeconomics, the Slutsky equation (or Slutsky identity), named after Eugen Slutsky, relates changes in Marshallian (uncompensated) demand to changes in Hicksian (compensated) demand, which is known as such since it compensates to maintain a fixed level of utility. There are two parts of the Slutsky equation, namely the substitution effect, and income effect. a substitution effect: when the price of good changes, as it becomes relatively cheaper, if hypothetically consumer's consumption remains same, income would be freed up which could be spent on a combination of each or more of the goods.an income effect: the purchasing power of a consumer increases as a result of a price decrease, so the consumer can now afford better products or more of the same products, depending on whether the product itself is a normal good or an inferior good. The Slutsky equation decomposes the change in demand for good i in response to a change in the price of good j: where . When .
Mr Keynes and the moderns It’s a great honour to be asked to give this talk, especially because I’m arguably not qualified to do so.[1] I am, after all, not a Keynes scholar, nor any kind of serious intellectual historian. Nor have I spent most of my career doing macroeconomics. Until the late 1990s my contributions to that field were limited to international issues; although I kept up with macro research, I avoided getting into the frontline theoretical and empirical disputes. By contrast I probably do have a better sense than most technically competent economists of the arguments that actually drive political discourse and policy. What I want to do in this lecture is talk first, briefly, about how to read Keynes – or rather about how I like to read him. What did Keynes really intend to be the key message of the General Theory? I’d divide Keynes readers into two types: Chapter 12ers and Book 1ers. So who’s right about how to read the General Theory? But of course, it wasn’t just about that. Figure 1. Figure 2.
First-order approach Historically,[1] the first-order approach was the main tool used to solve the first formal moral hazard models, such as those of Richard Zeckhauser, [3] Michael Spence,[4] and Joseph Stiglitz.[5] Not long after these models were published, James Mirrlees was the first to point out that the approach was not generally valid, and sometimes imposed even stronger necessary conditions than those of the original problem.[2] Following this realization, he[6] and other economists such as Bengt Holmström,[7] William P. Rogerson[2] and Ian Jewitt[8] gave both sufficient conditions for cases where the first-order approach gives a valid solution to the problem, and also different techniques that could be applied to solve general principal-agent models. Mathematical formulation [edit] In mathematical terms, the first-order approach relaxes the more general incentive compatibility constraint in the principal's problem. and proposes a contract to the agent by solving the following program: subject to and
How Online Companies Get You to Share More and Spend More | Magazine Zynga, Facebook, Apple, and many other online companies and services are refining techniques developed by game developers to keep you in their game. Photo: Christopher Griffith; brain created by Megan Caponetto/Apostrophe You’re not stupid, but you can be fooled. For millennia, the best salespeople have known how to exploit the vulnerabilities of the human mind. In the burgeoning field of behavioral economics, we’ve begun to give precise names to the mental weaknesses that make us all susceptible to a well-crafted pitch. Drawing on the insights of psychology, behavioral economists have explained why we buy more stuff at $0.99 than at $1.00 (the “left-digit effect”), why we commit to gym memberships we’ll never use (“optimism bias”), and why we don’t return things we buy as often as we should (“post-purchase rationalization”). Eliminating small frictions can radically alter one’s decisions. The more interesting mechanism is Amazon Prime, the option I have been using for years.
Threshold population From Wikipedia, the free encyclopedia Typically a low-order shop (such as a grocer or newsagent) may require only 800 or so customers, whereas a higher-order store such as Marks and Spencer or Waitrose may need a threshold of 70,000 to be profitable, and a university may need 350,000 to be viable.[2] Thresholds may also be linked to the spending power of customers; this is most obvious in periodic markets in poor countries, where wages are so low that people can buy the goods or services only once in a while.
Corner solution In the context of economics the corner solution is best characterised by when the highest indifference curve attainable is not tangential to the budget line, in this scenario the consumer puts their entire budget into purchasing as much of one of the goods as possible and none of any other.[2] When the slope of the indifference curve is greater than the slope of the budget line, the consumer is willing to give up more of good 1 for a unit of good 2 than is required by the market. Thus, it follows that if the slope of the indifference curve is strictly greater than the slope of the budget line: Then the result will be a corner solution intersecting the x-axis.[3] The converse is also true for a corner solution resulting from an intercept through the y-axis.[3] Another example is "zero-tolerance" policies, such as a parent who is unwilling to expose their children to any risk, no matter how small and no matter what the benefits of the activity might be.
Microeconomic reform Reforms aimed to increase the efficiency of an economy "Economic reform" usually refers to deregulation, or at times to reduction in the size of government, to remove distortions caused by regulations or the presence of government, rather than new or increased regulations or government programs to reduce distortions caused by market failure. As such, these reform policies are in the tradition of laissez faire, emphasizing the distortions caused by government, rather than in ordoliberalism, which emphasizes the need for state regulation to maximize efficiency. Microeconomic reform in Australia[edit] The policy agenda associated with microeconomic reform included:[citation needed] reductions in and eventual removal of tariff protectioncorporatisation and privatisation of government business enterprisesderegulation of industries including airlinesnew forms of regulation in industries subject to privatisation and corporatisationtax reform Microeconomic reform in India[edit] See also[edit]
Microeconomics Behavior of individuals and firms Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.[1][2][3] Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as a whole, which is studied in macroeconomics. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses[citation needed]. Microeconomics shows conditions under which free markets lead to desirable allocations. Assumptions and definitions[edit] Microeconomic study historically has been performed according to general equilibrium theory, developed by Léon Walras in Elements of Pure Economics (1874) and partial equilibrium theory, introduced by Alfred Marshall in Principles of Economics (1890).[6] History[edit]
National Competition Policy (Australia) The term National Competition Policy refers to a set of policies introduced in Australia in the 1990s with the aim of promoting microeconomic reform. Origins[edit] In 1992, an independent committee of inquiry, the National Competition Policy Review Committee, was established by Prime Minister Paul Keating to inquire into and advise on appropriate changes to legislation and other measures in relation to the scope of the Trade Practices Act 1974 and the application of the principles of competition policy. The Committee was chaired by Fred Hilmer and also comprised Geoffrey Tapperall and Mark Rayner. The report was commissioned against a backdrop of major microeconomic reforms led by the Keating Government, but slow progress on areas of the economy sheltered from competition as a result of constitutional limits on the application of the Federal Trade Practices Act or of other actions by Federal or state governments. Key provisions[edit] Benefits[edit] Controversy[edit] References[edit]
Robinson Crusoe economy Economy with one consumer, one producer, and two goods A Robinson Crusoe economy is a simple framework used to study some fundamental issues in economics.[1] It assumes an economy with one consumer, one producer and two goods. The title "Robinson Crusoe" is a reference to the 1719 novel of the same name authored by Daniel Defoe. As a thought experiment in economics, many international trade economists have found this simplified and idealized version of the story important due to its ability to simplify the complexities of the real world. The implicit assumption is that the study of a one agent economy will provide useful insights into the functioning of a real world economy with many economic agents. This article pertains to the study of consumer behaviour, producer behaviour and equilibrium as a part of microeconomics. Framework[edit] Robinson Crusoe is assumed to be shipwrecked on a deserted island. The basic assumptions are as follows:[4] Production function and indifference curves[edit]
by raviii Apr 13