Series
Microeconomics I Studied
49 posts
- #1
Introduction to Microeconomics
I lost faith in traditional economics after reading The Origin of Wealth, but I'm studying micro anyway — someone has to know the old framework before they can fix it.
· 1 min read - #2
Endogenous and Exogenous Variables
A fun, breezy breakdown of endogenous vs. exogenous variables — think exam scores, study hours, and yes, a girlfriend shifting your efficiency curve upward by h.
· 4 min read - #3
Demand Curve and Supply Curve
We build the demand curve from scratch using red ginseng as our example market, then unpack the law of demand plus direct vs. derived demand — heh heh.
· 4 min read - #4
Equilibrium
Turns out economic equilibrium is a dynamic concept — and it clicks way easier once you see it's basically the same thing as thermal equilibrium in physics.
· 3 min read - #5
Types of Elasticity
Elasticity isn't the same as a derivative — here's why, plus a breakdown of price elasticity of demand and why the value can differ at every single point on the curve.
· 7 min read - #6
Long-Run and Short-Run Elasticity
Elasticity isn't a fixed number — oil demand can be inelastic short-term but flip elastic long-run, and durable goods like airplanes can do the exact opposite.
· 3 min read - #7
Estimating Demand and Supply Curves
Using elasticity plus a few starred averages pulled from real data, we cook up an approximate linear demand (or supply) curve without having to derive it from scratch.
· 4 min read - #8
Preferences
A casual intro to consumer choice theory — breaking down what a 'basket' is, why we pretend only two goods exist, and the 'more is better' axiom.
· 3 min read - #9
Indifference Curves and Utility Functions
We get into indifference curves and utility functions — why some baskets make you equally happy, and why piling on more stuff gives you less of a kick each time.
· 9 min read - #10
Marginal Rate of Substitution
MRS is basically something we already know deep down — here's why ∆y is always negative on the indifference curve, plus a Coke vs. Pepsi reality check on diminishing MRS.
· 4 min read - #11
Special Utility Functions
We dive into the 'special cases' where diminishing marginal utility just doesn't apply — perfect substitutes and perfect complements, with all their quirks!
· 5 min read - #12
Utility Maximization
Mr. Nodap's got 10,000 won and a choice between booze and smokes — here's how utility curves and the budget line team up to nail the one combo that maxes him out.
· 6 min read - #13
Utility Maximization with Special Utility Functions
We knock out utility maximization for two funky non-Cobb-Douglas functions — one with a surprising shape and one for perfect substitutes — and spoiler: both consumers go all-in on x!
· 3 min read - #14
Utility Maximization with Coupons and Subsidies
Walking through how government housing subsidies mess with your budget line — turns out it's not as scary as it sounds, just a little funky shaped.
· 4 min read - #15
Utility Maximization Under a Membership Scheme
A fun walkthrough of how a membership fee shifts your budget line — and why some people are actually better off never joining in the first place.
· 3 min read - #16
Utility Maximization with Savings and Loans
We tackle the last weird budget line — loans let you borrow against next year's income, savings stack up interest, and the slope ties it all together.
· 3 min read - #17
Price Consumption Curve and Demand Curve
We trace what happens when the price of good x keeps dropping, connect all the utility-maximizing bundles into a price consumption curve, and boom — that's literally where the demand curve comes from.
· 5 min read - #18
Engel Curve and Income Consumption Curve
We derive the income consumption curve and Engel curve step by step, then use their shapes to figure out whether a good is normal or inferior — think ramen vs. electricity.
· 3 min read - #19
Substitution Effect, Income Effect, Inferior Goods, and Giffen Goods
We break down what actually happens when a price drops — splitting that bump in consumption into the substitution effect and the income effect, then going deep on inferior and Giffen goods.
· 7 min read - #20
Backward-Bending Labor Supply Curve
As wages rise you work more — until you don't: here's why the labor supply curve bends backward once you'd rather enjoy your money than grind 24/7.
· 5 min read - #21
Compensating Variation and Equivalent Variation
We dig into compensating and equivalent variation — two ways to pin down how much a price change is worth by pretending it was an income change instead.
· 4 min read - #22
Market Demand and Network Externalities
We stack up individual demand curves to get the market demand curve, watch it flatten under perfect competition, then kick off network externalities with real-life examples.
· 4 min read - #23
Average and Marginal Product of Labor
We flip to the supplier side and dig into how output Q responds to labor L (with K fixed) — including why piling on more workers eventually starts hurting.
· 7 min read - #24
Isoquants
We bring K back into the picture, plot the whole Q = f(L, K) surface in 3D, then slice it to see what isoquants actually are — infinite (L, K) combos that spit out the same output.
· 4 min read - #25
Isoquants: The Uneconomic Region of Production
That weird backward-bending chunk of the isoquant has a name — it's the uneconomic region, and here's exactly why it exists and why no sane firm would ever go there.
· 3 min read - #26
Marginal Rate of Technical Substitution
We crack what the isoquant slope actually means — it's the MRTS — and work out mathematically why that labor-for-capital swap rate keeps shrinking as you slide along the curve.
· 5 min read - #27
Types of Isoquants: Linear, L-Shaped, and Cobb-Douglas
A chill rundown of linear, L-shaped, and Cobb-Douglas isoquants — and why their shapes directly tell you everything about σ, the elasticity of substitution.
· 4 min read - #28
Returns to Scale
We dig into the 3D production function to figure out why doubling a factory isn't the same as building a new one — and how increasing, decreasing, and constant returns to scale all shake out.
· 3 min read - #29
Technological Progress
We sort technological progress on the K-L plane into three buckets — labor-saving, capital-saving, and neutral — by comparing MRTS slopes on isoquants over time.
· 3 min read - #30
Opportunity Cost vs. Sunk Cost
Breaking down opportunity cost and sunk cost with a hilariously relatable uni-picking analogy — because sometimes your 'best' choice becomes a sunk cost real fast.
· 3 min read - #31
Cost and Cost Minimization
We dig into the cost minimization problem — and spoiler, it's basically the same deal as utility maximization, just swap the budget line for an isocost line.
· 6 min read - #32
Expansion Path
Unlike demand theory, firms chasing a fixed output level have zero income effect — just pure substitution — and tracing those cost-minimizing combos as output rises draws out the expansion path.
· 4 min read - #33
Labor Demand Curve
We derive the labor demand curve by tracing how a firm's optimal labor choice shifts each time the wage ticks up — first with graphs, then with a Cobb-Douglas proof.
· 3 min read - #34
Short-Run Analysis
In the short run capital is locked in at K̄, so cost minimization means working around that constraint — which shifts your expansion path and nudges total cost up.
· 3 min read - #35
Cost Minimization with Three Variables
Adding a third input M sounds fancy, but once you pin K as a fixed cost the whole 3D problem just collapses back into the same old 2D setup — same playbook, every time.
· 3 min read - #36
Total Cost, Marginal Cost, and Average Cost
Wait, cost curves again?! Nope — this time we're plotting minimum TC against Q, then eyeballing derivatives to build the marginal and average cost curves from scratch.
· 6 min read - #37
Untitled
We pin down TC, MC, and AC for a Cobb-Douglas production function and find they all collapse to the same constant α — constant returns to scale is why.
· 2 min read - #38
Economies of Scale and Diseconomies of Scale
We poke at what happens to TC when factor prices move, work through output elasticity of cost, and land on exactly what economies vs. diseconomies of scale actually mean.
· 6 min read - #39
Short-Run Total, Average, and Marginal Cost Curves (STC, SAC, SMC)
We flip from long-run to short-run, lock K down as a constant, and split total cost into TFC + TVC to build the STC curve — which, unlike long-run TC, doesn't pass through (0,0)!
· 7 min read - #40
Graphing AC, MC, SAC, and SMC Together
We finally plot AC, MC, SAC, and SMC all on one graph and trace exactly how they intersect and relate as capital K gets pinned at different levels — it all snaps into place!
· 3 min read - #41
Average Variable Cost and Average Fixed Cost (AVC, AFC)
Breaking STC into FC + VC, then dividing by Q, shows SAC decomposes neatly into AFC + AVC — and why SMC passes through the minimum of AVC too.
· 2 min read - #42
Perfectly Competitive Markets
A casual breakdown of perfectly competitive markets — why we bother studying a model that doesn't exist, plus a walkthrough of its four core assumptions.
· 6 min read - #43
Short-Run Supply Curve
We derive the short-run supply curve in a perfectly competitive market — turns out it's just the SMC curve above AVC, and here's exactly why that matters.
· 5 min read - #44
Short-Run Supply Curve (Part 2)
We split fixed costs into sunk vs. non-sunk and trace out exactly when a firm decides to keep producing — or bail — in the short run.
· 3 min read - #45
Chapter 2 & 3 Practice Problems
A collection of practice problems covering the material from Chapters 2 and 3, all laid out for you to work through.
· 1 min read - #46
Chapter 4 Practice Problems
Work through the Chapter 4 practice problems to test your understanding and sharpen your skills.
· 1 min read - #47
Chapter 5 Practice Problems
Grinding through Chapter 5 consumer theory problems — price-consumption curves, Giffen goods, and utility optimization — one painful step at a time.
· 9 min read - #48
Chapter 6 Practice Problems
Working through Chapter 6 problems on production functions — filling tables, sketching graphs, and hunting down where average product, marginal product, and total product each hit their max.
· 6 min read - #49
Chapter 7 Practice Problems
Working through Chapter 7 cost-minimization problems with gradients and isoquants — turns out it's the exact same math as the utility-function stuff, just with different names.
· 6 min read