https://gdpark.blog/tags/microeconomics/Recent content in Microeconomics on gdpark.blogHugoenSun, 08 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-01-introduction-to-microeconomics/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-01-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.https://gdpark.blog/posts/microeconomics-02-endogenous-and-exogenous-variables/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-02-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.https://gdpark.blog/posts/microeconomics-03-demand-curve-and-supply-curve/Sun, 03 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-03-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.https://gdpark.blog/posts/microeconomics-04-equilibrium/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-04-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.https://gdpark.blog/posts/microeconomics-05-types-of-elasticity/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-05-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.https://gdpark.blog/posts/microeconomics-06-long-run-and-short-run-elasticity/Wed, 13 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-06-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.https://gdpark.blog/posts/microeconomics-07-estimating-demand-and-supply-curves/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-07-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.https://gdpark.blog/posts/microeconomics-08-preferences/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-08-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.https://gdpark.blog/posts/microeconomics-09-indifference-curves-and-utility-functions/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-09-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.https://gdpark.blog/posts/microeconomics-10-marginal-rate-of-substitution/Thu, 14 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-11-special-utility-functions/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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!https://gdpark.blog/posts/microeconomics-12-utility-maximization/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-13-utility-maximization-with-special-utility-functions/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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!https://gdpark.blog/posts/microeconomics-14-utility-maximization-with-coupons-and-subsidies/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-15-utility-maximization-under-a-membership-scheme/Fri, 15 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-16-utility-maximization-with-savings-and-loans/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-17-price-consumption-curve-and-demand-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-18-engel-curve-and-income-consumption-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-19-substitution-effect-income-effect-inferior-goods-and-giffen/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-19-substitution-effect-income-effect-inferior-goods-and-giffen/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.https://gdpark.blog/posts/microeconomics-20-backward-bending-labor-supply-curve/Sat, 16 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-21-compensating-variation-and-equivalent-variation/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-22-market-demand-and-network-externalities/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-23-average-and-marginal-product-of-labor/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-24-isoquants/Sun, 17 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-25-isoquants-the-uneconomic-region-of-production/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-26-marginal-rate-of-technical-substitution/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-27-types-of-isoquants-linear-l-shaped-and-cobb-douglas/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-28-returns-to-scale/Mon, 18 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-29-technological-progress/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-31-cost-and-cost-minimization/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-32-expansion-path/Tue, 19 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-33-labor-demand-curve/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-34-short-run-analysis/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-35-cost-minimization-with-three-variables/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-36-total-cost-marginal-cost-and-average-cost/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-37-long-run-cost-minimization-with-cobb-douglas/Wed, 20 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-37-long-run-cost-minimization-with-cobb-douglas/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.https://gdpark.blog/posts/microeconomics-38-economies-of-scale-and-diseconomies-of-scale/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-39-short-run-total-average-and-marginal-cost-curves-stc-sac-smc/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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)!https://gdpark.blog/posts/microeconomics-40-graphing-ac-mc-sac-and-smc-together/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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!https://gdpark.blog/posts/microeconomics-41-average-variable-cost-and-average-fixed-cost-avc-afc/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-42-perfectly-competitive-markets/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-43-short-run-supply-curve/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-44-short-run-supply-curve-part-2/Thu, 21 Jul 2016 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-47-chapter-5-practice-problems/Fri, 06 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-48-chapter-6-practice-problems/Sat, 07 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.https://gdpark.blog/posts/microeconomics-49-chapter-7-practice-problems/Sun, 08 Jan 2017 00:00:00 +0000https://gdpark.blog/posts/microeconomics-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.