Intermediate Microeconomics with Microsoft Excel

✍ Scribed by Humberto Barreto

• Publisher: Cambridge University Press
• Year: 2009
• Tongue: English
• Leaves: 594
• Edition: 1
• Category: Library

✦ Synopsis

This book succeeds in making Intermediate Microeconomics simple and effective for the modern computer-heavy world. The book is filled with great quotes, easy-to-understand computer language and is superbly organized. What a great book!

✦ Table of Contents

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Preface......Page 13
Excel 2007......Page 15
Opening a Workbook......Page 16
Older Versions of Excel (from 1997 to 2003)......Page 17
Accessing and Using the Excel Files: ......Page 19
Troubleshooting......Page 20
Drawing in Word......Page 21
Older Versions of Excel (from 1997 to 2003)......Page 22
Active Learning......Page 23
The Tech Support Example......Page 25
A Complication......Page 26
Setting Up the Problem......Page 27
Finding the Initial Solution......Page 28
Exercises......Page 29
References......Page 30
1.7 Search Theory......Page 31
1.1 Budget Constraint......Page 33
The Budget Constraint in the Abstract......Page 35
A Numerical Example of the Budget Constraint......Page 36
Changes in the Budget Line – Pivots (or Rotations)
and Shifts......Page 37
Funky Budget Lines......Page 38
References......Page 39
1.2 Satisfaction......Page 41
Three Axioms......Page 43
Displaying Preferences via Indifference Curves......Page 44
The Indifference Map......Page 46
Marginal Rate of Substitution......Page 47
Example 2: Perfect Complements – L Shaped Indifference Curves......Page 48
Example 4: Neutral Goods......Page 49
Exercises......Page 50
References......Page 51
Cardinal and Ordinal Scales......Page 52
Monotonic Transformation......Page 53
Cobb-Douglas: A Ubiquitous Functional Form......Page 54
Expressing Other Preferences with Utility Functions......Page 55
Computing the MRS for a Utility Function......Page 56
Utility Functions Represent Preferences......Page 58
References......Page 59
1.3 Optimal Choice......Page 61
1.3.1 Initial Solution for the Consumer Choice Problem......Page 63
Analytical Approach......Page 64
A Concrete Example......Page 65
Numerical Approach......Page 67
Exercises......Page 70
Appendix: Derivatives and Optimization......Page 71
Optimizing with the Derivative......Page 73
Rules for Taking Derivatives......Page 74
Laws of Exponents......Page 75
Quasilinear Utility Practice Problem......Page 76
Practice with the MRS=p1/p2 Logic......Page 79
Numerical Approach to Quasilinear Practice Problem......Page 80
Perfect Complements Practice Problem......Page 83
Exercises......Page 84
References......Page 85
About the U.S. Food Stamp Program......Page 86
Food Stamp Participation and Costs......Page 87
Food Stamp Theory......Page 88
Introducing the Corner Solution......Page 90
Cash Instead of Food Stamps......Page 91
Food Stamp Practice......Page 93
The San Diego Experiment......Page 94
The (Illegal) Sale of Food Stamps......Page 95
One Last Question......Page 97
Summarizing the Food Stamp Example......Page 98
References......Page 99
The Quantity Tax on Cigarettes......Page 100
A Brief History of Cigarettes......Page 101
Comparing Quantity and Lump Sum Taxes......Page 103
Comparing the Tax Schemes......Page 107
The Lesson and a Question......Page 109
Exercises......Page 110
References......Page 111
1.4 Comparative Statics......Page 113
Introduction to Comparative Statics – Initial, Shock, New, Compare......Page 115
1. Analytical Versus Numerical Methods......Page 116
Elasticity Basics......Page 117
Numerical Comparative Statics Analysis of Changing Income......Page 120
Numerical Approach via the Comparative Statics Wizard......Page 121
Engel and Income Consumption (Offer) Curves......Page 123
Analytical Comparative Statics Analysis of Changing Income......Page 124
References......Page 127
Comparative Statics Analysis of Changing Income with Quasilinear Preferences......Page 128
Comparative Statics Analysis of Changing Income with Perfect Complements......Page 131
The Utility Function Determines the Shape of the Engel Curve......Page 132
References......Page 133
Numerical Comparative Statics Analysis of Changing Price......Page 134
Analytical Comparative Statics Analysis of Changing Price......Page 137
A Point Off the Demand Curve?......Page 139
References......Page 140
Comparative Statics Analysis of Changing Price with Quasilinear Preferences......Page 142
Comparative Statics Analysis of Changing Price with Perfect Complements......Page 145
Exercises......Page 146
References......Page 147
The Canonical Example: Robert Giffin and the Irish Potato Famine......Page 148
Two Common Mistakes in Giffen Good Analysis......Page 149
Giffen Goods in Theory......Page 151
Giffen Goods in Theory and Practice......Page 153
References......Page 154
Intuition......Page 155
Numerical Example of Income and Substitution Effects......Page 157
The Slutsky Equation......Page 160
Working with Demand Curves......Page 162
The Slutsky Equation and Giffen Goods......Page 163
Getting the Law of Demand Exactly Right......Page 166
References......Page 167
Income and Substitution Effects with Quasilinear Preferences......Page 168
Using the Slutsky Equation......Page 170
Quasilinear Preferences Yield Zero Income Effects......Page 171
References......Page 172
A Concrete Example of the Tax/Rebate Proposal......Page 173
Evaluating the Tax/Rebate Proposal......Page 175
The Income and Substitution Effects of a Price Increase......Page 176
Tax/Rebate Schemes Do Alter Consumption Patterns, but Lower Utility......Page 177
References......Page 178
1.5 Endowment Model......Page 179
The Budget Constraint in an Endowment Model......Page 181
The Initial Solution in an Endowment Model......Page 184
Comparative Statics with an Endowment Model......Page 187
The Endowment Model Extends the Standard Model......Page 188
References......Page 189
Two Questions......Page 190
The Budget Constraint......Page 191
Preferences......Page 194
Finding the Initial Solution......Page 195
Comparative Statics......Page 196
References......Page 198
1.5.3 An Economic Analysis of Charitable Giving......Page 200
The Budget Constraint......Page 201
Preferences......Page 202
Finding the Initial Solution......Page 203
Comparative Statics......Page 204
Exercises......Page 207
References......Page 208
An Endowment Model of Insurance......Page 209
The Budget Constraint......Page 210
Preferences......Page 212
Initial Solution......Page 215
Comparative Statics......Page 216
Exercises......Page 217
References......Page 218
1.6 Bads......Page 219
Constraint......Page 221
Preferences......Page 225
Initial Optimal Solution......Page 227
Comparative Statics......Page 228
Exercises......Page 229
References......Page 230
1.6.2 Automobile Safety Regulation......Page 231
Theoretical Intuition......Page 233
Finding the Initial Solution......Page 234
Preferences......Page 235
Finding the Initial Solution......Page 236
Comparative Statics......Page 237
Exercises......Page 239
References......Page 240
Setting Up the Problem......Page 241
Budget Constraint......Page 242
Preferences......Page 244
Finding the Initial Optimal Solution......Page 245
Decomposing the Total Effect into Income and Substitution Effects......Page 246
Modeling Labor Supply: Work as a Bad......Page 250
References......Page 251
Describing the Search Optimization Problem......Page 255
Monte Carlo Simulation......Page 257
Analytical Methods......Page 261
Comparative Statics......Page 262
Results of Fixed Sample Search......Page 263
References......Page 264
Setting Up the Model......Page 265
Solving the Problem via Monte Carlo Simulation......Page 267
An Exact Solution......Page 269
Exercises......Page 271
References......Page 272
1.8 Behavioral Economics......Page 273
1.8.1 Behavioral Economics......Page 275
The Choice Game......Page 276
Actual Empirical Results......Page 277
Deconstructing the Choice Game......Page 278
Melioration......Page 279
Implications of Melioration......Page 280
The Future of Behavioral Economics......Page 281
References......Page 282
Part II The Theory of the Firm......Page 285
References......Page 286
2.1 Production Function......Page 289
Key Definitions and Assumptions......Page 291
Product Curves......Page 293
Isoquants......Page 297
Technological Progress......Page 299
Exercises......Page 300
References......Page 301
2.2 Input Cost Minimization......Page 303
Setting Up the Problem......Page 305
The Constraint......Page 306
Goal......Page 307
The Initial Optimal Solution......Page 308
Comparing the Theory of Consumer Behavior and Input Cost Minimization......Page 311
References......Page 312
Rifling......Page 314
The Enfield Arsenal Versus the Springfield Armory......Page 315
The Puzzle......Page 316
Why Did the British to Use Mass Production Techniques to Make Rifles with Interchangeable Parts?......Page 317
Why Did the British to Mass Production Techniques in 1854?......Page 318
Evaluating the Application of the Economic Approach to the Enfield Arsenal......Page 319
References......Page 320
Responses to the Possible Answers to Why the British Did Not Use Mass Production Techniques......Page 321
Responses to the Possible Anwers to Why the British Switched......Page 323
Numerical Methods: Deriving the Cost Function with the Comparative Statics Wizard......Page 325
Analytical Methods: Finding the Cost Function via the Lagrangean......Page 326
Interpreting Points Off the Cost Function......Page 327
Shifts in the Cost Function......Page 329
Interpreting lambda......Page 330
Conclusion......Page 331
References......Page 332
Total Costs......Page 333
Average Costs......Page 334
A Key Relationship between Average and Marginal Curves......Page 335
Cobb-Douglas Cost Curves......Page 336
Tying the Isoquant Map to the Cost Function......Page 338
Canonical Cost Curves......Page 339
The Role of Cost Curves in the Theory of the Firm......Page 341
Exercises......Page 342
References......Page 343
2.3 Output Profit Maximization......Page 345
Market Structure......Page 347
Finding the Initial Solution......Page 348
Analytical Approach......Page 349
Representing the Optimal Solution with Graphs......Page 350
The Shutdown Rule......Page 352
The Corner Solution Revisited......Page 356
References......Page 357
Numerical Approach......Page 359
Analytical Approach......Page 361
Points Off the Supply Curve......Page 362
Exercises......Page 363
References......Page 364
Setting the Table......Page 365
On the Variation of Methods Used in a Variety of Industries......Page 367
Aside: Price Falling over Time?......Page 373
It Is Diffusion, not Discovery, that Really Matters......Page 375
References......Page 376
2.4 Input Profit Maximization......Page 379
2.4.1 Initial Solution for Input Profit Maximization......Page 381
Finding the Initial Solution......Page 382
The Short Run......Page 385
Another Short-Run Production Function......Page 387
References......Page 388
Demand for Labor in the Short Run......Page 390
Demand for Labor in the Long Run......Page 394
The Effect of the Shutdown Rule on the Demand Curve for Labor......Page 396
More Comparative Statics......Page 397
Labor Demand Highlights......Page 398
References......Page 399
2.5 Consistency in the Theory of the Firm......Page 401
Perfect Competition in the Long Run......Page 403
Perfect Competition in the Short Run......Page 407
Comparing Long- and Short-Run Results......Page 409
The Theory of the Firm in toto......Page 410
References......Page 411
2.6 Monopoly......Page 413
Definition and Issues......Page 415
Monopoly’s Revenue Structure......Page 416
Finding the Initial Solution......Page 419
Numerical Solution......Page 420
Measuring Monopoly Power: Lerner and Herfindahl Indexes......Page 422
An Unconventional Approach to the Monopolist’s Profit Maximization Problem......Page 426
Monopoly Basics......Page 427
References......Page 428
2.7 Game Theory......Page 431
2.7.1 Game Theory......Page 433
Interdependence and Nash Equilibrium......Page 434
Introducing the Cournot Model......Page 435
Residual Demand......Page 436
Finding the Nash Equilibrium......Page 438
Interdependence is the Foundation of Game Theory......Page 441
References......Page 442
3.2 General Equilibrium......Page 547
Optimization Versus Equilibrium......Page 443
Society’s Resource Allocation Problem......Page 444
Organization......Page 447
References......Page 448
3.1 Partial Equilibrium......Page 449
3.1.1 Supply and Demand......Page 451
Numerical Approach......Page 453
Elasticity......Page 455
Long-Run Equilibrium......Page 456
Comparative Statics......Page 457
Supply and Demand as a Resource Allocation Mechanism......Page 458
Appendix: An Empirical Application of Supply and Demand......Page 460
Finding an Optimal Quantity in a Single Market......Page 463
Producers’ Surplus......Page 464
Consumers’ Surplus......Page 465
Maximizing CS + PS......Page 466
Deadweight Loss......Page 467
Optimal Resource Allocation......Page 469
Price Controls......Page 470
Choose Q to Max CS + PS......Page 472
Exercises......Page 473
References......Page 474
3.1.3 Taxes: Incidence and Deadweight Loss......Page 475
Case 1: Supplier Pays......Page 476
Case 2: Demander Pays......Page 478
Price Elasticities of Demand and Supply Determine Tax Incidence and Deadweight Loss......Page 479
Optimal Taxation......Page 482
References......Page 483
3.1.4 Inefficiency of Monopoly......Page 484
The Monopoly Solution......Page 485
Numerical Approach......Page 486
Evaluating Monopoly......Page 487
Monopoly DWL Is a Function of the Elasticities of Supply and Demand......Page 489
Monopoly and Price Discrimination......Page 490
A Final Note......Page 493
Exercises......Page 494
References......Page 495
Facts about Sugar......Page 496
Supply and Demand for U.S. Sugar......Page 499
Free Trade......Page 500
Analyzing the U.S. Sugar Quota......Page 501
Comparative Statics......Page 503
Do as I Say, Not as I Do......Page 504
References......Page 505
What Is an Externality?......Page 506
Why Do Externalities Cause Market Failure?......Page 508
The Big Problem......Page 509
Pigovian Taxes......Page 512
Marketable Permits and the Coase Theorem......Page 513
Coase Versus Pigou......Page 514
The EPA and Acid Rain......Page 515
Exercises......Page 516
References......Page 517
A Brief History of Norwegian Cement......Page 518
Monopoly Review......Page 519
Cournot Review......Page 520
Stage 2: Choosing Total Domestic Output (and Price)......Page 522
Stage 1: Choosing Capacity......Page 524
Comparing Monopoly, Cournot, and Cartel Solutions......Page 527
Welfare Analysis for 1968......Page 529
Consequences of Using Actual Versus Theoretical Total Capacity......Page 532
Exercises......Page 533
References......Page 534
Three Approaches to Honest Behavior......Page 535
An Economic Model of Used Cars......Page 537
Signaling Theory......Page 538
The Signal......Page 540
Signaling Failures and Equilibrium......Page 542
The Economics of Honesty......Page 544
References......Page 545
3.2.1 The Edgeworth Box......Page 549
Creating the Edgeworth Box......Page 551
Properties of the Edgeworth Box......Page 553
References......Page 554
Tatonnement – The Equilibration Process......Page 556
Equilibrium......Page 560
Walras’ Law......Page 561
Comparative Statics with the Edgeworth Box......Page 562
Equilibrium in the Edgeworth Box......Page 563
References......Page 564
Finding the Optimal Solution......Page 565
The Pareto Vocabulary: Pareto Inferior/Pareto Superior, Pareto Non-comparable, and Pareto Optimal (or Efficient)......Page 567
Pareto Optimality with Solver......Page 569
Comparative Statics with Excel......Page 570
The First Fundamental Theorem of Welfare Economics......Page 571
That Markets Generate Pareto Optimal Solutions Is a Truly Fundamental Idea......Page 572
Exercises......Page 573
References......Page 574
Monopoly in an Edgeworth Box......Page 575
Judging Monopoly......Page 578
Exercises......Page 579
References......Page 580
Solver......Page 581
Overall View......Page 584
The Open Problem......Page 586
References......Page 588
Index......Page 589