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Intermediate microeconomics: a modern approach

Author: Varian, Hal R. Publisher: Norton 1999.Edition: 5th ed.Language: EnglishDescription: 662 p. and appendix : Graphs ; 24 cm.ISBN: 0393973700Type of document: BookBibliography/Index: Includes bibliographical references and index
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Asia Campus
Main Collection
Print HB172 .V37 1999
(Browse shelf)
Available 900098207
Book Europe Campus
Main Collection
Print HB172 .V37 1999
(Browse shelf)
Available 001214943
Total holds: 0

Includes bibliographical references and index


Intermediate Microeconomics Intermediate Microeconomics CONTENTS Preface xix 1 The Market Constructing a Model 1 Optimization and Equilibrium 3 The Demand Curve 3 The Supply Curve 5 Market Equilibrium 7 ComThe Disparative Statics 9 Other Ways to Allocate Apartments 11 criminating Monopolist The Ordinary Monopolist Rent Control Which Way Is Best? 14 Pareto Efficiency 15 Comparing Ways to Allocate Apartments 16 Equilibrium in the Long Run 17 Summary 18 Review Questions 19 2 Budget Constraint The Budget Constraint 20 Two Goods Are Often Enough 21 Properties of the Budget Set 22 How the Budget Line Changes 24 The Example: The Numeraire 26 Taxes, Subsidies, and Rationing 26 Food Stamp Program Budget Line Changes 31 Summary 31 Review Questions 32 Vlll CONTENTS 3 Preferences Consumer Preferences 34 Assumptions about Preferences 35 IndifPerfect Substitutes ference Curves 36 Examples of Preferences 37 a Perfect Complements Buds Neutrals Satiation a Discrete Goods a Well-Behaved Preferences 44 The Marginal Rate of Substitution 48 Other Interpretations of the MRS 50 Behavior of the MRS 51 Summary 52 Review Questions 52 4 Utility Cardinal Utility 57 Constructing a Utility Function 58 Some Examples of Utility Functions 59 Example: 1 n . d i f l e r . e ~ ~ ~ Curves from Utility Quasilinear Preferences Perfect Substihtes a Perfect Complements Marginal Utilitv 65 Marginal Utility Cobb-Douglas Preferences and MRS 66 Utility for Commuting 67 Summary 69 Review Example: Cobb-Douglas Preferences Questions 70 Appendix 70 5 Choice Optimal Choice 73 Consumer Demand 78 Some Examples 78 Perfect Substitutes a Perfect Complements ~Veuf.rals and Buds a Discrete Goods Concave Preferences a Cobb-Douglas Preferences a Estimating Utility Functions 83 Implications of the MRS Condition 85 Choosing Taxes 87 Summary 89 Review Questions 89 AppenExample: Cobb-Douglas Demand Fu,nctions dix 90 6 Demand Normal and Inferior Goods 96 Income Offer Curves and Engel Curves 97 Some Examples 99 Perfect Substitu.ks Perfect Complements Cobb-Douglas Preferences a Hom.othetic Preferences Quasilinear Pref(~ences Ordinary Goods and Giffen Goods 104 The Price Offer Perfect Curvc and the Demand Curve 106 Some Examples 107 A Discrete Good a Substitutes Substitutes a Perfect Complements 1 and Complements 1 1 The Inverse Demand Function 112 Summary 114 Review Questions 115 Appendix 116 CONTENTS I X 7 Revealed Preference The Idea of Revealed Preference 119 From Revealed Preference to Preference 120 Recovering Preferences 122 The Weak Axiom of Revealed Preference 124 Checking WARP 125 The Strong Axiom of Revealed Preference 128 How t,o Check SARP 129 Index Numbers 130 Price Indices 132 Example: Indexing Social Security Payments Summary 135 Review Questions 135 8 Slutsky Equation The Substitution Effect 137 Exam,ple: Calculating th,e Substitution Example: Calculating the Income EfEfect The Income Effect 141 Sect Sign of the Substitution Effect 142 The Total Change in Demand 143 Rates of Change 144 The Law of Demand 147 Examples Example: Rebating a Tax of Income and Substitution Effects 147 Another Substitution Effect, 151 Compensated Demand Curves 154 Summary 154 Review Questions 155 Appendix 155 Example: Rebating a Small Tax 9 Buying and Selling Net. and Gross Demands 158 The Budget Constraint 159 Changing the Endowment 161 Price Changes 162 Offer Curves and Demand Curves 165 The Slutsky Equation Revisited 166 Use of the Slutsky Equation 170 Exa,mple: Calculating the Endo,wment Incom.~ Eflect Labor Supply 171 The Budget Constraint Comparative St.atics of Example: Overtime a,r~dthe Supply of Labor SumLabor Supply 172 marv 176 Review Questions 177 Appendix 177 X CONTENTS 10 Intertemporal Choice The Budget Constraint 180 Preferences for Consumption 183 Comparative Statics 184 The Slutsky Equation and Intertemporal Choice 185 Inflation 187 Present Value: A Closer Look 189 Analyzing Present Value for Several Periods 191 Use of Present Value 192 Example: Valuing a Stream of Payments Example: The True Cost of a Credit Card Bonds 195 Example: Installment Loans Taxes 197 Example: Scholarships and Savings Choice of the Interest Rate 198 Summary 199 Review Questions 199 11 Asset Markets Rates of Return 200 Arbitrage and Present Value 202 Adjustments for Differences among Assets 202 Assets with Consumption Returns 203 Taxation of Asset Returns 204 Applications 205 Depletable When to Cut a Forest Example: Gasoline Prices during Resources the Gulf War Financial Institutions 209 Summary 210 Review Questions 211 Appendix 211 12 Uncertainty Contingent Consumption 213 Utility Functions and Probabilities 217 Example: Some Examples of Utility Functions Expected Utility 218 Why Expected Utility Is Reasonable 219 Risk Aversion 221 Example: The Demand for Insurance Diversification 225 Risk Spreading 225 Role of the Stock Market 226 Summary 227 Review Example: The E$ect of Taxation on Questions 227 Appendix 228 Investment i n Risky Assets 13 Risky Assets Mean-Variance Utility 231 Measuring Risk 236 Equilibrium in a Example: Market for Risky Assets 238 How Returns Adjust 239 Ranking Mutual finds Summary 243 Review Questions 243 CONTENTS XI 14 Consumer's Surplus Demand for a Discrete Good 245 Constructing Utility from Demand 246 Other Interpretations of Consumer's Surplus 247 From Consumer's Surplus to Consumers' Surplus 248 Approximating a Continuous Demand 248 Quasilinear Utility 248 Interpreting the Change in Consumer's Surplus 249 Example: The Change in Consu,mer'.s Surplus Compensating and Equivalent Variation 251 Example: Compensating and Equivalent Variations Example: Compensating and Equivalent Variation for Quasilinear Preferences Producer's Surplus 255 Calculating Gains and Losses 257 Summary 258 Review Questions 259 ApExample: A Few Demand Fun.ctions Example: CV, EV, pendix 259 and Consumer's Surplus 15 Market Demand From Individual to Market Demand 262 The Inverse Demand Function 264 Example: Adding Up "Linear" Demand Curues Discrete Goods 265 The Extensive and the Intensive Margin 265 Elasticity 266 Example: Th.e Elasticity of a Linear Demand Curve Elasticity and DeExample: Strikes and Profits mand 268 Elasticity and Revenue 269 Constant Elasticity Demands 272 Elasticity and Marginal Revenue 273 Example: Setting a Price Marginal Revenue Curves 275 Income Elasticity 276 Summary 277 Review Questions 278 Appendix 279 Example: The Laffer Curve Example: Another Expression for Elasticity 16 Equilibrium Supply 285 Market Equilibrium 285 Two Special Cases 286 Inverse Demand and Supply Curves 287 Example: Equilibrium with LinExample: Shifting Both Curves ear Curves Comparative Statics 289 Taxes 290 Example: Taxation with Linear Deman.d and Supply Passing Along a Tax 294 The Deadweight Loss of a Tax 296 Example: The Market for Loans Example: Food Subsidies Pareto Efficiency 302 Example: Waiting in Line Summary 304 Review Questions 305 XI1 CONTENTS 17 Auctions Classification of Auctions 307 Bidding Rules 0 Auction Design 308 Problenis with Auctions 311 The Winner's Curse 312 Summary 312 Review Questions 313 18 Technology Lnputs and Outputs 314 Describing Technological Constraints 315 Examples of Technology 316 Fixed Proportions Perfect Substitutes Cobb-Douglas Properties of Technology 318 The Marginal Product 320 The Technical Rate of Substitution 320 Diminishing Marginal Product 321 Diminishing Technical Rate of Substitution 321 The Long Run and the Short Run 322 Returns to Scale 322 Summary 324 Review Questions 325 19 Profit Maximization Profits 326 The Organization of Firms 328 Profits and Stock Market Value 328 Fixed and Variable Factors 330 Short-Run Profit Maximization 330 Comparative Statics 332 Profit Maximization in the Long Run 333 Inverse Factor Demand Curves 334 Profit MaximizaExamtion and Returns to Scale 335 Revealed Profitability 336 ple: How Do Farmers React to Price Supports? Cost Minimization 340 Summary 340 Review Questions 341 Appendix 342 20 Cost Minimization Cost Minimization 344 Example: hciinirnizing Costs for Specific Technologies Revealed Cost Minimization 348 Returns to Scale and the Cost Function 349 Long-Run and Short-Run Costs 351 Fixed and Quasi-Fixed Costs 353 Sunk Costjs 353 Summary 354 Review Questions 354 Appendix 355 CONTENTS Xlll 21 Cost Curves Average Costs 358 Marginal Costs 360 Marginal Costs and Variable Example: Specific Cost Curves Example: Margin,al Cost Costs 362 Curves for TWOPlants Long-Run Costs 366 Discrete Levels of Plant Size 368 Long-Run Marginal Costs 370 Summary 371 Review Questions 372 Appendix 372 22 Firm Supply Market Environments 374 Pure Competition 375 The Supply Decision of a Competitive Firm 377 An Exception 379 Another Exception 380 Example: Pricing Operating system,^ The Inverse Supply Function 382 Profits and Producer's Surplus 382 Example: The Supply Curve for a Specific Cost Function The Long-Run Supply Curve of a Firm 386 Long-Run Constant Average Costs 388 Summary 389 Review Questions 390 Appendix 390 23 Industry Supply Short-Run Industry Supply 392 Industry Equilibrium in the Short Run 393 Industry Equilibrium in the Long Run 394 The Long-Run Supply Example: Taxation i n the Long Run and in the Short Run Curve 396 The Meaning of Zero Profits 400 Fixed Factors and Economic R ~ n t , 401 Example: Taxi Licenses in New York City Economic Rent 403 Rental Rates and Prices 405 Example: Liquor Licenses The Politics Example: Farming the Government Energy Policy 408 of Rent 406 Two-Tiered Oil Pricing Price Controls The Entitlement Program Summary 412 Review Questions 413 XIV CONTENTS 24 Monopoly Maximizing Profits 415 Linear Demand Curve and Monopoly 416 Markup Pricing 418 Example: The Impact of Taxes o n a Monopolist Inefficiency of Monopoly 420 Deadweight Loss of Monopoly 422 Example: The Optimal Life of a Patent Natural Monopoly 425 What Example: Diamonds Are Forever ExamCauses Monopolies? 427 ple: Pooling i n Auction Markets Summary 430 Review Questions 431 Appendix 432 25 Monopoly Behavior Price Discrimination 434 First-Degree Price Discrimination 434 SecExample: Price Discrimination ond-Degree Price Discrimination 436 Example: Linin Airfares Third-Degree Price Discrimination 440 ear Demand Curves Example: Calculating Optimal Price Discrimination Example: Price Discrimination i n Academic Journals Bundling 444 Example: Soflware Suites Two-Part Tariffs 446 Monopolistic Competition 448 A Location Model of Product Differentiation 451 Product Differentiation 453 More Vendors 453 Summary 454 Review Questions 455 26 Factor Markets Monopoly in the Output Market 456 Monopsony 459 Example: The Minimum Wage Upstream and Downstream Monopolies 463 Summary 465 Review Questions 466 Appendix 466 CONTENTS XV 27 Oligopoly Choosing a Strategy 469 Quantity Leadership 469 The Follower's Problem The Leader's Problem Price Leadership 475 Comparing Price Leadership and Quantity Leadership 477 Simultaneous Quantity Setting 477 An Example of Cournot Equilibrium 479 Adjustment to Equilibrium 481 Many Firms in Cournot Equilibrium 481 Simultaneous Price Setting 482 Collusion 483 Punishment Strategies 486 Example: Price Matching and Competition Example: Voluntary Export Restraints Comparison of the Solutions 489 Summary 490 Review Questions 491 28 Came Theory The Payoff Matrix of a Game 492 Nash Equilibrium 494 Mixed Strategies 495 The Prisoner's Dilemma 496 Repeated Games 498 Enforcing a Cartel 499 Example: Tit for Tat in Airline Pricing Sequential Games 501 A Game of Entry Deterrence 503 Summary 505 Review Questions 505 29 Exchange The Edgeworth Box 508 Trade 510 Pareto Efficient Allocations 511 Market Trade 513 The Algebra of Equilibrium 515 Walras' Example: A n Algebraic Example of Law 517 Relative Prices 518 Equilibrium The Existence of Equilibrium 520 Equilibrium and EffiExample: Monopoly in ciency 521 The Algebra of Efficiency 522 the Edgeworth Box Efficiency and Equilibrium 525 Implications of the First Welfare Theorem 527 Implications of the Second Welfare Theorem 529 Summary 531 Review Questions 532 Appendix 532 XVI CONTENTS 30 Production The Robinson Crusoe Economy 534 Crusoe, Inc. 536 The Firm 537 Robinson's Problem 538 Putting Them Together 538 Different Technologies 540 Production and the First Welfare Theorem 542 Production and the Second Welfare Theorem 543 Production Possibilities 543 Comparative Advantage 545 Pareto Efficiency 547 Castaways, Inc. 549 Robinson and Friday as Consumers 551 Decentralized Resource Allocation 552 Summary 553 Review Questions 553 Appendix 554 31 Welfare Aggregation of Preferences 557 Social Welfare Functions 559 Welfare Maximization 561 Individualistic Social Welfare Functions 563 Fair Allocations 564 Envy and Equity 565 Summary 567 Review Questions 567 Appendix 568 32 Externalities Smokers and Nonsmokers 570 Quasilinear Preferences and the Coase Example: Pollution Theorem 573 Production Externalities 575 Vouchers Interpretation of the Conditions 580 Market Signals 583 The Tragedy of the Commons 583 Example: Overfishing Automobile Pollution 587 Summary 588 Review Questions 589 33 Law and Economics Crime and Punishment 590 Qualifications 593 Liability Law 594 Bilateral Accidents 596 Treble Damages in Antitrust Law 598 Seelcing to Be Damaged Which Model Is Right'? 601 Summary 601 Review Questions 601 CONTENTS XVll 34 lnformation Technology Systems Competition 603 Lock-In 603 A Model of Competition ,with Switching Costs Network Externalities 606 Markets with Network Example: Network ExterExternalities 606 Market Dynamics 608 nalities in Computer Software Implications of Network Externalities 611 Rights Management 612 Example: Video Rental Sharing Intellectual Property 614 Summary 616 Review Questions 616 35 Public Goods When to Provide a Public Good? 618 Private Provision of the Public Good 622 Free Riding 622 Different. Levels of the Public Good 624 Quasilinear Preferences and Public Goods 626 Example: Pollution Revisited The Free Rider Problem 628 Comparison to Private Goods 630 Voting 631 Example: Agenda Manipulation Demand Revelation 634 ! Example: An Example o the Clarke Tax Problems with the Clarke Tax 638 Summary 639 Review Questions 639 Appendix 640 36 Asymmetric lnformation Choosing the QuolThe Market for Lemons 642 Quality Choice 643 itq Adverse Selection 645 Moral Hazard 647 Moral Hazard and Example: The Sheepskin Effect Adverse Selection 648 Signaling 649 Incentives 653 Example: Voting Rights in the Corporation Example: Chinese Economic Reforms Asymmetric lnformation 658 Example: Monitoriny Costs Example: The Crameen Bank Summary 661 Review Questions 662 XVlll CONTENTS Mathematical Appendix Functions A1 Graphs A2 Properties of Functions A2 Inverse finctions A3 Equations and Identitics A3 Linear Functions A4 Changes and Rates of Change A4 Slopes and Intercepts A5 Absolute Values and Logarithms A6 Derivatives A6 Second Derivatives A7 The Product Rule and the Chain Rule A8 Partial Derivatives A8 Optimization A9 Constrained Optimization A10 Answers Index ~ 1 1 ~ 3 1

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