Intermediate Microeconomics : A Modern Approach

, by Varian, Hal R.

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ISBN: 9780393973709 | 0393973700
Cover: Hardcover
Copyright: 3/1/1999

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Supplemental Materials

Preface

xix

The Market

Constructing a Model

(2)

Optimization and Equilibrium

(1)

The Demand Curve

(2)

The Supply Curve

(2)

Market Equilibrium

(2)

Comparative Statics

(2)

Other Ways to Allocate Apartments

(3)

The Discriminating Monoplist • The Ordinary Monopolist • Rent Control • Which Way Is Best?

(1)

Pareto Efficiency

(1)

Comparing Ways to Allocate Apartments

(1)

Equilibrium in the Long Run

(1)

Summary

(1)

Review Questions

(1)

Budget Constraint

The Budget Constraint

(1)

Two Goods Are Often Enough

(1)

Properties of the Budget Set

(2)

How the Budget Line Changes

(2)

The Numeraire

(1)

Taxes, Subsidies, and Rationing

(5)

Example: The Food Stamp Program Budget Line Changes

(1)

Summary

(1)

Review Questions

(2)

Preferences

Consumer Preferences

(1)

Assumptions about Preferences

(1)

Indifference Curves

(1)

Examples of Preferences

(7)

Perfect Substitutes • Perfect Complements • Bads • Neutrals • Satiation • Discrete Goods • Well-Behaved Preferences

(4)

The Marginal Rate of Substitution

(2)

Other Interpretations of the MRS

(1)

Behavior of the MRS

(1)

Summary

(1)

Review Questions

(5)

Utility

Cardinal Utility

(1)

Constructing a Utility Function

(1)

Some Examples of Utility Functions

(6)

Example: Indifference Curves from Utility Perfect Substitutes • Perfect Complements • Quasiliner Preferences • Cobb-Douglas Preferences • Marginal Utility

(1)

Marginal Utility and MRS

(1)

Utility for Commuting

(2)

Summary

(1)

Review Questions

(1)

Appendix

(3)

Example: Cobb-Douglas Preferences

Choice

Optimal Choice

(5)

Consumer Demand

(1)

Some Examples

(5)

Perfect Substitutes • Perfect Complements • Neutrals and Bads • Discrete Goods • Concave Preferences • Cobb-Douglas Preferences • Estimating Utility Functions

(2)

Implications of the MRS Condition

(2)

Choosing Taxes

(2)

Summary

(1)

Review Questions

(1)

Appendix

(6)

Example: Cobb-Douglas Demand Functions

Demand

Normal and Inferior Goods

(1)

Income Offer Curves and Engel Curves

(2)

Some Examples

(5)

Perfect Substitutes • Perfect Complements • Cobb-Douglas Preferences • Homothetic Preferences • Quasilinear Preferences • Ordinary Goods and Giffen Goods

104

(2)

The Price Offer Curve and the Demand Curve

106

(1)

Some Examples

107

(4)

Perfect Substitutes • Perfect Complements • A Discrete Good • Substitutes and Complements

111

(1)

The Inverse Demand Function

112

(2)

Summary

114

(1)

Review Questions

115

(1)

Appendix

116

(3)

Reealed Preference

The Idea of Revealed Preference

119

(1)

From Revealed Preference to Preference

120

(2)

Recovering Preferences

122

(2)

The Weak Axiom of Revealed Preferences

124

(1)

Checking WARP

125

(3)

The Strong Axiom of Revealed Preference

128

(1)

How to Check SARP

129

(1)

Index Numbers

130

(2)

Price Indices

132

(3)

Example: Indexing Social Security Payments Summary

135

(1)

Review Questions

135

(2)

Slutsky Equation

The Substitution Effect

137

(4)

Example: Calculating the Substitution Effect The Income Effect

141

(1)

Example: Calculating the Income Effect Sign of the Substitution Effect

142

(1)

The Total Change in Demand

143

(1)

Rates of Change

144

(3)

The Law of Demand

147

(1)

Examples of Income and Substitution Effect

147

(4)

Example: Rebating a Tax Another Substitution Effect

151

(3)

Compensated Demand Curves

154

(1)

Summary

154

(1)

Review Questions

155

(1)

Appendix

155

(3)

Example: Rebating a Small Tax

Buying and Selling

Net and Gross Demands

158

(1)

The Budget Constraint

159

(2)

Changing the Endowment

161

(1)

Price Changes

162

(3)

Offer Curves and Demand Curves

165

(1)

The Slutsky Equation Revisited

166

(4)

Use of the Slutsky Equation

170

(1)

Example: Calculating the Endowment Income Effect Labor Supply

171

(1)

The Budget Constraint • Comparative Statics of Labor Supply

172

(4)

Example: Overtime and the Supply of Labor Summary

176

(1)

Review Questions

177

(1)

Appendix

177

(3)

Intertemporal Choice

The Budget Constraint

180

(3)

Preferences for Consumption

183

(1)

Comparative Statics

184

(1)

The Slutsky Equation and Intertemporal Choice

185

(2)

Inflation

187

(2)

Present Value: A Closer Look

189

(2)

Analyzing Present Value for Several Periods

191

(1)

Use of Present Value

192

(3)

Example: Valuing a Stream of Payments Example: The True Cost of a Credit Card Bonds

195

(2)

Example: Installment Loans Taxes

197

(1)

Example: Scholarships and Savings Choice of the Interest Rate

198

(1)

Summary

199

(1)

Review Questions

199

(1)

Asset Markets

Rates of Return

200

(2)

Arbitrage and Present Value

202

(1)

Adjustments for Differences among Assets

202

(1)

Assets with Consumption Returns

203

(1)

Taxation of Asset Returns

204

(1)

Applications

205

(4)

Depletable Resources • When to Cut a Forest • Example: Gasoline Prices during the Gulf War Financial Institutions

209

(1)

Summary

210

(1)

Review Questions

211

(1)

Appendix

211

(2)

Uncertainty

Contingent Consumption

213

(4)

Utility Functions and Probabilities

217

(1)

Example: Some Examples of Utility Functions Expected Utility

218

(1)

Why Expected Utility Is Reasonable

219

(2)

Risk Aversion

221

(4)

Example: The Demand for Insurance Diversification

225

(1)

Risk Spreading

225

(1)

Role of the Stock Market

226

Summary

(200)

Review Questions

227

(1)

Appendix

228

(3)

Example: The Effect of Taxation on Investment in Risky Assets

Risky Assets

Mean-Variance Utility

231

(5)

Measuring Risk

236

(2)

Equilibrium in a Market for Risky Assets

238

(1)

How Returns Adjust

239

(4)

Example: Ranking Mutual Funds Summary

243

(1)

Review Questions

243

(2)

Consumer's Surplus

Demand for a Discrete Good

245

(1)

Constructing Utility from Demand

246

(1)

Other Interpretations of Consumer's Surplus

247

(1)

From Consumer's Surplus to Consumers' Surplus

248

(1)

Approximating a Continuous Demand

248

(1)

Quasilinear Utility

248

(1)

Interpreting the Change in Consumer's Surplus

249

(2)

Example: The Change in Consumer's Surplus Compensating and Equivalent Variation

251

(4)

Example: Compensating and Equivalent Variations Example: Compensating and Equivalent Variation for Quasilinear Preferences Producer's Surplus

255

(2)

Calculating Gains and Losses

257

(1)

Summary

258

(1)

Review Questions

259

(1)

Appendix

259

(3)

Example: A Few Demand Functions Example: CV, EV, and Consumer's Surplus

Market Demand

From Individual to Market Demand

262

(2)

The Inverse Demand Function

264

(1)

Example: Adding Up ``Linear'' Demand Curves Discrete Goods

265

(1)

The Extensive and the Intensive Margin

265

(1)

Elasticity

266

(2)

Example: The Elasticity of a Linear Demand Curve Elasticity and Demand

268

(1)

Elasticity and Revenue

269

(3)

Example: Strikes and Profits Constant Elasticity Demands

272

(1)

Elasticity and Marginal Revenue

273

(2)

Example: Setting a Price Marginal Revenue Curves

275

(1)

Income Elasticity

276

(1)

Summary

277

(1)

Review Questions

278

(1)

Appendix

279

(6)

Example: The Laffer Curve Example: Another Expression for Elasticity

Equilibrium

Supply

285

(1)

Market Equilibrium

285

(1)

Two Special Cases

286

(1)

Inverse Demand and Supply Curves

287

(2)

Example: Equilibrium with Linear Curves Comparative Statics

289

(1)

Example: Shifting Both Curves Taxes

290

(4)

Example: Taxation with Linear Demand and Supply Passing Along a Tax

294

(2)

The Deadweight Loss of a Tax

296

(6)

Example: The Market for Loans Example: Food Subsidies Pareto Efficiency

302

(2)

Example: Waiting in Line Summary

304

(1)

Review Questions

305

(2)

Auctions

Classification of Auctions

307

(1)

Bidding Rules • Auction Design

308

(3)

Problems with Auctions

311

(1)

The Winner's Curse

312

(1)

Summary

312

(1)

Review Questions

313

(1)

Technology

Inputs and Outputs

314

(1)

Describing Technological Constraints

315

(1)

Examples of Technology

316

(2)

Fixed Proportions • Perfect Subsititutes • Cobb-Douglas • Properties of Technology

318

(2)

The Marginal Product

320

(1)

The Technical Rate of Substitution

320

(1)

Diminishing Marginal Product

321

(1)

Diminishing Technical Rate of Substitution

321

(1)

The Long Run and the Short Run

322

(1)

Returns to Scale

322

(2)

Summary

324

(1)

Review Questions

325

(1)

Profit Maximization

Profits

326

(2)

The Organization of Firms

328

(1)

Profits and Stock Market Value

328

(2)

Fixed and Variable Factors

330

(1)

Short-Run Profit Maximization

330

(2)

Comparative Statics

332

(1)

Profit Maximization in the Long Run

333

(1)

Inverse Factor Demand Curves

334

(1)

Profit Maximization and Returns to Scale

335

(1)

Revealed Profitibility

336

(4)

Example: How Do Farmers React to Price Supports? Cost Minimization

340

(1)

Summary

340

(1)

Review Questions

341

(1)

Appendix

342

(2)

Cost Minimization

344

(4)

Example: Minimizing Costs for Specific Technologies Revealed Cost Minimization

348

(1)

Returns to Scale and the Cost Function

349

(2)

Long-Run and Short-Run Costs

351

(2)

Fixed and Quasi-Fixed Costs

353

(1)

Shunk Costs

353

(1)

Summary

354

(1)

Review Questions

354

(1)

Appendix

355

(3)

Cost Curves

Average Costs

358

(2)

Marginal Costs

360

(2)

Marginal Costs and Variable Costs

362

(4)

Example: Specific Cost Curves Example: Marginal Cost Curves for Two Plants Long-Run Costs

366

(2)

Discrete Levels of Plant Size

368

(2)

Long-Run Marginal Costs

370

(1)

Summary

371

(1)

Review Questions

372

(1)

Appendix

372

(2)

Firm Supply

Market Environments

374

(1)

Pure Competition

375

(2)

The Supply Decision of a Competitive Firm

377

(2)

An Exception

379

(1)

Another Exception

380

(2)

Example: Pricing Operating Systems The Inverse Supply Function

382

(1)

Profits and Producer's Surplus

382

(4)

Example: The Supply Curve for a Specific Cost Function The Long-Run Supply Curve of a Firm

386

(2)

Long-Run Constant Average Costs

388

(1)

Summary

389

(1)

Review Questions

390

(1)

Appendix

390

(2)

Industry Supply

Short-Run Industry Supply

392

(1)

Industry Equilibrium in the Short Run

393

(1)

Industry Equilibrium in the Long Run

394

(2)

The Long-Run Supply Curve

396

(4)

Example: Taxation in the Long Run and in the Short Run The Meaning of Zero Profits

400

(1)

Fixed Factors and Economic Rent

401

(2)

Example: Taxi Licenses in New York City Economic Rent

403

(2)

Rental Rates and Prices

405

(1)

Example: Liquor Licenses The Politics of Rent

406

(2)

Example: Farming the Government Energy Policy

408

(4)

Two-Tiered Oil Pricing • Price Control • The Entitlement Program • Summary

412

(1)

Review Questions

413

(2)

Monopoly

Maximizing Profits

415

(1)

Linear Demand Curve and Monopoly

416

(2)

Markup Pricing

418

(2)

Example: The Impact of Taxes on a Monopolist Inefficiency of Monopoly

420

(2)

Deadweight Loss of Monopoly

422

(3)

Example: The Optimal Life of a Patent Natural Monopoly

425

(2)

What Causes Monopolies?

427

(3)

Example: Diamonds Are Forever Example: Pooling in Auction Markets Summary

430

(1)

Review Questions

431

(1)

Appendix

432

(2)

Monopoly Behavior

Price Discrimination

434

(1)

First-Degree Price Discrimination

434

(2)

Second-Degree Price Discrimination

436

(4)

Example: Price Discrimination in Airfares Third-Degree Price Discrimination

440

(4)

Example: Linear Demand Curves Example: Calculating Optimal Price Discrimination Example: Price Discrimination in Academic Journals Bundling

444

(2)

Example: Software Suites Two-Part Tariffs

446

(2)

Monopolistic Competition

448

(3)

A Location Model of Product Differentiation

451

(2)

Product Differentiation

453

(1)

More Vendors

453

(1)

Summary

454

(1)

Review Questions

455

(1)

Factor Markets

Monopoly in the Output Market

456

(3)

Monopsony

459

(4)

Example: The Minimum Wage Upstream and Downstream Monopolies

463

(2)

Summary

465

(1)

Review Questions

466

(1)

Appendix

466

(3)

Oligopoly

Choosing a Strategy

469

(1)

Quantity Leadership

469

(6)

The Follower's Problem • The Leader's Problem • Price Leadership

475

(2)

Comparing Price Leadership and Quantity Leadership

477

(1)

Simultaneous Quantity Setting

477

(2)

An Example of Cournot Equilibrium

479

(2)

Adjustment to Equilibrium

481

(1)

Many Firms in Cournot Equilibrium

481

(1)

Simultaneous Price Setting

482

(1)

Collusion

483

(3)

Punishment Strategies

486

(3)

Example: Price Matching and Competition Example: Voluntary Export Restraints Comparison of the Solutions

489

(1)

Summary

490

(1)

Review Questions

491

(1)

Game Theory

The Payoff Matrix of a Game

492

(2)

Nash Equilibrium

494

(1)

Mixed Strategies

495

(1)

The Prisoner's Dilemma

496

(2)

Repeated Games

498

(1)

Enforcing a Cartel

499

(2)

Example: Tit for Tat in Airline Pricing Sequential Games

501

(2)

A Game of Entry Deterrence

503

(2)

Summary

505

(1)

Review Questions

505

(3)

Exchange

The Edgeworth Box

508

(2)

Trade

510

(1)

Pareto Efficient Allocations

511

(2)

Market Trade

513

(2)

The Algebra of Equilibrium

515

(2)

Walras' Law

517

(1)

Relative Prices

518

(2)

Example: An Algebraic Example of Equilibrium The Existence of Equilibrium

520

(1)

Equilibrium and Efficiency

521

(1)

The Algebra of Efficiency

522

(3)

Example: Monopoly in the Edgeworth Box Efficiency and Equilibrium

525

(2)

Implications of the First Welfare Theorem

527

(2)

Implications of the Second Welfare Theorem

529

(2)

Summary

531

(1)

Review Questions

532

(1)

Appendix

532

(2)

Production

The Robinson Crusoe Economy

534

(2)

Crusoe, Inc.

536

(1)

The Firm

537

(1)

Robinson's Problem

538

(1)

Putting Them Together

538

(2)

Different Technologies

540

(2)

Production and the First Welfare Theorem

542

(1)

Production and the Second Welfare Theorem

543

(1)

Production Possibilities

543

(2)

Comparative Advantage

545

(2)

Pareto Efficiency

547

(2)

Castaways, Inc.

549

(2)

Robinson and Friday as Consumers

551

(1)

Decentralized Resource Allocation

552

(1)

Summary

553

(1)

Review Questions

553

(1)

Appendix

554

(3)

Welfare

Aggregation of Preferences

557

(2)

Social Welfare Functions

559

(2)

Welfare Maximization

561

(2)

Individualistic Social Welfare Functions

563

(1)

Fair Allocations

564

(1)

Envy and Equity

565

(2)

Summary

567

(1)

Review Questions

567

(1)

Appendix

568

(2)

Externalities

Smokers and Nonsmokers

570

(3)

Quasilinear Preferences and the Coase Theorem

573

(2)

Production Externalities

575

(5)

Example: Pollution Vouchers Interpretation of the Conditions

580

(3)

Market Signals

583

(1)

The Tragedy of the Commons

583

(4)

Example: Overfishing Automobile Pollution

587

(1)

Summary

588

(1)

Review Questions

589

(1)

Law and Economics

Crime and Punishment

590

(3)

Qualifications

593

(1)

Liability Law

594

(2)

Bilateral Accidents

596

(2)

Treble Damages in Antitrust Law

598

(3)

Seeking to Be Damaged • Which Model Is Right?

601

(1)

Summary

601

(1)

Review Questions

601

(2)

Information Technology

Systems Competition

603

(1)

Lock-In

603

(3)

A Model of Competition with Switching Costs • Network Externalities

606

(1)

Markets with Network Externalities

606

(2)

Market Dynamics

608

(3)

Example: Network Externalities in Computer Software Implications of Network Externalities

611

(1)

Rights Management

612

(2)

Example: Video Rental Sharing Intellectual Property

614

(2)

Summary

616

(1)

Review Questions

616

(2)

Public Goods

When to Provide a Public Good?

618

(4)

Private Provision of the Public Good

622

(1)

Free Riding

622

(2)

Different Levels of the Public Good

624

(2)

Quasilinear Preferences and Public Goods

626

(2)

Example: Pollution Revisited The Free Rider Problem

628

(2)

Comparison to Private Goods

630

(1)

Voting

631

(3)

Example: Agenda Manipulation Demand Revelation

634

(4)

Example: An Example of the Clarke Tax Problems with the Clarke Tax

638

(1)

Summary

639

(1)

Review Questions

639

(1)

Appendix

640

(2)

Asymmetric Information

The Market for Lemons

642

(1)

Quality Choice

643

(2)

Choosing the Quality • Adverse Selection

645

(2)

Moral Hazard

647

(1)

Moral Hazard and Adverse Selection

648

(1)

Signaling

649

(4)

Example: The Sheepskin Effect Incentives

653

(5)

Example: Voting Rights in the Corporation Example: Chinese Economic Reforms Asymmetric Information

658

(3)

Example: Monitoring Costs Example: The Grameen Bank Summary

661

(1)

Review Questions

662

Mathematical Appendix

Functions

(1)

Graphs

(1)

Properties of Functions

(1)

Inverse Functions

(1)

Equations and Identities

(1)

Linear Functions

(1)

Changes and Rates of Change

(1)

Slopes and Intercepts

(1)

Absolute Values and Logarithms

(1)

Derivatives

(1)

Second Derivatives

(1)

The Product Rule and the Chain Rule

(1)

Partial Derivatives

(1)

Optimization

(1)

Constrained Optimization

(1)

Answers

(20)

Index

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Intermediate Microeconomics : A Modern Approach

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