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Advanced Microeconomics - Coggle Diagram
Advanced Microeconomics
Decision Theory
Preferences and utility (L1, ch. 1.1-1.2)
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Consumer problems and demand (L2, ch. 1.3-1.4)
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Choice under uncertainty (L3, ch. 2.4)
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Applications -> Insurance, Risk sharing
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Theory of the Firm
Profit maximization (L5)
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MRTS: how well an input can be replaced by another. Elasticity of substitution tells how change in MRTS affects ratio of inputs used in production. MRTS(x1)=(df(x1)/dx1)/(df(x1)/dx2)
Returns to scale: Production function f(x) has following property:
- Constant RTS if f(tx)=tf(x) for all t>0 and all x
- Increasing RTS if f(tx)>tf(x) for all t>1 and all x
- Decreasing RTS if f(tx)<tf(x) for all t>1 and all x
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Short run -> sc(w,w-streck,x-streck,y) instead of c(w,y) to maximize -> p=SMC (short run marginal cost)
Cost minimization (L4, ch. 3.1-3.4)
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