Intermediate Microeconomics A Modern Approach

Name: Intermediate Microeconomics A Modern Approach
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ISBN: 9780393973709

ISBN-10: 0393973700

ISBN-13: 9780393973709

Edition: 5th 1999

Authors: Hal R. Varian

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Description:

This edition continues the title's contemporary emphasis and is aimed at students studying microeconomics in their first or second years. It provides fresh insights into information technology, expanded coverage of strategic behaviour and a new chapter on auctions featuring fresh research.

Book details

Edition: 5th
Copyright year: 1999
Publisher: W. W. Norton & Company, Incorporated
Binding: Hardcover
Pages: 724
Size: 6.93" wide x 9.45" long x 1.34" tall
Weight: 1.320
Language: English

Hal R. Varian is the chief economist at Google.

Preface	p. xix
The Market
Constructing a Model	p. 1
Optimization and Equilibrium	p. 3
The Demand Curve	p. 3
The Supply Curve	p. 5
Market Equilibrium	p. 7
Comparative Statics	p. 9
Other Ways to Allocate Apartments	p. 11
The Discriminating Monopolist
The Ordinary Monopolist
Rent Control
Which Way Is Best?	p. 14
Pareto Efficiency	p. 15
Comparing Ways to Allocate Apartments	p. 16
Equilibrium in the Long Run	p. 17
Summary	p. 18
Review Questions	p. 19
Budget Constraint
The Budget Constraint	p. 20
Two Goods Are Often Enough	p. 21
Properties of the Budget Set	p. 22
How the Budget Line Changes	p. 24
The Numeraire	p. 26
Taxes, Subsidies, and Rationing	p. 26
Example: The Food Stamp Program Budget Line Changes	p. 31
Summary	p. 31
Review Questions	p. 32
Preferences
Consumer Preferences	p. 34
Assumptions about Preferences	p. 35
Indifference Curves	p. 36
Examples of Preferences	p. 37
Perfect Substitutes
Perfect Complements
Bads
Neutrals
Satiation
Discrete Goods
Well-Behaved Preferences	p. 44
The Marginal Rate of Substitution	p. 48
Other Interpretations of the MRS	p. 50
Behavior of the MRS	p. 51
Summary	p. 52
Review Questions	p. 52
Utility
Cardinal Utility	p. 57
Constructing a Utility Function	p. 58
Some Examples of Utility Functions	p. 59
Example: Indifference Curves from Utility Perfect Substitutes
Perfect Complements
Quasilinear Preferences
Cobb-Douglas Preferences
Marginal Utility	p. 65
Marginal Utility and MRS	p. 66
Utility for Commuting	p. 67
Summary	p. 69
Review Questions	p. 70
Appendix	p. 70
Example: Cobb-Douglas Preferences
Choice
Optimal Choice	p. 73
Consumer Demand	p. 78
Some Examples	p. 78
Perfect Substitutes
Perfect Complements
Neutrals and Bads
Discrete Goods
Concave Preferences
Cobb-Douglas Preferences
Estimating Utility Functions	p. 83
Implications of the MRS Condition	p. 85
Choosing Taxes	p. 87
Summary	p. 89
Review Questions	p. 89
Appendix	p. 90
Example: Cobb-Douglas Demand Functions
Demand
Normal and Inferior Goods	p. 96
Income Offer Curves and Engel Curves	p. 97
Some Examples	p. 99
Perfect Substitutes
Perfect Complements
Cobb-Douglas Preferences
Homothetic Preferences
Quasilinear Preferences
Ordinary Goods and Giffen Goods	p. 104
The Price Offer Curve and the Demand Curve	p. 106
Some Examples	p. 107
Perfect Substitutes
Perfect Complements
A Discrete Good
Substitutes and Complements	p. 111
The Inverse Demand Function	p. 112
Summary	p. 114
Review Questions	p. 115
Appendix	p. 116
Revealed Preference
The Idea of Revealed Preference	p. 119
From Revealed Preference to Preference	p. 120
Recovering Preferences	p. 122
The Weak Axiom of Revealed Preference	p. 124
Checking WARP	p. 125
The Strong Axiom of Revealed Preference	p. 128
How to Check SARP	p. 129
Index Numbers	p. 130
Price Indices	p. 132
Example: Indexing Social Security Payments Summary	p. 135
Review Questions	p. 135
Slutsky Equation
The Substitution Effect	p. 137
Example: Calculating the Substitution Effect The Income Effect	p. 141
Example: Calculating the Income Effect Sign of the Substitution Effect	p. 142
The Total Change in Demand	p. 143
Rates of Change	p. 144
The Law of Demand	p. 147
Examples of Income and Substitution Effects	p. 147
Example: Rebating a Tax Another Substitution Effect	p. 151
Compensated Demand Curves	p. 154
Summary	p. 154
Review Questions	p. 155
Appendix	p. 155
Example: Rebating a Small Tax
Buying and Selling
Net and Gross Demands	p. 158
The Budget Constraint	p. 159
Changing the Endowment	p. 161
Price Changes	p. 162
Offer Curves and Demand Curves	p. 165
The Slutsky Equation Revisited	p. 166
Use of the Slutsky Equation	p. 170
Example: Calculating the Endowment Income Effect Labor Supply	p. 171
The Budget Constraint
Comparative Statics of Labor Supply	p. 172
Example: Overtime and the Supply of Labor Summary	p. 176
Review Questions	p. 177
Appendix	p. 177
Intertemporal Choice
The Budget Constraint	p. 180
Preferences for Consumption	p. 183
Comparative Statics	p. 184
The Slutsky Equation and Intertemporal Choice	p. 185
Inflation	p. 187
Present Value: A Closer Look	p. 189
Analyzing Present Value for Several Periods	p. 191
Use of Present Value	p. 192
Example: Valuing a Stream of Payments Example: The True Cost of a Credit Card Bonds	p. 195
Example: Installment Loans Taxes	p. 197
Example: Scholarships and Savings Choice of the Interest Rate	p. 198
Summary	p. 199
Review Questions	p. 199
Asset Markets
Rates of Return	p. 200
Arbitrage and Present Value	p. 202
Adjustments for Differences among Assets	p. 202
Assets with Consumption Returns	p. 203
Taxation of Asset Returns	p. 204
Applications	p. 205
Depletable Resources
When to Cut a Forest
Example: Gasoline Prices during the Gulf War Financial Institutions	p. 209
Summary	p. 210
Review Questions	p. 211
Appendix	p. 211
Uncertainty
Contingent Consumption	p. 213
Utility Functions and Probabilities	p. 217
Example: Some Examples of Utility Functions Expected Utility	p. 218
Why Expected Utility Is Reasonable	p. 219
Risk Aversion	p. 221
Example: The Demand for Insurance Diversification	p. 225
Risk Spreading	p. 225
Role of the Stock Market	p. 226
Summary	p. 227
Review Questions	p. 227
Appendix	p. 228
Example: The Effect of Taxation on Investment in Risky Assets
Risky Assets
Mean-Variance Utility	p. 231
Measuring Risk	p. 236
Equilibrium in a Market for Risky Assets	p. 238
How Returns Adjust	p. 239
Example: Ranking Mutual Funds Summary	p. 243
Review Questions	p. 243
Consumer's Surplus
Demand for a Discrete Good	p. 245
Constructing Utility from Demand	p. 246
Other Interpretations of Consumer's Surplus	p. 247
From Consumer's Surplus to Consumers' Surplus	p. 248
Approximating a Continuous Demand	p. 248
Quasilinear Utility	p. 248
Interpreting the Change in Consumer's Surplus	p. 249
Example: The Change in Consumer's Surplus Compensating and Equivalent Variation	p. 251
Example: Compensating and Equivalent Variations Example: Compensating and Equivalent Variation for Quasilinear Preferences Producer's Surplus	p. 255
Calculating Gains and Losses	p. 257
Summary	p. 258
Review Questions	p. 259
Appendix	p. 259
Example: A Few Demand Functions Example: CV, EV, and Consumer's Surplus
Market Demand
From Individual to Market Demand	p. 262
The Inverse Demand Function	p. 264
Example: Adding Up "Linear" Demand Curves Discrete Goods	p. 265
The Extensive and the Intensive Margin	p. 265
Elasticity	p. 266
Example: The Elasticity of a Linear Demand Curve Elasticity and Demand	p. 268
Elasticity and Revenue	p. 269
Example: Strikes and Profits Constant Elasticity Demands	p. 272
Elasticity and Marginal Revenue	p. 273
Example: Setting a Price Marginal Revenue Curves	p. 275
Income Elasticity	p. 276
Summary	p. 277
Review Questions	p. 278
Appendix	p. 279
Example: The Laffer Curve Example: Another Expression for Elasticity
Equilibrium
Supply	p. 285
Market Equilibrium	p. 285
Two Special Cases	p. 286
Inverse Demand and Supply Curves	p. 287
Example: Equilibrium with Linear Curves Comparative Statics	p. 289
Example: Shifting Both Curves Taxes	p. 290
Example: Taxation with Linear Demand and Supply Passing Along a Tax	p. 294
The Deadweight Loss of a Tax	p. 296
Example: The Market for Loans Example: Food Subsidies Pareto Efficiency	p. 302
Example: Waiting in Line Summary	p. 304
Review Questions	p. 305
Auctions
Classification of Auctions	p. 307
Bidding Rules
Auction Design	p. 308
Problems with Auctions	p. 311
The Winner's Curse	p. 312
Summary	p. 312
Review Questions	p. 313
Technology
Inputs and Outputs	p. 314
Describing Technological Constraints	p. 315
Examples of Technology	p. 316
Fixed Proportions
Perfect Substitutes
Cobb-Douglas
Properties of Technology	p. 318
The Marginal Product	p. 320
The Technical Rate of Substitution	p. 320
Diminishing Marginal Product	p. 321
Diminishing Technical Rate of Substitution	p. 321
The Long Run and the Short Run	p. 322
Returns to Scale	p. 322
Summary	p. 324
Review Questions	p. 325
Profit Maximization
Profits	p. 326
The Organization of Firms	p. 328
Profits and Stock Market Value	p. 328
Fixed and Variable Factors	p. 330
Short-Run Profit Maximization	p. 330
Comparative Statics	p. 332
Profit Maximization in the Long Run	p. 333
Inverse Factor Demand Curves	p. 334
Profit Maximization and Returns to Scale	p. 335
Revealed Profitability	p. 336
Example: How Do Farmers React to Price Supports? Cost Minimization	p. 340
Summary	p. 340
Review Questions	p. 341
Appendix	p. 342
Cost Minimization
Cost Minimization	p. 344
Example: Minimizing Costs for Specific Technologies Revealed Cost Minimization	p. 348
Returns to Scale and the Cost Function	p. 349
Long-Run and Short-Run Costs	p. 351
Fixed and Quasi-Fixed Costs	p. 353
Sunk Costs	p. 353
Summary	p. 354
Review Questions	p. 354
Appendix	p. 355
Cost Curves
Average Costs	p. 358
Marginal Costs	p. 360
Marginal Costs and Variable Costs	p. 362
Example: Specific Cost Curves Example: Marginal Cost Curves for Two Plants Long-Run Costs	p. 366
Discrete Levels of Plant Size	p. 368
Long-Run Marginal Costs	p. 370
Summary	p. 371
Review Questions	p. 372
Appendix	p. 372
Firm Supply
Market Environments	p. 374
Pure Competition	p. 375
The Supply Decision of a Competitive Firm	p. 377
An Exception	p. 379
Another Exception	p. 380
Example: Pricing Operating Systems The Inverse Supply Function	p. 382
Profits and Producer's Surplus	p. 382
Example: The Supply Curve for a Specific Cost Function The Long-Run Supply Curve of a Firm	p. 386
Long-Run Constant Average Costs	p. 388
Summary	p. 389
Review Questions	p. 390
Appendix	p. 390
Industry Supply
Short-Run Industry Supply	p. 392
Industry Equilibrium in the Short Run	p. 393
Industry Equilibrium in the Long Run	p. 394
The Long-Run Supply Curve	p. 396
Example: Taxation in the Long Run and in the Short Run The Meaning of Zero profits	p. 400
Fixed Factors and Economic Rent	p. 401
Example: Taxi Licenses in New York City Economic Rent	p. 401
Rental Rates and Prices	p. 405
Example: Liquor Licenses The Politics of Rent	p. 406
Example: Farming the Government Energy Policy	p. 408
Two-Tiered Oil Pricing
Price Controls
The Entitlement Program
Summary	p. 412
Review Questions	p. 413
Monopoly
Maximizing Profits	p. 415
Linear Demand Curve and Monopoly	p. 416
Markup Pricing	p. 418
Example: The Impact of Taxes on a Monopolist Inefficiency of Monopoly	p. 420
Deadweight Loss of Monopoly	p. 425
Example: The Optimal Life of a Patent Natural Monopoly	p. 425
What Causes Monopolies?	p. 427
Example: Diamonds Are Forever Example: Pooling in Auction Markets Summary	p. 430
Review Questions	p. 431
Appendix	p. 432
Monopoly Behavior
Price Discrimination	p. 434
First-Degree Price Discrimination	p. 434
Second-Degree Price Discrimination	p. 436
Example: Price Discrimination in Airfares Third-Degree Price Discrimination	p. 440
Example: Linear Demand Curves Example: Calculating Optimal Price Discrimination Example: Price Discrimination in Acade mic Journals Bundling	p. 444
Example: Software Suites Two-Part Tariffs	p. 446
Monopolistic Competition	p. 448
A Location Model of Product Differentiation	p. 451
Product Differentiation	p. 453
More Vendors	p. 453
Summary	p. 454
Review Questions	p. 455
Factor Markets
Monopoly in the Output Market	p. 456
Monopsony	p. 459
Example: The Minimum Wage Upstream and Downstream Monopolies	p. 463
Summary	p. 465
Review Questions	p. 466
Appendix	p. 466
Oligopoly
Choosing a Strategy	p. 469
Quantity Leadership	p. 469
The Follower's Problem
The Leader's Problem
Price Leadership	p. 475
Comparing Price Leadership and Quantity Leadership	p. 477
Simultaneous Quantity Setting	p. 477
An Example of Cournot Equilibrium	p. 479
Adjustment to Equilibrium	p. 481
Many Firms in Cournot Equilibrium	p. 481
Simultaneous Price Setting	p. 482
Collusion	p. 483
Punishment Strategies	p. 486
Example: Price Matching and Competition Example: Voluntary Export RestraintsComparison of the Solutions	p. 489
Summary	p. 490
Review Questions	p. 491
Game Theory
The Payoff Matrix of a Game	p. 492
Nash Equilibrium	p. 494
Mixed Strategies	p. 495
The Prisoner's Dilemma	p. 496
Repeated Games	p. 498
Enforcing a Cartel	p. 499
Example: Tit for Tat in Airline Pricing Sequential Games	p. 501
A Game of Entry Deterrence	p. 503
Summary	p. 505
Review Questions	p. 505
Exchange
The Edgeworth Box	p. 508
Trade	p. 510
Pareto Efficient Allocations	p. 511
Market Trade	p. 513
The Algebra of Equilibrium	p. 515
Walras' Law	p. 517
Relative Prices	p. 518
Example: An Algebraic Example of Equilibrium The Existence of Equilibrium	p. 520
Equilibrium and Efficiency	p. 521
The Algebra of Efficiency	p. 522
Example: Monopoly in the Edgeworth Box Efficiency and Equilibrium	p. 525
Implications of the First Welfare Theorem	p. 527
Implications of the Second Welfare Theorem	p. 529
Summary	p. 531
Review Questions	p. 532
Appendix	p. 532
Production
The Robinson Crusoe Economy	p. 534
Crusoe, Inc.	p. 536
The Firm	p. 537
Robinson's Problem	p. 538
Putting Them Together	p. 538
Different Technologies	p. 540
Production and the First Welfare Theorem	p. 542
Production and the Second Welfare Theorem	p. 543
Production Possibilities	p. 543
Comparative Advantage	p. 545
Pareto Efficiency	p. 547
Castaways, Inc.	p. 549
Robinson and Friday as Consumers	p. 551
Decentralized Resource Allocation	p. 552
Summary	p. 553
Review Questions	p. 553
Appendix	p. 554
Welfare
Aggregation of Preferences	p. 557
Social Welfare Functions	p. 559
Welfare Maximization	p. 561
Individualistic Social Welfare Functions	p. 563
Fair Allocations	p. 564
Envy and Equity	p. 565
Summary	p. 567
Review Questions	p. 567
Appendix	p. 568
Externalities
Smokers and Nonsmokers	p. 570
Quasilinear Preferences and the Coase Theorem	p. 573
Production Externalities	p. 575
Example: Pollution Vouchers Interpretation of the Conditions	p. 580
Market Signals	p. 583
The Tragedy of the Commons	p. 583
Example: Overfishing Automobile Pollution	p. 587
Summary	p. 588
Review Questions	p. 589
Law and Economics
Crime and Punishment	p. 590
Qualifications	p. 593
Liability Law	p. 598
Bilateral Accidents	p. 596
Treble Damages in Antitrust Law	p. 598
Seeking to Be Damaged
Which Model Is Right?	p. 601
Summary	p. 601
Review Questions	p. 601
Information Technology
Systems Competition	p. 603
Lock-In	p. 603
A Model of Competition with Switching Costs
Network Externalities	p. 606
Markets with Network Externalities	p. 606
Market Dynamics	p. 608
Example: Network Externalities in Computer Software Implications of Network Externalities	p. 611
Rights Management	p. 612
Example: Video Rental Sharing Intellectual Property	p. 614
Summary	p. 616
Review Questions	p. 616
Public Goods
When to Provide a Public Good?	p. 618
Private Provision of the Public Good	p. 622
Free Riding	p. 622
Different Levels of the Public Good	p. 624
Quasilinear Preferences and Public Goods	p. 626
Example: Pollution Revisited The Free Rider Problem	p. 628
Comparison to Private Goods	p. 630
Voting	p. 631
Example: Agenda Manipulation Demand Revelation	p. 634
Example: An Example of the Clarke Tax Problems with the Clarke Tax	p. 638
Summary	p. 639
Review Questions	p. 639
Appendix	p. 640
Asymmetric Information
The Market for Lemons	p. 642
Quality Choice	p. 643
Choosing the Quality
Adverse Selection	p. 645
Moral Hazard	p. 647
Moral Hazard and Adverse Selection	p. 648
Signaling	p. 649
Example: The Sheepskin Effect Incentives	p. 653
Example: Voting Rights in the Corporation Example: Chinese Economic Reforms Asymmetric Information	p. 658
Example: Monitoring Costs Example: The Grameen Bank Summary	p. 661
Review Questions	p. 662
Mathematical Appendix
Functions	p. 1
Graphs	p. 2
Properties of Functions	p. 2
Inverse Functions	p. 3
Equations and Identities	p. 3
Linear Functions	p. 4
Changes and Rates of Change	p. 4
Slopes and Intercepts	p. 5
Absolute Values and Logarithms	p. 6
Derivatives	p. 6
Second Derivatives	p. 7
The Product Rule and the Chain Rule	p. 8
Partial Derivatives	p. 8
Optimization	p. 9
Constrained Optimization	p. 10
Answers	p. 11
Index	p. 31
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