Intermediate Microeconomics

In this microeconomics tutorial, instructor Revi explores market mechanisms and resource allocation in a hypothetical scenario involving sellers with varying production costs and buyers with differing willingness to pay. Ravi poses an engaging question: what would happen if these parties were placed in a room to negotiate within a limited timeframe? He encourages critical thinking before revealing his predictions based on a demand-supply model, suggesting that high-cost producers may not sell, while low-cost sellers will likely match with high-valuation buyers at equilibrium prices between £18 and £22. Ravi supports this analysis by sharing real-world experiment results demonstrating the accuracy of such models despite market complexity. Finally, he introduces Pareto efficiency, emphasizing market mechanisms' focus on overall surplus maximization rather than equity concerns. Subscribe to @AxiomTutoringCourses for more insightful economics lessons.

In this video, the tutor delves into consumer theory in microeconomics. They introduce the concept of demand determination, focusing on a two-good problem (X and Y). Key aspects include plotting the budget constraint, recognizing its slope as price ratios, and understanding trade-offs between X and Y. The consumer's problem is then discussed: maximizing utility given infinite points on the budget constraint. Indifference curves are introduced to represent utility level sets, with various shapes explored (linear, smooth, L-shaped, perfect complements). The video concludes by highlighting key topics for future videos. Subscribe to @AxiomTutoringCourses for more.

Exploring Quasi-Linear Utility Functions: In this video, we revisit consumer theory to maximize utility under budget constraints with a focus on quasi-linear utility functions. Learn to identify their general shape and visualize them using marginal utilities. Discover how corner solutions can arise and practice solving these problems. A separate video will analyze quasi-linearity through indifference curves.

In this tutorial, the private tutor delves into perfect substitutes' intuition, building upon previous problem-solving methods. They explain marginal utilities of X and Y, representing extra utility gained per unit, and introduce indifference curves of perfect substitutes. The slope of these curves represents the marginal rate of substitution, contrasting with the market's marginal rate of transformation. By comparing MUx/Px vs MUy/Py, one determines where to allocate resources for optimal utility per pound spent. Subscribe to @AxiomTutoringCourses for more insightful economics lessons or visit our website for an award-winning private tutor to help you with your undergraduate studies.

Exploring consumer theory, this video discusses 'perfect substitutes' in utility maximization under a budget constraint. Beginning with a simple example of goods x and y, the tutor demonstrates two methods to solve for optimal consumption: a non-graphical approach using corner solutions, and a graphical method employing indifference curves. The tutorial then generalizes these concepts, outlining how to determine optimal consumption given a general utility function. Subscribe to @AxiomTutoringCourses for more insightful explanations.

The tutor discusses perfect complements in economics, where utility is maximized by 'balancing' two goods (x & y) where the 'min' function guides the balancing exercise. They illustrate with left/right shoes and bike parts examples. The tutor then demonstrates graphing indifference curves for these goods, noting that the highest utility occurs along the 'king' line (e.g. y = x). They conclude with a practical example of maximizing utility under budget constraints.

The tutor presents an in-depth exploration of Cobb-Douglas preferences in consumer theory. Starting with a general utility function, x^αy^β, they discuss its transformations and interpretations, emphasizing ordinal properties and identical indifference curves. The tutor's favorite form is demonstrated through a most general Cobb-Douglas equation, with emphasis on mechanics, solutions, intuitions, corner vs interior solutions, tangency points, and budget constraints. They provide an example using α=0.5, β=0.5, px=2, py=4, m=12. Subscribe to @AxiomTutoringCourses for more comprehensive economic explanations.

The tutor presents the Lagrangian method for deriving Copeland's theorem, explaining its transformation of constrained optimization into unconstrained with three variables. The process involves setting up first-order conditions and combining them to obtain the optimal condition: 'p_x / p_y = αy / βx'. The tutor emphasizes understanding the derivation over memorizing the formula alone. Subscribe to @AxiomTutoring for more.

The tutor introduces the Edgeworth Box, a graphical model illustrating resource allocation in an economy with two goods ('x' and 'y') and two participants ('Revi' and 'Ben'). They discuss how each point within the box represents a unique distribution of resources between individuals. The video emphasizes that every point allocates all available resources, reflecting a key principle in exchange economies. Subscribe to @AxiomTutoringCourses for more insightful mini tutorials.

In this microeconomics tutorial, an experienced tutor explains Pareto optimality using the Edgeworth Box. They discuss how to determine Pareto optimal allocations between two individuals (Revi and Ben), focusing on preferences and indifference curves. The tutor demonstrates that not all points within the box are Pareto optimal, emphasizing the importance of understanding these concepts for assessing efficiency in exchange economies. Subscribe to @AxiomTutoringCourses for more insightful economics lessons or visit our website for an award-winning private tutor to help you with your undergraduate studies.

In this tutorial, the instructor delves into the concept of equilibrium in economics, building upon previous lessons on consumer theory and utility maximization. The video explores the definition of equilibrium as a pair of prices that clear markets, satisfy initial endowments, and maximize utility for all agents. Using an example with two goods (X and Y), the instructor demonstrates how to determine if given prices result in an equilibrium by calculating optimal consumption and verifying market clearing. They conclude by previewing the next video, where they will find the actual equilibrium price.

In this video, Revi explores how to find equilibrium relative prices in an Edgeworth box scenario. He begins by reviewing key concepts from the previous lesson, emphasizing the importance of focusing on relative prices rather than absolute ones. Using a hypothetical economy with two individuals trading food (x) and shelter (y), Ravi demonstrates how to solve for equilibrium price using Walras' Law and market clearing conditions. He shows that by setting one price as the numerator, simplifying demands into functions of the relative price, and solving for market clearance, the equilibrium price can be found. Ravi also offers a check by reversing the price assumption, confirming the expected inverse relationship. Subscribe to @AxiomTutoringCourses for more insightful economics tutorials.

This video introduces the concept of uncertainty in economics, starting a new series on the topic. We will explore what creates uncertainty and delve into risk aversion, a key assumption in understanding economic choices under uncertainty. By the end of this lesson, you'll grasp the meaning of an expected utility maximizer and understand what it truly signifies to be risk averse. To analyze uncertain situations, economists often assume individuals are expected utility maximizers. This means they make decisions based on the weighted average of the utilities they expect to receive from different possible outcomes. This assumption is crucial for modeling economic behavior when the future is not guaranteed. Furthermore, this video clarifies the often misunderstood definition of risk aversion. A risk-averse individual strictly prefers the certain expected value of a lottery over the lottery itself, even if the lottery might offer a higher potential payout in some scenarios. This preference for certainty has practical implications, such as why risk-averse individuals might avoid casinos or prefer a stable salary over freelance work with fluctuating income. Subscribe to @AxiomTutoringCourses for more economics tutorials.

This video introduces a second, equivalent definition of risk aversion in economics. It explains that a risk-averse individual is one whose utility function for money is concave. The presenter uses visual examples to demonstrate what a concave function looks like and how it relates to expected utility versus the utility of an expected value. This concept is crucial for understanding decision-making under uncertainty. Subscribe to @AxiomTutoringCourses for more educational content.

This video introduces the concept of the certainty equivalent as a third definition of risk aversion. We explore how a risk-averse individual compares a lottery to a sure amount of money. The certainty equivalent is the specific sum that makes someone indifferent between receiving that amount for certain and participating in the lottery. We visually demonstrate how this certainty equivalent is always less than the expected value of the lottery for a risk-averse person. This third definition solidifies our understanding of risk aversion through the lens of what individuals are willing to pay for potential gains. Subscribe to @AxiomTutoringCourses for more economic concepts.

This video explains the concept of certainty equivalent in intermediate microeconomics, focusing on risk-averse individuals. We explore a lottery scenario and determine the maximum amount a risk-averse person would be willing to pay for it. The discussion highlights how a risk-averse individual will always prefer the expected value of a lottery over the lottery itself, and will never pay the full expected value. The presenter uses a utility function to calculate the certainty equivalent, demonstrating the steps involved in finding the maximum willingness to pay for an uncertain outcome. This video will help you understand how to calculate the certainty equivalent of a lottery using a given utility function. It's essential for anyone studying economic decision-making under uncertainty. Subscribe to @AxiomTutoringCourses for more economics tutorials.

This video defines risk-neutral individuals and explains their behavior in economic scenarios. We explore the concept of a linear utility function and how risk-neutral individuals are indifferent between a lottery's expected value and the lottery itself. The video then presents a practical application involving a risk-neutral business owner and a risk-averse employee, demonstrating how their differing risk preferences can lead to mutually beneficial outcomes through insurance-like transactions. Subscribe to @AxiomTutoringCourses for more economic tutorials.

This video explains the common setup for insurance problems in microeconomics, contrasting it with real-world insurance. We break down the basic lottery model without insurance and then introduce how insurance is incorporated. The explanation covers wealth, losses, probabilities, coverage amounts, and premiums. The core of the video focuses on defining the consumer's problem within this insurance framework. This involves understanding how consumers make choices to maximize their expected utility when faced with potential losses and insurance payouts. The video sets the stage for solving this optimization problem in the next installment. Subscribe to @AxiomTutoringCourses for more economics tutorials.

This video explores the insurance problem from the consumer's perspective, focusing on expected utility maximization. We'll analyze how a risk-averse consumer makes decisions about purchasing insurance, considering the probability of a bad state, the utility derived from different consumption levels, and the cost of insurance premiums. The explanation delves into the mathematical derivation of the optimality condition for insurance purchases, highlighting the marginal rate of substitution and relative prices. A special case is examined where insurance is actuarially fair, demonstrating that risk-averse individuals will opt for full insurance coverage. Discover the key economic principles behind insurance decisions and understand how risk aversion influences financial choices. This lesson breaks down a complex economic model into understandable components. Subscribe to @AxiomTutoringCourses for more educational content.

This video introduces the Edgeworth box, a crucial tool for understanding economies with multiple participants. We begin by building an economy with two goods, X and Y, and establish the total endowment of these goods. The concept of an allocation is then explained through an example, showing how resources are distributed among individuals. The Edgeworth box specifically emerges when we consider an economy comprised of just two individuals. In this setup, any point within the box represents a specific distribution of both goods between the two participants. This means that by identifying a single point, we simultaneously understand the resource allocation for each individual, highlighting the efficiency and utility of the Edgeworth box in economic analysis. Subscribe to @AxiomTutoringCourses for more economic insights.

This video delves into the concept of equilibrium in the insurance market, exploring what it means for insurance companies and consumers. We break down the fundamental idea of Nash equilibrium and how it applies to this economic model. Learn about the players involved, their strategies, and the conditions that must be met for a stable market. The discussion moves to a graphical analysis of a single firm offering an insurance package to identical buyers, examining why this initial scenario fails to represent an equilibrium. We then explore the implications of free entry and exit, concluding that zero profit is a necessary condition. Discover what a true equilibrium looks like, where no party has an incentive to unilaterally deviate, and understand the concept of actuarially fair insurance. Subscribe to @AxiomTutoringCourses for more economics tutorials.

This video explores the concept of perfect competition within the insurance market, explaining what it means for prices and profitability. Discover how perfect competition ensures actuarially fair prices, where the premium charged equals the probability of the insured event. We illustrate this principle with an example, showing why competitive pressures drive insurance companies to zero economic profit. Understanding this mechanism reveals why actuarially fair prices are the direct outcome of a perfectly competitive insurance landscape. Subscribe to @AxiomTutoringCourses for more insights into economic principles.

This video explores the zero-profit condition within competitive insurance markets. Using a visual framework of consumption in good and bad states, it explains how insurance companies operate under actuarially fair terms. The video demonstrates how market forces, driven by free entry and exit, compel insurance contracts to settle on a specific 'zero-profit line.' Understand why firms making losses or excessive profits cannot sustain their position, leading to perfectly competitive outcomes for consumers. We use a consumption-in-good-state versus consumption-in-bad-state diagram to visualize uncertain contracts. The 45-degree line represents certainty, where outcomes are identical regardless of the state. Actuarially fair insurance is defined where the premium equals the probability of a bad outcome, moving individuals towards full insurance. The video details the slope of the actuarially fair line, represented by (1-Q)/Q or (1-P)/P, which is the locus of zero-profit insurance contracts. It also connects this slope to the Marginal Rate of Substitution between consumption states. Learn how market dynamics ensure that consumers ultimately receive insurance offers at this equilibrium, preventing firms from making sustained profits or losses. Subscribe to @AxiomTutoringCourses for more economics insights.