Tag Archives | Firm

Envelope Theorem for Constrained Optimization | Production | Economics

The Envelope theorem is explained in terms of Shepherd's Lemma. In this case, we can apply a version of the envelope theorem.  Such theorem is appropriate for following case: Envelope theorem is a general parameterized constrained maximization problem of the form Such function is explained as h(x1, x2 a) = 0. In the case of the cost function, the function [...]

By |2017-06-08T11:57:23+05:30June 8, 2017|Production Function|Comments Off on Envelope Theorem for Constrained Optimization | Production | Economics

The Technical Rate of Substitution | Production Function | Economics

The technical rate of substitution in two dimensional cases is just the slope of the iso-quant. The firm has to adjust x2 to keep out constant level of output. If x1 changes by a small amount then x2 need to keep constant. In n dimensional case, the technical rate of substitution is the slope of an iso-quant surface. It is [...]

By |2017-06-08T11:57:23+05:30June 8, 2017|Production Function|Comments Off on The Technical Rate of Substitution | Production Function | Economics

Nash Equilibrium Strategies of Game Theory | Microeconomics

The definition of Nash equilibrium lacks the ∀ s-i" of dominant strategy equilibrium. The Nash equilibrium strategy need only be a best response to the other Nash strategies not to all possible strategies. Although, we deal with best responses and the moves are actually simultaneous. Therefore the players are predicting each other moves. The Battle of Politics: In the battle [...]

By |2017-06-08T11:57:23+05:30June 8, 2017|Game Theory|Comments Off on Nash Equilibrium Strategies of Game Theory | Microeconomics
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