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CES: Production function: Elasticity of substitution $\sigma = 1/(1 + \rho)$

I have to prove that $\sigma = 1/(1 + \rho)$ for the CES production function: \begin{align} q = (l^\rho + k^\rho)^\frac{1}{\rho} \end{align} I found out that I need to solve the following equation: \begin{align} \sigma =…
frankfranfrank
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Are options a form of insurance?

In my economics classes we have studied some really rudimentary concepts about insurance. I'm not really sure what qualifies as insurance to be honest. I was wondering if options are considered a form of insurance? Is that the right way to think…
Stan Shunpike
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Why hasn't Quantitative Easing surged inflation, or caused hyperinflation?

Quantitative Easing (QE) is the buying of bonds and other financial assets by the Central Bank with high-powered money, or money created by the CB for this purpose. Isn't this ad-hoc creation of money the main ingredient for hyperinflation? Why…
An old man in the sea.
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Will a Guaranteed minimum income not eventually just be crowded out by inflation?

That is, if we implement a guaranteed minimum income, would inflation not eventually rise to a point where it is essentially useless? I would expect prices to be adjusted knowing people have a certain amount of money available. Any explanation would…
Rich
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Are obstructed views a negative externality?

I recently read an excellent paper on the causes of high urban real estate prices in the United States, Why is Manhattan so expensive? Regulation and the rise in house prices (GLAESER, GYOURKO, and SAKS (2005)). In trying to understand if…
BKay
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Envelope Paradox

There are two envelopes. One contains $x$ money and the other contains $2x$ amount of money. The exact amount "$x$" is unknown to me, but I know the above. I pick one envelope and I open it. I see $y$ money in it, obviously where $y \in \{x,…
Kitsune Cavalry
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Competitive equilibrium in Leontief economies

Consider an economy in which all consumers have, possibly different, Leontief utilities. Since preferences are not strictly convex, it is not guaranteed that a competitive equilibrium exists. I found some papers that discuss the computational…
Erel Segal-Halevi
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Inflation without Increase in Money Supply?

Is it possible to have inflation without increase in the supply of money? For example, if workers demanded higher wages, and goods went up in price, but the money supply in circulation did not increase. Or is this an impossible paradox?
Bob Umadbro
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Are terrorists rational?

Terrorism in general, and suicidal terrorism in particular, is popularly seen as “irrational,” but many economists and political scientists argue otherwise. This quote is from Terrorism: The relevance of the rational choice model by Bryan…
emeryville
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Getting up to Date on Macro

I have undergraduate level experience in macroeconomics...but I want to do some further learning to try and acquaint myself with where mainstream macroeconomics is at the moment in the hopes that I can understand the economy better. I understand…
SocraticParadox
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Why do stock exchanges not operate at a fixed frequency?

Would this not be more fair towards traders who don't trade at high frequency? And would it not be possible to distribute this fixed frequency to other exchanges, modulo relativity? The reason I'm asking is because I recently learned that…
sshine
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Bartik Instrument Intuition

I have a question regarding the Bartik Instrument. I understand that this instrument is a particularly important tool that is used in labor economics. From my understanding, this instrument attempts to isolate demand shocks from supply…
ChinG
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Why wouldn't competition prevent "usurious" payday loan rates?

The current Wiki page on "Payday Loans" claims loans are priced above marginal cost. The justification is that If a lender chooses to innovate and reduce cost to borrowers in order to secure a larger share of the market, the competing lenders will…
tba
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Concave production function implies convex cost function

Let's assume we have an increasing production function $f:\mathbb{R^+} \to \mathbb{R^+}$ Now, assume this production function is concave and that the price of input z is fixed (this is a single-input and single output case). I want to show this…
123
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How infinite Nash equilibria are possible in a game?

I was studying games when one of the players seems to be indifferent between two or more pure strategies because he gets the same payoff with each strategy. We say that there are infinite Nash equillibria in the game but I am unable to calculate it…
Sub-Optimal
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