EMLE cheat sheet

Utility maximization: choose bundle where MRS (MUx/MUy) equals price ratio px/py; tangency of indifference curve and budget line, with corner solutions when MRS never equals the price ratio.

Slutsky decomposition: total effect of a price change = substitution effect (always opposite to price change for a normal or inferior good) + income effect; Giffen goods require inferiority and a dominant income effect.

Marshallian demand derives from max U subject to income; Hicksian (compensated) demand holds utility fixed - used for exact welfare measures (CV, EV).

Consumer surplus change approximates welfare only for small price changes; compensating variation is the income adjustment restoring the original utility level.

Short-run cost: MC = w/MPL; ATC = AFC + AVC; MC crosses ATC and AVC at their minima. Long-run equilibrium in perfect competition: P = MC = min ATC, zero economic profit.

Elasticity: price elasticity of demand = (dQ/dP)(P/Q); revenue rises with a price cut only if demand is elastic (|e| > 1). Lerner index = (P − MC)/P = 1/|e| for profit-maximizing monopoly.

Monopoly: MR = P(1 + 1/e); profit max at MR = MC; deadweight loss from pricing above MC equals the triangle between demand and MC over the restricted quantity.

Oligopoly benchmarks: Cournot quantity competition yields output between monopoly and perfect competition; Bertrand price competition with homogeneous goods and equal costs drives P to MC.

Production: cost minimization requires MRTS = w/r; returns to scale from the homogeneity degree of the production function; economies of scale imply declining long-run average cost.

Coase theorem: with zero transaction costs, well-defined property rights, and full information, bargaining reaches an efficient allocation regardless of the initial entitlement; the assignment affects distribution only.

Transaction costs (bilateral monopoly holdout, many parties, asymmetric information, strategic behavior) explain why legal rules matter when bargaining is costly.

Pareto efficiency: no reallocation can make someone better off without making another worse off; Kaldor-Hicks (potential Pareto) improvement: gains exceed losses, allowing compensation in principle.

Negative externality: private optimum sets marginal private benefit equal to marginal private cost; social optimum equates marginal social benefit and marginal social cost; the gap is the Pigouvian tax or damages measure.

Coasean remedy vs Pigouvian remedy: injunctions/property rules assign entitlements and let parties bargain; liability rules and taxes price the harm and work better with high transaction costs.

Hand formula (United States v. Carroll Towing): breach of duty when burden B < probability P × loss L; a cost-benefit standard for negligence.

Property rule vs liability rule (Calabresi-Melamed): property rule requires consent before taking; liability rule permits taking against payment of objectively set compensation.

Reciprocal nature of harm: the externality problem is choosing between competing uses, so the question is which activity should bear the cost, not merely who caused the damage.

Civil law tradition: primary authority in comprehensive codification (e.g., French Code civil 1804, German BGB 1900); judges apply and interpret codes rather than create binding precedent.

Common law tradition: case law and stare decisis are central; statutes are interpreted against a background of judge-made doctrine.

Institutional distinctions: career judiciary with separate training in civil law systems; in common law systems judges typically are appointed from the practicing bar.

Legal families: Romanistic, Germanic, Nordic, and common law; mixed jurisdictions (Scotland, South Africa, Louisiana, Quebec) combine both traditions.

Procedure: inquisitorial model (court-driven fact-finding, dossier) versus adversarial model (party-driven presentation, cross-examination); the divide is a tendency, not absolute.

Legal origins literature (La Porta et al.) links common law to stronger investor protection and civil law (especially French) to weaker protection; findings are contested and correlational.

Codification vs precedent affects information costs: codes lower search costs for general rules; precedent supplies fine-grained, fact-specific guidance.

Path dependence and legal transplants: transplanted rules interact with local institutions, so identical statutes can yield different outcomes.

Efficient breach: breach is efficient when the promisor's cost of performance exceeds the promisee's expected benefit; expectation damages make the promisor internalize the promisee's loss.

Remedy comparison: expectation damages protect reliance and expectation; reliance damages restore the pre-contract position; restitution disgorges the breacher's gain; specific performance is used when damages are inadequate (unique goods).

Hadley v Baxendale limits damages to losses foreseeable at contracting; this caps liability and reduces information costs.

Incomplete contracts: parties leave terms open because of uncertainty and drafting costs; default rules fill gaps and should be set to what most parties would have chosen (majoritarian default).

Tort: strict liability is efficient when the injurer is the cheaper cost avoider or when activity levels matter; negligence is preferred when the injurer can take efficient care and the victim's precaution also matters.

Negligence under the Hand formula: liability if PL > B; under strict liability the injurer internalizes all accident costs and chooses care where marginal cost of care equals marginal reduction in expected harm.

Property: bundle of rights (use, exclusion, transfer); exclusion is cheap to administer for land, while governance rules are used for common-pool resources.

Tragedy of the commons: open access leads to overuse because users ignore the congestion cost imposed on others; solutions include privatization, quotas, or Ostrom-style self-governance.

Coasean remedies in property: injunctions protect entitlements but risk holdout; damages allow efficient transfers when bargaining is costly.

Public goods: non-rival and non-excludable, so private markets underprovide; efficient provision requires sum of marginal benefits equal marginal cost (Samuelson condition).

Natural monopoly: declining average cost over relevant demand, so marginal-cost pricing causes losses; regulated price often set at average cost (break-even) or via price-cap (RPI − X) regulation.

Regulatory capture and asymmetric information: regulators may serve the regulated industry; rate-of-return regulation can induce overcapitalization (Averch-Johnson effect).

Competition law: Article 101 TFEU prohibits anticompetitive agreements; Article 102 TFEU prohibits abuse of dominance; EU merger control (Regulation 139/2004) applies significant-impediment-to-effective-competition test.

Relevant market defined by demand and supply substitutability (SSNIP test: small but significant non-transitory increase in price); market shares and concentration (HHI) inform dominance analysis.

Horizontal agreements: price fixing and market sharing are per se illegal (restrictions by object); other agreements assessed under effects analysis with efficiency defense.

Vertical restraints and abuse: refusal to supply, tying, and predatory pricing assessed under as-efficient-competitor and consumer-harm standards.

Public choice: rent-seeking and logrolling explain regulation that benefits concentrated interests at diffuse cost; cost-benefit analysis and sunset clauses are corrective tools.

Expected value = Σ p_i x_i; variance = Σ p_i (x_i − μ)²; standard deviation is the square root of variance. Risk-neutral agents maximize expected value; risk-averse agents maximize expected utility of a concave utility function.

Nash equilibrium: a strategy profile where no player can gain by unilateral deviation; dominant strategy equilibrium is stronger; mixed strategies may be required (matching pennies).

Prisoner's dilemma: individually rational defection yields a Pareto-inferior outcome; repeated games can sustain cooperation via trigger strategies when the discount factor is high enough.

Sequential games solved by backward induction; subgame-perfect equilibrium requires credibility at every node.

Graph reading: slope of a line = Δy/Δx; area under a marginal curve equals the total; consumer surplus is the area between demand and price; deadweight loss is the triangle between demand and marginal cost.

Statistical inference: standard error of the mean = s/√n; a 95% confidence interval is approximately estimate ± 1.96 SE; correlation does not establish causation.

Regression: coefficient is the expected change in y per one-unit change in x, holding other regressors fixed; omitted variable bias arises when a relevant variable correlates with both x and y.

Present value = FV/(1 + r)^t; discounting compares costs and benefits occurring at different times; higher discount rates favor near-term benefits.

Thesis statement: a single, contestable claim that the essay defends; it should be specific enough to be falsifiable and placed early (usually end of introduction).

Argument structure: claim, evidence, warrant (the reasoning linking evidence to claim), and acknowledgment of counterarguments (steel-manning then rebuttal).

Hedging and precision: use modal and quantifying language ("suggests", "is associated with") for uncertain claims; avoid absolute terms ("always", "proves") unless justified.

Cohesion: topic sentences, signposting ("however", "therefore", "by contrast"), and consistent terminology; each paragraph should advance one idea.

Citation and attribution: distinguish the author's claim from sources ("According to X..."); avoid plagiarism by quoting, paraphrasing with citation, and keeping your own analysis distinct.

Common fallacies to avoid: ad hominem, straw man, false dilemma, post hoc ergo propter hoc, appeal to authority without expertise, and circular reasoning.

Formal register: avoid contractions and colloquialisms; use precise verbs ("argues", "contends", "demonstrates") rather than vague ones ("says", "talks about").

Editing checklist: subject-verb agreement, parallel structure in lists, clear pronoun reference, and one main idea per sentence; read aloud to catch awkward phrasing.