Beruflich Dokumente
Kultur Dokumente
Q&A
State and solve the diamond-water paradox.
If total utility is falling, what does this
imply for marginal utility? Give an a
mathematical example to illustrate your
answer.
When would the total utility of a good and
the marginal utility of a good be the same?
Consumer Equilibrium
Occurs when the
consumer has spent all
income and the
marginal utilities per
dollar spent on each
good purchased are
equal.
Q&A
Alesandro purchases two goods, X and Y, and the
utility gained for the last unit purchased of each is
16 utils and 23 utils, respectively. The prices of X
and Y are $1 and $1.75, respectively. Is Alesandro
in consumer equilibrium? Explain your answer.
The text cites a situation in which the buying
behavior of two rats followed the law of demand.
Does it follow that these two rats were attempting
to equate marginal utilities per push of the
lever? Explain your answer.
Behavioral Economics
Are People Willing to Reduce Others Incomes? In
a study, 62% of the participants made themselves
worse off in order to make someone else worse off.
Is $1 always $1? Sometimes people
compartmentalize their money.
Coffee Mugs and the Endowment Effect: We value
X more highly if we have it than if we do not have it
because such behavior at one point in our evolution
made possible a system of property rights in a world
where the alternative was the Hobbesian jungle.
Q&A
Brandons grandmother is very cautious about spending
money. Yesterday, she gave Brandon $100 for his birthday.
Brandon also received a gift of $100 from his father who
isnt nearly as cautious about spending money as Brandons
grandmother is. Brandon believes that it would somehow
be wrong to spend his grandmothers gift on frivolous
things, but that it wouldnt be wrong to spend his fathers
gift on such things. Why does Brandon feel this way?
What economic effect is this?
Explain the Endowment Effect.