Emily is considering a move from Galway to London. She only consumes food and clothing and the table contains information about her consumption levels in Galway, the prices of food and clothing in Galway and London, and her income in both cities. Her consumption of food and clothing are the only factors that affect her utility. Why does rational choice theory predict that Emily will move to London? Explain clearly. What bias in human behaviour explains why behavioural economics predicts that Emily may stay in Galway? Explain clearly. Price of Food in Galway €4 Price of Food in London €2 Quantity of food consumed in Galway 10 Quantity of food consumed in London n.a. Price of Clothing in Galway €2 Price of Clothing in London €5 Quantity of clothing consumed in Galway 20 Quantity of clothing consumed in London n.a. Income in Galway €80 Income in Galway €120
Emily is considering a move from Galway to London. She only consumes food and clothing and the table contains information about her consumption levels in Galway, the prices of food and clothing in Galway and London, and her income in both cities. Her consumption of food and clothing are the only factors that affect her utility.
Why does rational choice theory predict that Emily will move to London? Explain clearly.
What bias in human behaviour explains why behavioural economics predicts that Emily may stay in Galway? Explain clearly.
|
Price of Food in Galway |
€4 |
Price of Food in London |
€2 |
|
Quantity of food consumed in Galway |
10 |
Quantity of food consumed in London |
n.a. |
|
Price of Clothing in Galway |
€2 |
Price of Clothing in London |
€5 |
|
Quantity of clothing consumed in Galway |
20 |
Quantity of clothing consumed in London |
n.a. |
|
Income in Galway |
€80 |
Income in Galway |
€120 |
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