Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 21, Problem 17E
To determine
Reason for spending more on luxury goods at an older age than when people are younger.
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Based on several observations, people at older ages tend to buy more luxurious products than when they were younger. Does this mean that diminishing marginal utility of money declines as people age?
What factors commonly influence a person’s daily buying choices? Select one of these and explain how one might counteract this influence to improve purchasing behavior.
Explain how utility could be used in a decision where performance is not measured by monetary value.
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- A consumer is currently purchasing three pairs of jeans and five T-shirts per year. The price of jeans is $60, and shirts cost $10. At the current rate of consumption, the marginal utility of jeans is 240, and the marginal utility of shirts is 30. Based on the model of consumer choice, what should this consumer do to maximize utility? Purchase fewer shirts and more jeans. Purchase more shirts and fewer jeans. Purchase only jeans. This consumer is already maximizing utility. Purchase only shirts.arrow_forward"Wants are not limitless. This can be proven. I get all the breakfast I want every morning." Explainarrow_forwardIs it irrational to spend all your current disposable incomearrow_forward
- Critically discuss whether maximising behaviour or satisficing behaviour is the best way to explain consumer behaviourarrow_forwardYou have £20 per week to spend, and two possible uses for this money: telephoning friends back home, and drinking coffee. Each hour of phoning costs £2, and each cup of coffee costs £1. Your utility function is U(X,Y) = XY, where X is the hours of phoning you do, and Y the number of cups of coffee you drink. What are your optimal choices? What is the resulting utility level? You can use the standard result on the constrained maximization of such a function, but must state it clearly. Now suppose the price of telephone calls drops to £1 per hour. What are your optimal choices? What is the resulting utility level? How much income per week will enable you to achieve the same quantities at the new prices as the ones you chose before? What income will enable you to attain the same utility as you did before? Comment on your answer in the context of equivalent variation and compensating variation.arrow_forwardSam's extended family spends $3,200 per month on wine and beer. Their utility function is given by U = 200WB, where W represents the number of bottles of wine that they buy, and B represents the number of cases of beer that they buy. Wine costs $25 per bottle and beer costs $32 per case. Sam's family wants to maximize their utility. Calculate how many bottles of wine and how many cases of beer they should buy. Show your calculation(s).arrow_forward
- Use the graph below to answer the following question: Which point would give this individual the most utility, while still being affordable? tacos vs chicken fingers Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.arrow_forwardWhen a company offers a new product or service, they estimate how much of that product or service people will want at different prices. This is referred to as the product or service demand. As the price of a product or service increases, the demand usually decreases, and this drives the price down. Companies use the estimated demand to determine how much of a product or service they are willing to supply at different prices. As the price of a product or service increases, companies are willing to supply more of it because they will earn more money. If you graph the demand and the supply curves on the same xy-plane, they will sometimes intersect at the point where the price and the supply are in equilibrium. Consider the scenario below. Yaseen is a local artist who wants to increase the amount of money she earns every month by selling at-home painting kits. These kits will include a photograph of the finished painting, a link and password to Yaseen’s YouTube channel where she will…arrow_forwardLet MUA = z = 10 − x and MUB = z = 21 − 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $10 to spend on A and B—that is, x + y = 10. How is the $10 best allocated between A and B? How much utility will the marginal dollar yield?arrow_forward
- Explain the principles, concepts, and theories underlying individual consumers’ behaviour with respect to utility maximization.arrow_forwardWhat are the types of utilityarrow_forwardEvaluate the one specific law which states that the marginal utility of a good orservice declines as more of the good or service is consumed in a specific timeperiod.arrow_forward
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