Fred, a poor college student, states: "I eat tuna sandwiches five times a week. When I graduate and get a real job, I will never purchase tuna again." Is Fred planning on breaking the law of demand?
For normal goods, we expect consumers to increase their expenditures as their incomes rise. Fred views tuna as an inferior good. He buys tuna because his income is low; as his income rises, he plans on purchasing less.
You might also like to view...
In order to practice third degree price discrimination all of the following conditions must hold except that the firm
a. has monopoly power. b. is able to exercise control over resales. c. is willing to sell more to each customer at lower prices. d. charges a lower price to groups with more elastic demand.
Which of the following will increase the price needed to break even?
a. A decrease in overall fixed costs b. A decrease in the marginal costs c. An increase in fixed costs d. An increase in the level of production
Procyclical policy:
What will be an ideal response?
Your bike is worth $100 and if you park it outside at school there is a 25% chance that it will be stolen. Your utility function for money is U = (M)2. Assume throughout that the bike value and money are interchangeable since you could sell the bike instantly at its value if necessary. What is the expected value of your bike?
What will be an ideal response?