{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

N_P_Key_Ch_9 - Chapter 9 Consumer Choice and Behavioral...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 9 Consumer Choice and Behavioral Economics Some concepts and vocabulary Utility Marginal utility Diminishing marginal utility Marginal utility per dollar Income Effect Substitution Effect Practice Problem; Suppose there are two goods in the world: hot wings and lemonade. The following lists describe the marginal utility that Joe receives from baskets of wings and glasses of lemonade. , MU Hot Wings MU Lemonade mac/a I_I- IS 1+ Suppose Joe has a budget of $14, and the price of hot wings is SSS/basket and the price of lemonade is $1 / glass. How much of each does Joe consume? Him”: L 5 Now suppose the price of Wings drops to $1/basket. What happens to the relative rice of wings? The relative price of lemonade? Kl\ (W Mam) UR chew The income effect of this price change would cause Joe to consume more or less lemonade? More or fewer wings? What about the substitution effect? mm, ““1 MW ' WW LESS [AIM After the price change, how much of each would Joe consume? 26 W31 Li”? ...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online