1001majorch5

1001majorch5 - ECON1001AB IntroductiontoEconomicsI...

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ECON 1001 AB Introduction to Economics I Dr. Ka-fu WONG Fifth week  of tutorial sessions KKL 925, K812, KKL 106 Clifford CHAN KKL 1109 givencana@yahoo.ca
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Covered and to be covered Covered last week Dr. Wong finished up to slide #26 of kf005.ppt You should have at least read up to Chapter 5 Demand: The Benefit Side of the Market, and the Appendix If not, please press hard on it. Start reading Chapter 6 Your first Economics Naturalist writing assignment is due this Friday October 12. To be covered in the tutorial sessions this week Problems in chapter 5: #1, #3, #5, #7, #8 and #9 You are advised to work on the even ones as well
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Problem #1, Chapter 5 In which type of restaurant do you expect the service to be more prompt and courteous: an expensive gourmet restaurant or an inexpensive diner? Explain.
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Solution to Problem #1 (1) Refer to chapter 1 We discussed that the amount you are willing to spend on a certain product reveals the value or the benefit of the product If you are rational and are willing to pay $800 for an admission ticket to watch a concert, the value or benefit of the concert must be at least $800 In the question, two options are given: an expensive gourmet restaurant and an inexpensive diner Both the restaurant and the diner are actually businesses selling food and services
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Solution to Problem #1 (2) In of terms of Economics goods, is “food” a normal good or an inferior good? Food is both a necessity and a normal good. If your income increases, you will probably increase your consumption in food or increase your consumption in expensive food like premium beef and seafood In of terms of Economics goods, is “service” a normal good or an inferior good? Service is also a normal good. If your income increases, you will probably spend more on service or spend more on expensive service like hiring a in-house maid to do all the housework or hiring an professional accountant to look over your wealth management
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Solution to Problem #1 (3) Thus, “Willingness to pay for FOOD”, and that for SERVICE are increasing functions with income Expensive gourmet restaurants like those in ifc or in luxurious hotels target on diners who earn higher incomes Inexpensive diners like those on campus target on diners who earn lower incomes
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Solution to Problem #1 (4) To attract diners earning higher incomes and charge
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1001majorch5 - ECON1001AB IntroductiontoEconomicsI...

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