Managerial Economics – 6005 Chapter 4 & 5 Homework Chapter 4 4.1 “ The utility derived from consumption is intangible and unobservable. Therefore, the utility concept has no practical value”. Discuss this statement. The utility concept is a descriptive concept that relates well-being of consumers and the goods and services they consume. It is also measurable. Hence, although it is intangible and unobservable, it does have a practical value because of its measurability. 4.3 Prospective car buyers are sometimes confronted by sales representative who argue that they can offer a vehicle that is “just as good as a BMW, but at one-half the price.” Use the indifference concept to explain why the claims of the sales representative are not credible. 4.5 Describe the income, substitution, and total effects on consumption following a price decrease. Chapter 5 5.1 Is the economic demand for a product determined solely by its usefulness? 5.2
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