1. (Law of Diminishing Marginal Utility) Some restaurants offer all you can eat meals.
How is this practice related to diminishing marginal utility? What restrictions must the
restaurant impose on the customer in order to make a profit? (Answers may vary)
1. (Demand Under Perfect Competition) What type of demand curve does a perfectly competitive firm face? Why?
The demand curve is flat because if they try to raise the price on their products, their products
will not sell.
2. Explain the different options
1-) (Categories of Price Elasticity of Demand) For each of the following absolute values of price elasticity of demand, indicate whether demand is elastic, inelastic, perfectly elastic, perfectly inelastic, or unit
elastic. In addition, determine what wou
A 10% increase in the price of chicken has a greater effect on the consumer price index than a 10%
increase in the price of caviar because chicken is a bigger part of the average consumer's market basket.
2. The three problems in the consumer