Suppose, at a party for economics majors, you win a choice among three mystery boxes. You don't know what each contains, but you know that each box has a pair of gifts. You know that one box has a CD and a pair of sunglasses, another has tickets to a Flaming Lips concert and a gift certificate to a close-by restaurant for dinner before the concert, and the other has two very similar textbooks on economics. The only clue given is the cross elasticities among the gifts in each box: for the red box, cross elasticity is +1.5, for the blue box, -1.5, and for the white box, 0. If you wanted the dinner and concert pair, which box would you pick?
Answer to relevant QuestionsWhy do economists complicate the equation for elasticity by averaging prices and quantities? Calculate the price elasticities of demand for razors for each one-dollar change in price. How can proponents of a more equitable distribution of income use the law of diminishing marginal utility of money to justify their position? Choosing any set of numbers to represent utils, draw a total utility curve that shows your increasing enjoyment—then decreasing enjoyment—as you consume more and more chocolate-covered donuts. Draw the corresponding ...What are usury laws? Why do you think they have been so universally applied?
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