Suppose that in addition to being a college student, you run your own business and earn $35,000
Question:
Suppose that in addition to being a college student, you run your own business and earn $35,000 per year. Your friends are all in college, and their average annual income is $10,000 per year. When you graduate from college, you decide to continue running your business. Your friends accept jobs that pay $50,000 per year. Do you expect your utility to increase, decrease, or stay the same after graduation? Why?
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Even though your own income has not changed you now make relatively less than your friends instead of relatively more Your frame of reference has changed and this may lead to lower utility Of course being your own boss may make you happier and this might outweigh the relative ...View the full answer
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