Economics Homework Four Answers - Student Seventeen

JonathanL 10/15/09

1.) A consumer’s overall satisfaction is expressed as his total utility.

2.) Your consumer surplus would be 1,000$ dollars. This means that you have 1,000$ extra dollars to spend or save. It is as if you made 1,000$ dollars more because you planned to spend 10k on the car but it only cost 9k.

3.) If I hike for four hours my total utility is 19 units. After that I do not receive any extra utility from hiking. With reading, however, I generate 15 units of utility after five hours, and after no more utility comes out of reading. If I have five extra hours today, I should spend three hours hiking and two hours reading a book as to generate my maximum utility from my activities.

4.) Obviously you should talk the dealer down to the market value for that used car and not base your decision on how much you would pay for it rather how much everyone else would pay for it. In a free market no one cares what one person wants, and the car salesperson knows that.

5.) y = mx + b where m = slope and b = y intercept. If you graph two functions side by side both with a slope of m = -1, but with different y intercepts, it does not matter what your input value for x is because both equations are parallel and their corresponding y values will be proportional, because both lines have the same slope. Also, the slope of both equations have to be negative one because even if one equation’s slope was -.9999999999, the two lines would intersect at some point which would mean that they are not parallel therefore not perfect substitutes for one another.

6.) The income effect is when a good costs a different amount then previously expected. For example, you thought that milk would be 5$ per gallon, but instead is 1.50$ per gallon. You can either choose to by three gallons of milk and have .50$ left over, or you could simply save the other 3.50$. When the income effect stems from a good lowering in price, demand for goods always rises.

7.) First, I am going to limit charity to monetary gifts, not good deeds or actions. If this is the case, then charity HAS to follow a successful free market because people can only give when they have extra. If your market is not successful, then you cannot donate extra money, because you have none.