Economics Homework Four Answers - Student Two

Seth P.

1.A consumer's overall satisfaction is expressed in economics as his utility.

Correct, or you could say "total utility."

2.Your consumer surplus would be $1000. Consumer surplus is when you work hard and get lots of money and then go to buy something and find out it isn't as expensive as you thought. Then the amount of money you have left over is your consumer surplus.

Superb.

3.I would maximize my utility by hiking for 3 hours and reading for 2 hours. This would give me a total utility of 34 for those 5 hours. I hiked for 3 hours because after the first three hours my reading utility was higher than what my hiking utility would be. I would have more fun reading after those three hours than I would hiking.

Excellent, but your order for the activities is incorrect. 2 hours of hiking, then 2 hours of reading, then 1 hour of hiking. (Minus 1).

4.I would say no I want a lower price because it isn't brand new. It has a hundred miles on it. I want the market price.

Good.

5.The shape of an indifference curve for two goods that are perfect substitutes is a straight line going from the upper left down to the lower right because the person likes both things the same amount. It's slope must be negative 1 because it goes down 1 point every time you trade out one good.

Correct.

6.The income effect is what happens when the price of something goes down, it seems to increase your income which means you can use the extra money to buy more stuff.

"buy more stuff ..." perhaps including more of the good which had the decrease in price. Good answer.

7.Charity comes first because all free markets need to have a charity foundation to thrive. But in my opinion they go hand in hand, you can't have one without the other. In one place charity may come first and in another place the free market may come first but in both places they will have both charity and the free market at some point.

Excellent, may use as a model.

8.”A penny saved is a penny earned!” means that if you have a choice between two things that the quality is the same, but one is cheaper than the other one, and you buy the cheaper one that means the money you saved is basically like earning more money. You have more money than you would have if you bought the more expensive one.

Superb, could say a bit more about this question or another one. (Minus 3)

12.Goods X and Y are complements to each other because the indifference curves show that if you have one of X you want one of Y.

Excellent. (Plus 2).

Terrific answers. 108/110. Congratulations!!!--Andy Schlafly 11:06, 11 October 2009 (EDT)