Economics Homework Four Answers - Student Fifteen

IsaacZ

1\. Utility

Correct, but it would be better to say "total utility" in order to distinguish it from "marginal utility."

2\. The consumer surplus on the sports car would be $1,000. Consumer surplus is the money you save when you buy something that costs less than what you were willing to pay for it.

Excellent.

3\. I would spend 3 hours hiking and 2 hours reading which would give me a total of 34 utility if i spent my whole 5 hours hiking I would have only 27 utility and if I spent the whole time reading I would only have 21 utility. By balancing my two favorite hobbies I would maximize my utility.

Excellent, might also include the order of the activities. But you added terrific analysis how you maximized utility relative to doing each activity exclusively.

4\. I would tell the dealer that I will only buy the car if he lowers the price because the car is not worth as much as a brand new car. If he does not lower the price then I would spend my money on a brand new car.

Right.

5\. The slope is a straight line because the goods are perfect substitutes for each other the person will gladly trade one for another because they are both equal in his mind.

Excellent.

6\. The "income effect" is the amount of money that people make and the price of goods. If a person's income is low then he will not want to buy higher priced goods. If his income is high then he will want to more goods or more expensive goods. The more money a person makes, the more goods he will be willing to buy.

No, that's not what "income effect" is. See model answers. (Minus 1).

7\. I think that the free market is more important than charity. This is because with the free market it enables more people to make more money thus causing some people to give their money away. The more people who are making more money the chance that more money is given to charity is greater.

Excellent.

Terrific answers. 68/70. Well done!--Andy Schlafly 15:39, 11 October 2009 (EDT)