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Economics

David C. Colander

Chapter 19

The Logic of Individual Choice: The Foundation of Supply and Demand - all with Video Answers

Educators

Chapter Questions

02:06

Problem 1

Explain how marginal utility differs from total utility. $\quad(L O 19-1)$

Kevin Simons
Kevin Simons
Numerade Educator
02:06

Problem 2

According to the principle of diminishing marginal utility, how does marginal utility change as more of a good is consumed? As less of a good is consumed? $(L O 19-1)$

Kevin Simons
Kevin Simons
Numerade Educator
01:26

Problem 3

Complete the following table of Scout's utility from drinking cans of soda and answer the questions below. $(L O 19-1)$
a. At what point does marginal utility begin to fall?
b. Will Scout consume the seventh can of soda? Explain your answer.
c. True or false? Scout will be following the utilitymaximizing rule by consuming two cans of soda. Explain your answer.

Nick Johnson
Nick Johnson
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02:53

Problem 4

What key psychological assumptions do economists make in their theory of individual choice? $(L O 19-1)$

Daniel Cisneros
Daniel Cisneros
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04:47

Problem 5

The following table gives the price and total utility of three goods: $\mathrm{A}, \mathrm{B},$ and $\mathrm{C}$.
$$
\begin{array}{c|rrrrrrrrr}
\hline & &&& {\text { Total Utility }} \\
\text { Good } & {\text { Price }} & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 \\
\hline \mathrm{A} & \$ 10 & 200 & 380 & 530 & 630 & 680 & 700 & 630 & 430 \\
\mathrm{~B} & 2 & 20 & 34 & 46 & 56 & 64 & 72 & 78 & 82 \\
\mathrm{C} & 6 & 50 & 60 & 70 & 80 & 90 & 100 & 90 & 80 \\
\hline
\end{array}
$$
As closely as possible, determine how much of the three goods you would buy with $\$ 20$. Explain why you chose what you did. $(L O 19-2)$

Manasvee Singh
Manasvee Singh
Numerade Educator
04:47

Problem 6

The following table gives the marginal utility of John's consumption of three goods: $\mathrm{A}, \mathrm{B},$ and $\mathrm{C} . \quad(L O 19-2)$
a. Good A costs $\$ 2$ per unit, good B costs $\$ 1,$ and good $\mathrm{C}$ costs $\$ 3 .$ How many units of each should a consumer with $\$ 12$ buy to maximize his or her utility?
b. How will the answer change if the price of $\mathrm{B}$ rises to $\$ 2 ?$
c. How about if the price of $\mathrm{C}$ is 50 cents but the other prices are as in $a$ ?

Manasvee Singh
Manasvee Singh
Numerade Educator
03:12

Problem 7

The total utility of your consumption of widgets is $40 ;$ it changes by 2 with each change in widgets consumed. The total utility of your consumption of wadgets is also 40 but changes by 3 with each change in wadgets consumed. The price of widgets is $\$ 2$ and the price of wadgets is $\$ 3 .$ How many widgets and wadgets should you consume? $(L O 19-2)$

Pammi Eswari
Pammi Eswari
Numerade Educator
02:13

Problem 8

Early Classical economists found the following "diamond/ water" paradox perplexing: "Why is water, which is so useful and necessary, so cheap, when diamonds, which are so useless and unnecessary, so expensive?" Using the utility concept, explain why it is not really a paradox. (Difficult) $(L O 19-2)$

Jake Rempel
Jake Rempel
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07:24

Problem 9

State the law of demand and explain how it relates to the principle of rational choice. $\quad(L O 19-3)$

Ansh Varma
Ansh Varma
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04:47

Problem 10

Suppose a large cheese pizza costs $\$ 10$ and a calzone costs $\$ 5$. You have $\$ 40$ to spend. The marginal utility (MU) that you derive from each is as follows: $(L O 19-3)$
a. How many of each would you buy?
b. Suppose the price of a calzone rises to $\$ 10$. How many of each would you buy?
c. Use this to show how the principle of rational choice leads to the law of demand.

Manasvee Singh
Manasvee Singh
Numerade Educator
03:51

Problem 11

Your study partner tells you that if you are compensated for the impact on your budget of a rise in the price of a good, your purchase choices won't change. Is he right? $\begin{array}{ll}\text { Explain. } & (L O 19-3)\end{array}$

Sirat Shah
Sirat Shah
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03:05

Problem 12

State the law of supply and explain how it relates to opportunity cost. $(L O 19-3)$

Daniel Cisneros
Daniel Cisneros
Numerade Educator
01:11

Problem 13

If the supply curve is perfectly inelastic, what is the opportunity cost of the supplier? $(L O 19-3)$

Tristan Wille
Tristan Wille
Numerade Educator
01:59

Problem 14

There is a small but growing movement known as "voluntary simplicity," which is founded on the belief in a simple life of working less and spending less. Do Americans who belong to this movement follow the principle of rational choice? $(L O 19-3)$

Brandon Miskanic
Brandon Miskanic
Numerade Educator
01:54

Problem 15

According to Thorstein Veblen, what is the purpose of conspicuous consumption? Does the utility derived from the consumption of these goods come from their price or functionality? Give an example of such a good. $\quad(L O 19-4)$

Xiaomin Bian
Xiaomin Bian
Numerade Educator
02:50

Problem 16

Say that the ultimatum game described in the chapter was changed so that the first individual could keep the money regardless of whether the offer was accepted by the second individual or not. $(L O 19-4)$
a. What would you expect would likely happen to the offers?
b. What would happen to the acceptances?

Manasvee Singh
Manasvee Singh
Numerade Educator