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Line 144: + + − − 3. A student likes swimming and playing the violin. The first hour she swims she improves by 6 units of utility, and then each successive hour she improves by half the rate of the hour before it. The first hour she practices the violin she improves by 4 units of utility, then each successive hour she improves at a rate of 90% the hour before it. In 3 total hours to practice, how should she maximize her utility?
better
Defining real price in terms of opportunity cost avoids the havoc that inflation causes with prices. Back in the late 1970s, inflation was more than 10% per year. What cost $10 one year would cost $11 the next year, and over $12 in the third year. If a good kept the same price during those three years, then its opportunity cost and real price actually decreased. Think about that.
Defining real price in terms of opportunity cost avoids the havoc that inflation causes with prices. Back in the late 1970s, inflation was more than 10% per year. What cost $10 one year would cost $11 the next year, and over $12 in the third year. If a good kept the same price during those three years, then its opportunity cost and real price actually decreased. Think about that.
Economists created something called the “Consumer Price Index,” or CPI, to measure changes in basic prices of many goods over time. It looks at the typical purchases by urban (not farming) families and monitors the change in prices of those goods and services from month-to-month. It includes the costs of food, beverages, housing, clothes, transportation, medical care, recreation, education, and even services like haircuts. It then combines all those values into one number. To make it easier to compare, the values are combined in a way that the CPI for the period 1982-84 averaged “100". In January 2004, the CPI was 185.2. You can view all the numbers back nearly a hundred years at:
Economists created something called the “Consumer Price Index,” or CPI, to measure changes in basic prices of many goods over time. It looks at the typical purchases by urban (not farming) families and monitors the change in prices of those goods and services from month-to-month. It includes the costs of food, beverages, housing, clothes, transportation, medical care, recreation, education, and even services like haircuts. It then combines all those values into one number. To make it easier to compare, the values are combined in a way that the CPI for the period 1982-84 averaged “100". In January 2004, the CPI was 185.2. You can view all the CPI numbers going back nearly a hundred years on the internet.<ref>ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt</ref> In July 2009, the CPI was 215.351. Inflation causes it to go higher and higher, as the government prints more and more dollars and cause them to lose their value.
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
By comparing a change in price of a good to the change in the CPI, you can tell whether the real price of the good is becoming more or less expensive. If the good’s price increases by less than the CPI’s increase, then the good has a real price that is falling.
By comparing a change in price of a good to the change in the CPI, you can tell whether the real price of the good is becoming more or less expensive. If the good’s price increases by less than the CPI’s increase, then the good has a real price that is falling.
2. Suppose you see a sleek-looking used sports car and you immediately want to buy it. You think to yourself, "I can paint that car and fix it up so it looks brand new!" You like it so much that you would very work hard for a year and save up $10,000 to buy it. You ask the owner how much he'd sell the car for, and he says $9,000. If you buy it for $9,000, then what is your "consumer surplus"? What does that concept mean?
2. Suppose you see a sleek-looking used sports car and you immediately want to buy it. You think to yourself, "I can paint that car and fix it up so it looks brand new!" You like it so much that you would very work hard for a year and save up $10,000 to buy it. You ask the owner how much he'd sell the car for, and he says $9,000. If you buy it for $9,000, then what is your "consumer surplus"? What does that concept mean?
3. Suppose your favorite hobbies are reading books and hiking, and imagine that they have these values for marginal utility. The first hour that you hike gives you lots of utility: 10 units. But as you start to tire, you enjoy and benefit from it less. The next hour of hiking is worth only 8 units of utility, and the next hour is worth only 5 units, and then 3, then 1, and then zero for the next hours, in that order. Your utility for reading books is more even. In the first hour, reading a book gives you utility of 6 units; the next hour is worth 5 units; the next hour is worth 4 units; and then 3, 2, 1 and 0. Suppose that you have 5 extra hours today. How will you spend those hours on hiking and reading in order to maximize your utility, and what will be your total utility for those 5 hours? Explain your answer.
Redo these questions:
Redo these questions:
4. How might one’s overall “utility” include religious goals that have nothing to do with money? Be specific.
4. How might one’s overall “utility” include religious goals that have nothing to do with money? Be specific.