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Economics Homework One Answers - Student Fourteen (view source)
Revision as of 19:23, September 12, 2009
, 19:23, September 12, 2009no edit summary
6. Caveat Emptor: Buyer beware means that the buyer of a good is responsible for whatever he purhcases and he is responsible for making sure it isn't harmful to him and is actually what it is represented to be.
6. Caveat Emptor: Buyer beware means that the buyer of a good is responsible for whatever he purhcases and he is responsible for making sure it isn't harmful to him and is actually what it is represented to be.
10. It makes sense to offer her any amount of money over $5 and some value less than $500 to leave you alone. Presumably if you offer her $5 or more she will get a net benefit on the transaction because she will be at least as well off as she was before she lost her money, as a result she will no longer have any reason or incentive to incessently complain. This, of course, assumes that she isn't just greedy and will then complain that she could have had whatever you've given her, plus five dollars. You will not want to give her all of the $500 to get her to leave you alone, however, because then you will have no incentive to work since you will not make any money on the deal. Instead it makes economic sense to give her up to the amount of money that it would take to quiet her while still making it worth your while to complete the project on the plane. Thus, if your time was worth $100 an hour to you and it will take you two hours to complete the work on the plane it makes sense to give her any amount of money up to $300 because you will get as much or more money than you think your time is worth. If there's a risk you won't finish in time because she's already wasted your time you need to take that into account as well. So if your time is worth $100/hr, you think it will take you two hours (there's two hours left in the flight), and there's only a 50% chance you'll finish on time you should only give her half as much money to account for the risk of you not finishing and not getting paid at all. So then it only makes sense to give her up to $150. To express the amount of money you could reasonably give her as a math equation:
Amount of money to give woman ≤ (hourly rate) * (amount of time it will take to finish the project) * (probability you will finish on time)