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Economics Homework, Mark

Economics Homework, Mark

'''1.'''  Utility

:Correct, but you might say TOTAL utility.

'''2.''' (a) Your consumer surplus is $1000.

'''2.''' (a) Your consumer surplus is $1000.

(b) The consumer surplus is the total benefit which a buyer gets when buying a good. For example, if someone wanted a new laptop so badly that he was willing to pay $1800 for it, and he bought it for $1500, then his consumer surplus is $300.  Consumer surplus = total benefit - total cost

(b) The consumer surplus is the total benefit which a buyer gets when buying a good. For example, if someone wanted a new laptop so badly that he was willing to pay $1800 for it, and he bought it for $1500, then his consumer surplus is $300.  Consumer surplus = total benefit - total cost

'''3.''' You can spend your time best by hiking for 3 hours, and then reading for 2 hours.  The three hours of hiking give you a total utility of 23 units, and the 2 hours of reading give you a total utility of 11 units.  twenty-three plus eleven is 34, so your total utility was 34.

'''3.''' You can spend your time best by hiking for 3 hours, and then reading for 2 hours.  The three hours of hiking give you a total utility of 23 units, and the 2 hours of reading give you a total utility of 11 units.  twenty-three plus eleven is 34, so your total utility was 34.

'''4.'''  In order to maximize my benefits from the purchase, I would tell the dealer that the car was used, and therefore not worth as much. The free market will drive the price down.

'''4.'''  In order to maximize my benefits from the purchase, I would tell the dealer that the car was used, and therefore not worth as much. The free market will drive the price down.

'''5.'''  If there are two goods that are perfect substitutes for each other, then you are equally happy with 1 of good X as you are with 1 of good Y. Because you are indifferent whether you have 1 of one good and 1 of another, you can subtract 1 of good X and add 1 of good Y and still be on the indifference curve.

'''5.'''  If there are two goods that are perfect substitutes for each other, then you are equally happy with 1 of good X as you are with 1 of good Y. Because you are indifferent whether you have 1 of one good and 1 of another, you can subtract 1 of good X and add 1 of good Y and still be on the indifference curve.

'''6.'''  The substitution effect happens when the price of a good increases, and people tend not to buy as much of it. They buy instead cheaper substitutes.   

'''6.'''  The substitution effect happens when the price of a good increases, and people tend not to buy as much of it. They buy instead cheaper substitutes.   

'''7.'''  The free market usually comes first, because to give money to charity you have to earn it somehow.

'''7.'''  The free market usually comes first, because to give money to charity you have to earn it somehow.