This is from Microeconomics Pertains to Chapter 21 Mankiw - Theory of Consumer Choice (Question not in the book, just as a reference I put this) 1) A Culinary Conundrum Assume that Georgetown University President John DeGioia is interested in encouraging healthier eating habits on the part of Georgetownstudents. Assume further that Georgetown Students have two options for their meals: they can eat in the cafeteria on campus or at one of the fancy restaurants in the surrounding neighborhood. Meals on campus are healthier than most off-campus options, so President DeGioia would like to encourage students to eat on campus more often. However, students think it’s fun to go off campus for their meals when they can afford to do so. Thus,you should consider on-campus meals to be inferior good standoff-campus meals to be normal goods. President DeGioia has four options:i) he could lower the price of on-campus meals without discouraging the GRA from offering a discount to Georgetown students; ii) he could discourage the GRA from offering a discount to Georgetown students without lowering the price of on-campus meals; iii) he could discourage the GRA discount andlower on-campus meal prices; or iv) he could do nothing. If his goal is to encourage more students to eat on campus, which of these four options should he pursue? If you would require more information in order to answer this question, describe the kind of information that you’d need.
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1) A Culinary Conundrum
Assume that Georgetown University President John DeGioia is interested in encouraging healthier eating habits on the part of Georgetownstudents. Assume further that Georgetown Students have two options for their meals: they can eat in the cafeteria on campus or at one of the fancy restaurants in the surrounding neighborhood. Meals on campus are healthier than most off-campus options, so President DeGioia would like to encourage students to eat on campus more often. However, students think it’s fun to go off campus for their meals when they can afford to do so. Thus,you should consider on-campus meals to be inferior good standoff-campus meals to be normal goods.
President DeGioia has four options:
i) he could lower the
Consumer goods are those commodities which satisfy the needs of the consumer and provides utility to the consumer from the consumption of the commodities. There are mainly two different types of commodities and they are normal commodities and inferior goods. The normal commodities are those commodities that have an indirect relation between the price and demand. As the price increases, the demand for the commodity decreases and inverse. In the case of inferior goods, when the price decreases, the demand for the good also decreases and vice versa.
The cafeteria meals are identified to be healthier than the off-campus meals provided to the university students. But it is clearly indicated that the on-campus cafeteria meals are considered to be inferior goods by the university students. When the price of the inferior goods decreases, the demand for the good would also decrease in the economy. As a result, when the president decreases the price of the inferior goods, it will lead to a further decline in the demand for the on-campus meals because of the fact that the GRA provides a 20 percent discount on meals for students.
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