EXPLORING ECONOMICS
8th Edition
ISBN: 2818000015614
Author: Sexton
Publisher: SAGE
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Question
Chapter 10, Problem 1P
To determine
Two people buying the same quantity of a good at the same
Expert Solution & Answer
Explanation of Solution
Relative comparison of two different people satisfaction is not possible. Two people consuming the same quantity of good at the same price can have different satisfaction level according to their interest, so they cannot have the same marginal utility. Interpersonal utility comparison is not possible.
Economics Concept Introduction
CONCEPT INTRODUCTION:
Marginal utility:
Marginal utility measures the additional fulfilment a customer earns from expending extra units of products or services. The idea of marginal utility is utilized by financial specialists to decide the amount of a thing customers are eager to buy. Positive marginal utility happens when the utilization of an extra thing builds the all-out utility, while negative marginal utility happens when the utilization of an extra thing diminishes the absolute utility.
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buy a government bond that pays 18 percent interest per year or to buy a year-old llama, send it onto the commons to
graze, and sell it after 1 year. The price the villager gets for the 2-year-old llama depends on the quality of the fleece It
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Number of
11amas on
the
commons
Price per 2-
year-old
11ama ($)
1
125
2
119
3
116
4
113
5
6
111
109
The villagers make their investment decisions one after another, and their decisions are public.
a. If each villager decides Individually how to Invest, how many llamas will be sent onto the commons, and what will
be the resulting village Income?
Number of llamas: [ 20
Instructions: Enter your response as a whole number.
Village Income: $
110
b. What is…
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