Topic 2
Principle of diminishing Marginal utility.
A local restaurant offers an ” all you can eat” ribs special. If a person pays $11.95, he can eat as many servings as he desires at no additional cost. Do you think the local restaurant will go bankrupt because people will eat much more than what they are paying for? Why?
Topic 1
Elasticity of Demand
* Assume you are the manager of a large supermarket. Your boss has told you that your store needs to increase revenue in order to increase profit. You have the authority to change the prices of any products in the store. List several items that you would increase the price of, and several you would decrease the price of to increase revenue. Explain your reasoning.
Topic
Sunk Costs
A few years ago my wife and I went to the movies. I quickly realized that I was not going to enjoy the movie, so I suggested after 20 minutes that we should leave. My wife was not happy with my suggestion. She said that we had just paid $20 for tickets. I said that was a sunk cost and that we shouldn’t consider it when deciding to stay or go. She said that we were not leaving, and that she didn’t want to hear about sunk costs any more. Have you ever had an issue with sunk costs? Explain
Economics, Krugman, Paul and Wells, Robin
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