In this assignment you will apply consumer choice theory and marginal analysis to business problems.
Consider each of the following products and services:
- A pair of tickets to a sporting or cultural event that you enjoy
- A can of common table salt
- A college class
In a two-page essay:
- Explain how your own current household budget, tastes and preferences, and future expectations determine how much of each of these products you purchase in a year. Describe the benefits (utility) you get from each product and service.
- Suppose the price of the tickets were cut in half. How would your consumption of cultural or sporting goods change? Why?
- Suppose your household budget was suddenly doubled because you received a 100% raise. How would your consumption of each of these goods and services change? Explain your answer in terms of utility and marginal analysis.
- What is the law of diminishing marginal utility? How does this law affect the ability of table salt companies to stimulate demand for their product?