Question

In these questions, let's assume that all the people involved have the same income.

a) What type of people are more likely to eat resturaunt meals? TV dinners? Why?

b) Why do some people tip? Eat too much? Smoke?

c) Why do some people give charilty? Are you more likely to give charity to a down on her luck FIT graduate or a equally poor down on her luck Brooklyn College grad? Why?

Note that your answers (and follow-up discussion) MUST be based on the tools of economics covered in this module (meaning utility theory). Remember, everyone, rich and poor, experience positive and negative utility.

Answer 1

A It depends on preferences. Those whose preferences are strongly in favour of restraunt food etc will eat restaurant meals, TV dinners etc

B Because they get more satisfaction from that than due to money

C Because there utility is influenced by situation of other people in society. These are called network externalities in utility. I will prefer that one which gives me more utility(Note I am not from usa so do not know many things about usa. Just pick one which you consider more deserving and thus gives you more utility)