Question

Q#1

Rank the following three gifting possibilities in terms of how much utility they are likely to bring and explain your reasoning:

1) A store specific gift card worth $15

2) A $15 item from that specific store

3) $15 in cash than can be spent anywhere

What about from your perspective as the gift-giver? Do your answers differ from what you would normally choose? If so, why/how.

Q#2

In the last decade or so, there has been a dramatic expansion of small retail convenience stores (such as 7-Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores? PLEASE RESPOND TO THIS ONE IN 200 WORDS THANK YOU!!!

Answer 1

In terms of utility from high to low-

1.$15 cash 2.a store specific gift card 3. $15 item from that store.

$15 cash can be used to buy products as per an individual consumer's taste and preference.A store specific card will come in second as his choices wil be limited but still he can exercise his preference over a bunch of available goods.A $ 15 item gifted to him wil give him the least utility as he cannot exercise his freedom of choice and preference.

From a perspective of a gift giver too it seems wise to maintain the same rank ordering as buying a gift for someone will require me to invest my time on it.So there is an opportunity cost attached to it.Giving a gift card is little less time consuming than choosing a particular gift but still a time component is attached to this also.Hence it is preferable to give money.