Question

Frank has won a lottery. The prize is that he will be sent to an isolated, primitive island in Southern Pacific for adventure. He is only allowed to take 10 items with him. Jeremy is an economist. He advises Frank to pick the 10 most expensive items in the market. Jeremy puts it this way, “The market price of an item reflects its true value.” Do you agree with Jeremy? Justify your answer with economic concepts and theories in detail.

Answer 1

the given statement is false and this is because of the fact that the 10 expensive items has taken might not carry on in the true sense as ultimately it is utility which has a major role to play rather than the cost of the item. Here the person has to take the top 10 items which gives sim highest utility rather than top 10 items which has highest cost. Here 'Utility' season economics concept comes in handy because the person gets to choose the item which gives maximum level of satisfaction and for instance his car might be expensive but there would be no utility if there is no fuel in the island and therefore taking his car with him isn't a good idea. because food carries more utility under such circumstances because the ultimate satisfaction would be more from food then car, even though it is not expensive one can suggest to take food along with him etc on the whole.