Question

Use 21 2. (1 pt) Suppose, you overnear tour economics professors make the fr onomics professors make the following comments. Use utility analysis to help explain why they might have made each of these comments. pollen count is out of control! It's making my allergies unbearable. Therefore, I'd gladly offer a student $25 to mow my lawn." b. can't believe Gail wouldn't pay $20,000 for that minivan. I would have!"

Answer 1

A.

A high pollen count, will create allergies while mowing the lawn. Treatment of allergies, will incur cost (or marginal cost) that will equal to or more than $25. So, the economics professor, will be willing to part with the $25 and give it to the student for mowing the lawn. It will make economist processor to pay the cost of $25 and save the funds or incur the benefits that is equal to or more than $25 by not becoming allergic.

B.

It is related to the utility derived from the minivan. Gail can derive utility or benefits that is less than the price of $20000. So, Gail will not pay the price of $20000. But, the economist professor, has the utility derived from the minivan is more than $20000. So, he is eagerly willing to pay the price.