1.1. In each of the following cases, determine whether the two goods are perfect substitutes, perfect complements,...

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1.1. In each of the following cases, determine whether the two goods are perfect substitutes, perfect complements, or ordinary goods. Explain your answer, paying particular attention to the marginal rate of substitution of one good in place of the other good.

a. Sanjay cares only about the number of jelly beans he receives and not about whether they are banana-flavored or pineapple-flavored.

b. Hillary’s marginal utility of cherry pie goes up as she has more scoops of vanilla ice cream to go with each slice. But she is willing to consume some cherry pie without any vanilla ice cream.

c. Despite repeated reductions in price, customers won’t buy software programs made by Omnisoft Corporation unless the company also sells the computer operating system that enables a computer to read these software programs.

d. Darnell works part time at the campus bookstore. The manager has asked him to work additional hours this week. Darnell is willing to do additional work, but he finds that the more hours he has already worked, the less willing he is to work yet another hour.

(Hint: Think of the goods in question as being income and leisure time.)

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Economics

ISBN: 978-0716771586

2nd Edition

Authors: Paul Krugman ,Robin Wells

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