Question

8 Your friend totaled his Hummer H2 and bought a new Prius. He calculates that he will consume 400 fewer gallons of gasoline this year. a. Does this mean that 400 fewer gallons of gasoline will be consumed in the world this year? Explain. Cost What would have to be true for his purchase to have his intended effect? b. What would have to be true for his purchase to have ZERO effect on the C. market quantity consumed?

I think it's no because of sunk cost. but am not 100% that's what they are asking.

Answer 1

a) No. One individual's consumption of 400 fewer gallons of gasoline in a particular year doesn't mean that 400 fewer gallons of gasoline will be consumed in the world that year. This is because that particular individual's consumption is totally independent of the world's consumption as a whole and since we don't have the data of world's consumption we cannot be definite about the aforementioned statement.

b) Prius has to consume 400 gallons of gasoline less than what Hummer H2 consumes for the same operation that the hummer H2 has been used for to make intended effect true for his purchase.

c) To have ZERO effect on the market quantity consumed, the world's consumption must cover up the 400 less gallons of gasoline that he will consume.