Question

Nonmonetary choices

Tuesday, June 18, 2019, 10:37 AM

People pursue various activities, as well as spend money. They must do this because they derive utility from doing so.

Questions:

1. You may work at the gym three hours per week. If working out six hours per week would make you more fit, why might you choose not to do it?

2. Rachel Ray shows some great new recipes on TV. You and your family would love to try these, and they would be more interesting than the usual fare, but you decide to order a pizza for dinner instead. Why might you choose to do this?

3. You wanted to take your kid on a fishing vacation, but you decided you had too many office assignments to complete at this time. Are you maximizing utility in this case?

Answer 1

1) This is because of the concept of Diminishing marginal utility where can I actually be mentioned that with the increase in gym hours the additional satisfaction might keep on decreasing and I would have more utility in doing some other work that is the reason why I choose not to do this.

2) Because since it would be your first time having that , you believe the utility would be very high and that is the reason why your willingness to pay also goes up and that is the reason you ended up buying that

3) No, the maximum utility is when I could not complete my office assignments as well as take it on a vacation and the combination would be the optimum 1 but due to the constraints only chose one which is not the case of highest satisfaction and that is the reason why it is not a case of maximizing utility