How would you contrast the interactions within a small family to those in the market place? In what way could you argue that the ways in which interactions are governed in the family can never work in a larger market setting -- just as the ways in which interactions are structured in market settings can never work well in families?
What will be an ideal response?
Interactions within families are based on intimate knowledge of each other's tastes and circumstances and are often motivated at least in part by altruism. Interactions in markets require no knowledge other than those of an individual's immediate circumstances -- and they are typically based solely on (narrow) self-interest. The ways in which family interactions are structured cannot work in larger market settings because they would require intimate knowledge of many others' circumstances and tastes -- a problem also faced by a social planner. They ways market interactions are structured cannot easily be applied to families because families are small and individuals within families are therefore "large" relative to the family "economy."
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As DVDs become popular substitutes for video cassettes, demand for video cassettes is likely to
a. become less price elastic b. become more price elastic c. increase d. stay the same e. become unit elastic
Bonnie gets her hair cut at her usual salon and is very happy with the results. Later that afternoon, she goes to the mall and sees that a hair salon is giving away free haircuts only on that day. If Bonnie does not take advantage of the giveaway, it is because the:
a. marginal utility of the next haircut would be zero or negative. b. marginal utility of the next haircut would increase. c. marginal utility of the next haircut would be zero or positive. d. total utility of both haircuts would be zero or negative. e. total utility of both haircuts would be higher than just one haircut.