Consider two individuals, Wendy and Jenny, who discount delayed utilities with a weight of 1/4 and 7/8, respectively. Consuming one hamburger gives both Wendy and Jenny benefits worth 16 utils instantly and has delayed costs of 20 utils
a) If the nearby hamburger shop is closed for a week, comment on whether both individuals will consume hamburgers after a week.
b) If a new shop is opened nearby, and hamburgers are available for consumption today, comment on whether both individuals will consume hamburgers.
a) If the consumption of hamburgers is delayed by a week, both the benefit and the cost the individuals receive from consumption will have to be discounted.
Wendy's net benefit from consuming a hamburger after a week = 1/4(16 - 20 ) = -1. Therefore, Wendy will not want to consumer a hamburger after a week.
Jenny's net benefit from consuming a hamburger after a week = 7/8(16 -20 ) = -3.5. Therefore, Jenny will not want to consume a hamburger after a week.
b) Net benefit that Wendy will derive by consuming a hamburger today = 16 - 1/4(20 ) = 11 utils. Because the net benefit is positive, Wendy will want to consume a hamburger from the new shop today.
The net benefit that Jenny will derive by consuming a hamburger today = 16 - 7/8(20 ) = -1.5 utils. Because the net benefit is negative, Jenny will not want to consume a hamburger from the new shop today.
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