Suppose Ramen noodles, an inexpensive but a quite tasty dish, are an inferior good. Why do grocery stores in college towns, that is, towns with a large fraction of college students, stock a lot of Ramen noodles?
What will be an ideal response?
Generally, college students' incomes are relatively low because they cannot hold high paying, full-time jobs. Hence the demand for inferior goods is strong in college towns. Hence the demand curve for Ramen noodles in a college town lies to the right of the demand curve for Ramen noodles in a similar size town not dominated by a college. Thus the equilibrium quantity of Ramen noodles is quite large in a college town and so stores stock a lot of Ramen noodles.
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The above figure shows Bob's utility function. He currently has $50 and is considering investing all of it in an investment that has a 50% chance of being worth $100 and a 50% chance of being worth $0. Bob will
A) definitely make the investment because the expected utility of the investment exceeds the utility of his $50. B) definitely not make the investment because the expected utility of the investment is less than the utility of his $50. C) definitely make the investment because he is indifferent between having $50 and having an investment with an expected value of $50. D) definitely not make the investment because he is indifferent between having $50 and having an investment with an expected value of $50.
Assume an Australian importer expects to pay 16,000 Australian dollars (AUD) for $8,000 worth of U.S. goods, but on the shipment date 30 days later, the same volume of U.S. goods costs the Australian importer only 10,000 Australian dollars. This means that between the contract date and the payment date, the exchange rate has changed:
a. from $1 = 1.25 AUD to $1 = 2.0 AUD. b. from $1 = 2.0 AUD to $1 = 1.25 AUD. c. from $1 = 0.8 AUD to $1 = 0.5 AUD. d. from $1 = 0.5 AUD to $1 = 0.8 AUD. e. from $1 = 0.5 AUD to $1 = 2.0 AUD.