Alexander Ayala Case Study - Utility maximization

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Lone Star College, CyFair *

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2302

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Economics

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May 7, 2024

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pdf

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Ayala 1 Alexander Ayala Professor Carrasco ECON 2302 7 April 2024 Case Study – Utility maximization Question 1 - Provide a brief explanation of why you made the selections you did. The selection of items I was getting was intended for the making of burgers, hotdogs, and other necessities needed to make like a little get-together with friends and family to have fun and watch sports. With the shopping, I was able to get items such as burger paddies, hotdogs, chips and salsa, drinks, fruits, vegetables, cheese, etc. All of these item’s choices were made so that I could be able to host a get-together between friends and family. In all my items I included a variety of items and some of the necessities I was able to get within the budget of $100. Question 2 - Now I want you to revisit your shopping cart and pretend your budget is now only $75 and consider how this will impact the selections you made. Which items will you choose to get rid of? Will you decide to trade in a brand name for a generic one? Explain your choices using the terminology of “income effect” and “substitution effect” Out of all my items the ones I got rid of were the chips and salsa, Coca-Cola, and a Doritos bag(chips)because they were just too expensive. Another thing was since the beef patties were expensive, I decided that I could change them to slightly cheaper chicken breast also I changed the burger buns’ brand to a generic brand which resulted in the cost being much cheaper. Since I had two different kinds of Doritos chips, I also decided to remove one of them just because is one of the things that I could remove so that the overall cost would be slightly less.

Ayala 2 For me, I would have preferred the beef patties but since they are more expensive than the chicken breast, I would have to go with the chicken breast. When it comes to the burger buns, I was thinking that if I wanted to save some money then I would have to change the brand of the buns to a more generic brand that is cheaper. I also did the same thing with the sausages for the hotdogs I decided to go with a more generic brand rather than the other one and it also came with the difference that the generic brand came with more sausages than the other brand which was way better cheaper price for more sausages. Question 3 - Looking at the items you chose to remove from your cart, would you describe these goods as “necessities” or “luxuries”? In either case, explain why these items lost out to the other ones left in your cart. In your response be sure to relate your answers to the topic of utility maximization. Were your decisions consistent with the “rational behavior” of a utility- maximizing individual? I would say that all the goods are a necessity because I need all of the items in order so I can host the get-together. I took out those certain items cause instead of taking out one or two expensive items I could remove multiple small items and replace the expensive items with much cheaper ones and still be able to get the same results on how the get-together could go for a much cheaper price. I think the decisions I made were rational because I was able to switch the beef patties to chicken breast and also change the brands of hotdog sausage which would benefit me in how I was able to save money. Instead of spending $100, I was able to change and remove some items and was able to get all of my necessities needed to host the get-together for $75. All the decisions I made so that I could have utility maximization and be able to get almost the same things just cheaper.

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