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Extra resources for Accounting and the Global Economy After Sarbanes-Oxley
20) This demand function implies that Tom will purchase more clothing as his income rises and less clothing as his income falls. His clothing purchases vary inversely with the price of clothing. In our example, Tom had an income of $100 and PC ϭ $2/unit. 20), we found that he consumed 25 units of clothing. The demand function 34 48 Brickley−Smith−Zimmerman: Managerial Economics and Organizational Architecture, Fifth Edition Part 1 I. Basic Concepts 2. Economists’ View of Behavior © The McGraw−Hill Companies, 2009 Basic Concepts implies that if Tom’s income were to increase to $200 (holding price constant) he would purchase 50 units of clothing.
Discuss the likely importance of these three mechanisms. SOURCE: E. Ramstad (1998), “High Rollers, How Trilogy Software Trains Its Raw Recruits to Be Risk Takers,” The Wall Street Journal (September 21), A1. 9 indicates that Taylor is indifferent between the risky commission scheme, which has an expected payoff of $100,000, and a certain income of $80,000. The $80,000 is Taylor’s certainty equivalent for the risky income stream—he is willing to trade the uncertain income of $100,000 for a certain income of $80,000.
What can the company do to induce Juan to purchase more clothing? Show graphically. ) 2–6. Suppose that Bob’s indifference curves are straight lines (as opposed to being convex to the origin). What does this imply about Bob’s willingness to trade one good for the other? Give examples of goods where this type of behavior might be expected? 2–7. Suppose that Bob’s indifference curves are perfectly L-shaped with the right angle occurring when Bob has equal amounts of both goods. What does this imply about Bob’s willingness to trade one good for the other?