Session:6 Consumer Choices
Critical Thinking Questions
Principles of Microeconomics 3e | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-microeconomics-3e
13. Think back to a purchase that you made recently. How would you describe your thinking before you made
that purchase?
14. The rules of politics are not always the same as the rules of economics. In discussions of setting budgets
for government agencies, there is a strategy called “closing the Washington Monument.” When an agency
faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by
many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the
Washington Monument strategy is so misleading. Hint: If you are really trying to make the best of a budget
cut, should you cut the items in your budget with the highest marginal utility or the lowest marginal
utility? Does the Washington Monument strategy cut the items with the highest marginal utility or the
lowest marginal utility?
15. Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods
you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income
elasticity of the other good you buy?
that purchase?
14. The rules of politics are not always the same as the rules of economics. In discussions of setting budgets
for government agencies, there is a strategy called “closing the Washington Monument.” When an agency
faces the unwelcome prospect of a budget cut, it may decide to close a high-visibility attraction enjoyed by
many people (like the Washington Monument). Explain in terms of diminishing marginal utility why the
Washington Monument strategy is so misleading. Hint: If you are really trying to make the best of a budget
cut, should you cut the items in your budget with the highest marginal utility or the lowest marginal
utility? Does the Washington Monument strategy cut the items with the highest marginal utility or the
lowest marginal utility?
15. Income effects depend on the income elasticity of demand for each good that you buy. If one of the goods
you buy has a negative income elasticity, that is, it is an inferior good, what must be true of the income
elasticity of the other good you buy?