This is from my microeconomics class, Mankiw Chapter 12. It is one question broken up into two parts. 1) A Culinary Conundrum Assume that Georgetown University President John DeGioia is interested in encouraging healthier eating habits on the part of Georgetownstudents. Assume further that Georgetown Students have two options for their meals: they can eat in the cafeteria on campus or at one of the fancy restaurants in the surrounding neighborhood. Meals on campus are healthier than most off-campus options, so President DeGioia would like to encourage students to eat on campus more often. However, students think it’s fun to go off campus for their meals when they can afford to do so. Thus,you should consider on-campus meals to be inferior good standoff-campus meals to be normal goods. a.) True, false, or uncertain: if President De Gioia orders the cafeteria to lower the price of its meals, students will eat on campus more often. Explain your answer. b.) True, false, or uncertain: if the Georgetown Restaurant Association (GRA) convinces off-campus restaurants to offer their meals to Georgetown students at a 20% discount, students will eat off campus more often.
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1) A Culinary Conundrum
Assume that Georgetown University President John DeGioia is interested in encouraging healthier eating habits on the part of Georgetownstudents. Assume further that Georgetown Students have two options for their meals: they can eat in the cafeteria on campus or at one of the fancy restaurants in the surrounding neighborhood. Meals on campus are healthier than most off-campus options, so President DeGioia would like to encourage students to eat on campus more often. However, students think it’s fun to go off campus for their meals when they can afford to do so. Thus,you should consider on-campus meals to be inferior good standoff-campus meals to be normal goods.
a.) True, false, or uncertain: if President De Gioia orders the cafeteria to lower the price of its meals, students will eat on campus more often. Explain your answer.
b.) True, false, or uncertain: if the Georgetown Restaurant Association (GRA) convinces off-campus restaurants to offer their meals to Georgetown students at a 20% discount, students will eat off campus more often.
The consumer goods are those commodities which satisfies the needs of the consumer and provides utility to the consumer from the consumption of the commodities. There are mainly two different types of commodities and they are the normal commodities and the inferior goods. The normal commodities are those commodities which have indirect relation between the price and demand. As the price increases, the demand for the commodity decreases and inverse. In the case of the inferior goods, when the price decreases, the demand for the good also decreases and vice versa.
a.
The cafeteria meals are identified to be healthier than the off-campus meals provided to the university students. But it is clearly indicated that the on-campus cafeteria meals are considered to be inferior goods by the university students. When the price of the inferior goods decreases, the demand for the good would also decrease in the economy. As a result, when the president demands the cafeteria in the university campus to offer a discount to the meals, the demand for meals in the cafeteria would not increase. Students will value the normal good over the cheap alternative inferior good available. The demand for inferior goods increases when the income of the consumer decreases. So, in this case, the discount provided to students by the cafeteria would not lead to the situation in which students will eat more often in the campus cafeteria.Thus, the statement is false.
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