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Indicate how each of the following changes would influence the incentive of a decision-maker to undertake the action described. a. A reduction in the temperature from 80° to 50° on one’s decision to go swimming b. A change in the meeting time of the introductory economics course from 11:00 A.M. to 7:30 A.M. on one’s decision to attend the lectures c. A reduction in the number of exam questions that relate directly to the text on the student’s decision to read the text d. An increase in the price of beef on one’s decision to buy steak e. An increase in the rental rates of apartments on one’s decision to build additional rental housing units

BuyFind

Microeconomics: Private and Public...

16th Edition
James D. Gwartney + 3 others
Publisher: Cengage Learning
ISBN: 9781305506893
BuyFind

Microeconomics: Private and Public...

16th Edition
James D. Gwartney + 3 others
Publisher: Cengage Learning
ISBN: 9781305506893

Solutions

Chapter
Section
Chapter 1, Problem 1CQ
Textbook Problem

Indicate how each of the following changes would influence the incentive of a decision-maker to undertake the action described.

  1. a. A reduction in the temperature from 80° to 50° on one’s decision to go swimming
  2. b. A change in the meeting time of the introductory economics course from 11:00 A.M. to 7:30 A.M. on one’s decision to attend the lectures
  3. c. A reduction in the number of exam questions that relate directly to the text on the student’s decision to read the text
  4. d. An increase in the price of beef on one’s decision to buy steak
  5. e. An increase in the rental rates of apartments on one’s decision to build additional rental housing units

Expert Solution
To determine

Decision making of an individual in different situations.

Explanation of Solution

Option (a):

When the temperature reduces from 80 degrees Fahrenheit to 50 degrees Fahrenheit, water become colder. Hence, the individual will not prefer to swim at this temperature.

Option (b):

When the meeting time of the introductory economics course is arranged from 11.00 AM to 7.30 AM, an individual would not have an incentive to attend the lectures since the opportunity cost of spending time for the basics is greater. Thus, people would not prefer to attend the basic class in the morning time.

Option (c):

When the number of questions are reduced, which is directly related to the text, it is a disincentive for the student to read the text more since he would get less marks by reading the text.

Option (d):

People usually have an economizing behavior since people prefer more benefit with low cost. When the price of beef increases, an individual will prefer to buy less of that commodity. Instead, he will purchase other substitutes that would be less costly than beef.

Option (e):

An individual usually has a strong tendency to build more units of rental houses, when the rate of rental house increases. Since this will help an individual to earn higher income. Hence, decision making of an individual is generally based on the benefit that he gets.

Economics Concept Introduction

Incentive: Incentive refers to the extra income given to the people who had worked for additional hours. In other words, incentive is the extra monetary and non-monetary benefits given to the person who had taken an additional productive effort.

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