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Preferences & Choice

In economics, preference refers to the assumptions of a product’s alternatives, relating to the degree of satisfaction or utility that the product gives the consumer. Preference is how the consumer makes their optimal choice when deciding on which product to purchase. The individual's preferences are how the individual ranks a product against its competitors.

Indifference curves are used to measure preference and choice because they represent an ordinal measure of consumer taste and preferences, and show how the consumer maximizes utility by spending income¹.

Utility is an important concept in consumer preference and choice because it refers to the ability of the good or service to satisfy a consumer's want. An indifferent curve displays the different combinations of two goods that provide the consumer with an equal level or utility or satisfaction¹. It therefore shows the ranking or order of a good based on an individual’s satisfaction. A higher indifference curve shows a higher level of satisfaction and a lower indifference curve shows a lower level of satisfaction.

The marginal rate of substitution is a useful indication of consumer preference and choice. The marginal rate of substitution (MRS) shows the amount of one good that an individual is willing to give up for an additional unit of another good while still maintaining the same level of satisfaction¹. Understanding consumer preference and choice will provide an understanding to how consumer taste is measured, how the consumer maximizes satisfaction or reaches equilibrium, and the relationship between money and happiness.


1.  Ragan, Chrisopher. Macroeconomics/Christopher T.S. Ragan, Richard G. Lipsey. – 13th Canadian ed.

Bretton Woods and Collapse

How did the Bretton Woods system operate? What caused its collapse? Some think the current system of managed but floating rates is too unstable. What would generate the instability?


Education is often used as an example of a positive externality. Are the external benefits greater for elementary, secondary, or college education? Explain.

Guide Post to Economic Thinking

How is economic thinking on government spending and taxation applied within the United States? Discuss some of the economic paradigms that influence policy decisions. What is the utility of taxation beyond a source of state and federal revenue.

Marginal product change for a resource

Explain how the marginal product for a resource can change. Conclude with an explanation for what can change the demand for a resource. Your answer to each written response question should contain a minimum 200-300 word response. Make certain that all of your sources (including your textbook) are referenced at the end of

Managerial Economics: First Entrants, Rational Consumers and the Lerner Index

1) Last summer the Wall Street Journal reported the declining market positions held by some of Japan's earliest innovators in the consumer electronics industry, including Sharp and Sony. Although these firms introduced the first low-cost electronic radios, stereos, and televisions, dominating the industry for several years, they

Total hours in a week

Tom has a job that pays $15 per hour. If he works more than 40 hours in a week, he gets an overtime premium of 50 percent, which increases his wage rate to $22.50/hour. Tom has preferences for consumption and leisure goods. Assuming that he has 80 hours available per week (he spends the other 88 hours sleeping and commuting), ho

Discuss economists' use of different graphical tools.

Economists often employ a set of graphical tools to illustrate how individuals make choices ("Theory of Consumer Choice"). Define each one: (a) individual objectives, (b) indifference curves, (c) opportunities and constraints, and (d) individual choice.

Express free market viewpoints.

Proponents of free market systems argue that free enterprise leads to more efficient production and better response to changing consumer preferences. Others point to the fact that markets are not perfect. Consider both viewpoints and respond to both sides of the issue with your viewpoints.

three types of houses

In Metro, there are three types of houses: E (expensive), M (medium), and C (cheap). A recent survey suggest that there are three types of preferences for fire protection: H (high), I (intermediate), and L (low). Mr Wizard, an economic consultant to the city, recently made the following statement: "If my assumptions are correct

Public choice

Suppose there are five people -1, 2, 3, 4, and 5-who rank projects A, B, C, and D as follows. 1 2 3 4 5 A A D C B D C B B C C B C D D B D A A A Will any project be chosen by a majority vote rule? If so, which one? lf not, explain why.

Expected NPV .

The McGregor Whiskey Company is proposing to market diet scotch. The product will be test-marketed for 2 years in Southern California at an initial cost of $500,000. This test launch is not expected to produce any profits but should reveal consumer preferences. There is a 60 percent chance that demand will be satisfactory. In th

Listed here are example of bad, or at least questionable, decision. Evaluate the decision makerâ??s approach or logic. In which of the six decision steps might the decision maker have gone wrong? How would you respond in the final decision situation?

Listed here are example of bad, or at least questionable, decision. Evaluate the decision makerâ??s approach or logic. In which of the six decision steps might the decision maker have gone wrong? How would you respond in the final decision situation? " After 9/11, to do nothing would constitute an abject surrender to terrorism.

Monopolistic Competition and Oligopoly: Example

Why might some people claim that the breakfast cereal industry is monopolistically competitive but that the automobile industry is an oligopoly? In both cases, about eight to ten firms dominate the industry.

Best Affordable Bundle and Allocation

A skier needs two pair of skis for every pair of bindings, due to wear and tear. Income equals $3600. Skis are $480 per pair bindings are $240 per pair. What is the skiers' best affordable bundle of skies & binding, given this information? (Note—This is a very simple question regarding a budget allocation—don't make it

Choosing Vehicles Based on Gas Mileage

You drive 5000 miles a year and buy gasoline at the price of $2/gal. Except for differences in annual costs, you are indifferent between driving a 10 year old Buick ($400/yr, 20 miles per gal) or a 10 year old Toyota ($800/yr, 50 miles per gal). (a) Which one do you choose to drive? (b) How does your decision change if the

The principle of rationality

In 1995, a former Brigham Young University football star, Eli Herring, turned down a three-year, $500,000-peryear offer to play professional football with the Oakland Raiders. Herring instead chose to pursue a career as a high school math teacher, earning $22,000 per year. Herring did so because he is a devout Mormon who be

Economic efficiency problems

Please help answer the following microeconomic questions. How does the problem of limited and bundled choice relate to economic efficiency? Why are public bureaucracies alleged to be less efficient than private enterprises?

Market Structure: Perfect Competition

DISCUSS HOW THESE FACTS ARE CONSISTENT WITH THE MODEL OF PERFECT COMPETITION. The following facts characterize the furniture industry in the United States: a. The industry has been very fragmented, so that few companies have the financial backing to make heavy investments in new technology and equipment. b. In 1998, onl

Managerial Economics

Managers are very interested in how a consumer makes choice among alternatives. Consider the price of gasoline you may purchase to operate your automobile in any month and any alternatives available to you assuming your net income available to make those purchases. Assume gasoline prices for your auto rose 100% during one di

Managerial Economics-Aircraft Industry

The Boeing Aircraft Company has dominated the commercial aircraft market for decades, but its position of influence has lessened in recent years. Its chief competitor, Airbus, has made significant market gains, and may be posed to become the number one producer of commercial aircraft in the near future. Analyze how Boeing a


Which of the following is not a true statement? (A) Common stockholders have a residual claim to income. (B) Bondholders may force a corporation into bankruptcy for failure to make interest payments. (C) Common stockholders are legally entitled to some dividend. (D) A minority interest can still elect mem

Work/Leisure Trade-Off

There are 168 hours in a week. Of these, about 60 hours will go to sleeping (more or less). That leaves 108 hours for which we have a choice in terms of how we will spend that time. Let's assume that we will spend the 108 hours in either work or leisure, or some kind of combination of the two. A. What factors would you consid

Economics and Time

Choice in economics is based on scarce resources, such as land, labor, and capital. One other scarce resource often cited is time. We recognize the choices we make to allocate our 24 hours in a day and the concept of opportunity cost (when we decide to spend an hour on one activity, its opportunity cost is the value of the next

Economics Questions

1) Explain your reasoning- Consider a vote being taken by a group of friends A, B and C. They are trying to decide which of the three elective courses to take together in this term. (Each one has a different concentration and is taking required courses in her field for the rest of her courses.) Their choices are Economics, Accou

Economic theory/International Business

1. Is Microsoft a monopoly? Is the electric power industry in California an oligopoly? Explain your reasoning for each. 2. Is it Microsoft's faults that they have all the wonderful technical people that can develop these systems? Second set of questions is international business 1. Please explain why international st

Expected profit, mean-variance, maximin, & maximax rule

A firm making production plans believes there is a 30% probability the price will be $10, a 50% probability the price will be $15%, and a 20% probability the price will be $20. The manager must decide whether to produce 6000 units of output (A), 8000 units (B) or 10000 units (C). The following table shows 9 possible outcomes de