Module 2 and 3 Discusion

Module 2 Discussion

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After viewing the video clip, Bart Gets an Elephant, consider the relationship between price elasticity of demand and total revenue, and why Homer didn't make the smartest business decision when raising the price of admission. For this week’s discussion question, you should pick two products: one that is relatively price inelastic and another that is relatively price elastic. You can determine a product’s relative price elasticity by considering the Determinants of the Price Elasticity of Demand listed in your textbook. You should begin by defining your product in terms of the determinants and then describe how increases in the price would affect total revenue. Would it make good business sense to be the one producing and selling these products?  Why or why not?

Module 3 Discussion

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After viewing the video clip from Cool Hand Luke, first consider how marginal benefits and marginal costs fit in to Luke’s decision, and how the concept of diminishing marginal utility is at work as Luke eats more and more eggs.

· What is driving his marginal benefits to continue to exceed his marginal cost?

· Consider how Luke’s decision would change if he had to actually pay for each egg he eats. How would this affect his choice to continue eating?

· Consider the concept of marginal utility per dollar spent (i.e. MU/p) and how it affects the consumption decisions we make. Have you ever had a time where you actually bought your second choice rather than your first choice? That is, can you think of a time where it wasn't only about marginal utility for you, but about marginal utility per dollar spent? Explain.