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Chapter 4: Q14. (page 167)

Vera has decided to upgrade the operating system on her new PC. She hears that the new Linux operating system is technologically superior to Windows and substantially lower in price. However, when she asks her friends, it turns out they all use PCs with Windows. They agree that Linux is more appealing but add that they see relatively few copies of Linux on sale at local stores. Vera chooses Windows. Can you explain her decision?

Short Answer

Expert verified

The decision taken by Vera reflects the bandwagon effect since even though the Linux operating system is superior to Windows and substantially lower in price, she still chooses Windows over Linux since all her friends are using Windows as their operating system.

Step by step solution

01

Explanation of the answer

Vera’s decision is the result of the bandwagon effect. The bandwagon effect is one of the exceptions to the law of demand. It postulates that the consumptions decisions of people regarding goods and services depend upon the consumption patterns of other individuals rather than the price of such a good or service.

We see here that even though Linux is superior in technology and lower in price, Vera still chooses Windows as the operating system since all her friends use it. Therefore, her decision is based on the bandwagon effect.

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Most popular questions from this chapter

An individual sets aside a certain amount of his income per month to spend on his two hobbies, collecting wine and collecting books. Given the information below, illustrate both the price-consumption curve associated with changes in the price of wine and the demand curve for wine.

PRICE

WINE


PRICE

BOOK


QUANTITY

WINE


QUANTITY

BOOK


BUDGET
\(10
\)10
78\(150
\)12
\(10
59\)150
\(15
\)10
49\(150
\)29
\(10
211\)150

The director of a theater company in a small college town is considering changing the way he prices tickets. He has hired an economic consulting firm to estimate the demand for tickets. The firm has classified people who go to the theater into two groups and has come up with two demand functions. The demand curves for the general public (Qgp) and students (Qs)

are given below:

Qgp = 500 - 5P

Qs = 200 - 4P

a. Graph the two demand curves on one graph, withon the vertical axis andQon the horizontal axis. If the current price of tickets is \(35, identify the quantity demanded by each group.

b. Find the price elasticity of demand for each group at the current price and quantity.

c. Is the director maximizing the revenue he collects from ticket sales by charging \)35 for each ticket? Explain.

d. What price should he charge each group if he wants to maximize revenue collected from ticket sales?

An individual consumes two goods, clothing and food. Given the information below, illustrate both the income-consumption curve and the Engel curve for clothing and food.

PRICE

CLOTHING

PRICE

FOOD

QUANTITY

CLOTHING

QUANTITY

FOOD

INCOME
\(10
\)2
620\(100
\)10
\(2
835\)150
\(10
\)2
1145\(200
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\(2
1550\)250

Suppose you are in charge of a toll bridge that costs essentially nothing to operate. The demand for bridge crossingsQis given byP= 15 - (1/2)Q.

a. Draw the demand curve for bridge crossings.

b. How many people would cross the bridge if there were no toll?

c. What is the loss of consumer surplus associated with a bridge toll of \(5?

d. The toll-bridge operator is considering an increase in the toll to \)7. At this higher price, how many people would cross the bridge? Would the toll-bridge revenue increase or decrease? What does your answer tell you about the elasticity of demand?

e. Find the lost consumer surplus associated with the increase in the price of the toll from \(5 to \)7.

a. Orange juice and apple juice are known to be perfect substitutes. Draw the appropriate price consumption curve (for a variable price of orange juice) and income-consumption curve.

b. Left shoes and right shoes are perfect complements. Draw the appropriate price-consumption and income-consumption curves.
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