Using the utility-maximization rule as your point of reference, explain the income and sub
Using the utility-maximization rule as your point of reference, explain the income and substitution effects of an increase in the price of product B, with no change in the price of product A.
8. ADVANCED ANAYLSIS A “mathematically fair bet” is one in which the amount won will on average equal the amount bet, for example when a gambler bets, say, $100 for a 10 percent chance to win $1,000 ($100 = .10 x $1,000). Assuming diminishing marginal utility of dollars, explain why this is not a fair bet in terms of utility. Why is it even a less fair bet when the “house” takes a cut of each dollar bet? So is gambling irrational?