Name a time you were indifferent between two goods. What were they? What made you indifferent between them?
If a combination of two goods that give a consumer equal satisfaction and utility, it's making the consumer indifferent.
Remember the last time I walked into a MUJI store to buy a pen, there are blue and black ballpoint pens on the shelf. For me, It does not matter whether it is a blue or black ballpoint pen. They all do the same thing for me, which is, writing. Assume the amounts of satisfaction and utils that a blue ballpoint pen gives me is 1, the black ballpoint pen is the same amount of 1. Suppose both the blue and the ballpoint pen are $1, the marginal utilities per dollar is also the same. While I make my choice of picking a little more or a little less blue or black ballpoint pens, I got exactly the same satisfaction no matter what combinations of these two goods.
Name a time there was a change (higher or lower) in your budget for two goods. What were they? How did the change affect your consumption choices?
I always have a cup of coffee in the morning, so I purchase coffee capsules very often. Whenever I purchase coffee capsules, I make a choice on how many the total amount of capsules and what kind of combinations of different tastes of coffee capsules, since there is a minimum for free shipping. Normally, I purchase a little bit above the minimum amounts for free shipping. Suppose my budget constraint per purchase is $100, I have to choose my combination of coffee capsules with a total amount of $100. Between the variety of tastes, the Ispirazione Palermo Kazaar and Ispirazione Ristretto Italiano are both my favorites. Assume they are both 10 utils for me, the same amounts reflect the indifference of these two goods. Usually, I purchase Kazzar and Italiano for half and half. They are both $0.5 per capsule in the past, but most recently the price of a Kazzar rises to $0.6 per capsule. In the past, I always purchased 100 capsules for Kazzar and 100 capsules for Italiano. After the increase in the price of per Kazzar capsule, the combination of capsules I put in my cart changed to 90 Kazzar capsules and 92 Italiano capsules. This change makes me reduce the total quantity of the capsules I purchase each time, but the total money I have to pay for it is the same.
How did the change affect my consumption choices? Due to my taste, the type of good, and budget constraint, I only changed the decision at the margin of my cart. In the short run, It's doesn't matter at all. But in the long run, I will keep finding any other solutions for the loss of the 18 capsules. Even so, If my income is higher than before while I purchase the coffee capsules, I will stop finding the solutions and accept the new price deal.
Name a time you believe you applied the utility maximization rule. What were the goods or services you chose to maximize your utility? How did this relate to your budget constraint?
Remember the last time I bought a new Timberland 6-inch Classic boots, I was struggling with the decision. There is a discount for a Converse Allstar Classic shoes, offered by the same store. Now the price of a pair of Converse Allstar Classic was $99, and the Timberland 6-inch Classic boots were $199. Which one satisfies me more? It's clearly the Timberland 6-inch Classic. But It is nearly two times more pain for me to pay for the price. So, I worked out a solution. Assume I get exactly the same satisfaction from the both, I started to think which one is more durable. Considered the Timberland 6-inch Classic boots is more durable than the Converse Allstar Classic for more than 2 years. Therefore, the utils of the Timberland 6-inch Classic is 3 and the Converse Allstar Classic is 1. Now I can make my decision easily since the utils are comfirmed. With the budget of $200, I should buy the Timberland 6-inch Classic first because it's 3 utils.
However, the utils of the Timberland 6-inch Classic can drop quickly after I have got one. The second time I will choose the Converse Allstar Classic because it's satisfies more after I have got one Timberland 6-inch Classic.
Reference
OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330
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