Full-time job with a considerably higher salary

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a) While you were an intern you bought 5 packages of hot dogs a month. After acquiring a full-time job with a considerably higher salary, you stopped purchasing hot dogs. Explain this behavior?

b) An investor has to choose between stocks A&B, each selling for $10. Stock A, can either increase in price to $12, with a 50% probability or stay at $10 with a 50% probability. Stock B can either increase in price to $15 with a 50% probability or go down to $7 with a 50% probability. Which of the stocks would the investor choose??

c) Peter’s Pizzeria sells both pizzas and wings. It wants to increase the sales of its pizzas. If the price of the wings increase, what economic concept does Peter assume? Explain.

d) Explain the indifference principle and provide an example.

e) Explain what happens both long and short term when a sudden increase in market demand occurs in a competitive industry.

Reference no: EM13999686

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