Mme. Asterix asks her housekeeper M. Obelisk to get her some beef tenderloin for
ID: 1189071 • Letter: M
Question
Mme. Asterix asks her housekeeper M. Obelisk to get her some beef tenderloin for dinner from the supermarket. She would like to buy 1Kg for her family if the price was 70 euros per kg, however, if the price was only 20 euros per kg then she would like to buy 3 Kgs (and invite some friends over for dinner). M. Obelisk wonders " The woman is nuts; she wants to pay less in total for more meat than for less! And she actually thinks the supermarket would sell more meat for less money too! Go figure!.
a) Is it irrational behaviour on the part of Asterix to make her purchase plans as described, i.e., that she wants to pay less in total for more meat? Why or why not? (Hint: Calculate her expenditure under each scenario, and consider the relationship between expenditure and elasticity.)
b) Is it sensible on her part to think that supermarkets may sometimes sell more meat for less money compared to some other times? Why or why not?
Explanation / Answer
a) price= 70 euros per kg, quantity =1 kg , toatal expenditure= 70 euros
price= 20 euros per kg, quantity =3 kg , toatal expenditure= 60 euros
the behaviour of Astrix is rational. as according to total expenditure method of calculating elasticity
if due to decrease in price of commodity , total expenditure on that commodity decreses than it means demand for that commodity is inelastic or not so elastic. so that means Astrix demand for meat is inelastic. that means her demand for beef is not highly effected by price.
so it is rational on the part of Asterix to make her purchase plans as described, i.e., that she wants to pay less in total for more meat
b)
it is sensible on her part to think that supermarkets may sometimes sell more meat for less money compared to some other times because demand for a commodity is not only depend on price but also on other factors like price of other goods, income, taste and preferences,etc. so when price is lower than other factors also effect the demand therefore sale.. as we can't keep other things constant in real life as we do in theories and books