Mme. Asterix asks her housekeeper M. Obelisk to get her some beef tenderloin for
ID: 1189381 • 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 I Kg 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!. 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? 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.
Case 1- price 70 euro per kg, and quantity demanded is 1 Kg
Then expenditure = P*Q = 70*1 = 70euro
Case 2- price 20 euro per kg quantity demanded is 3kgs
Expenditure = 20*3 = 60 euro
Hence demand is inelastic. The elasticity of demand for meat is less. Thus there is nothing irrational of Asterix to make purchase plan. She just wants to pay less for more meat
b.
Yes, it is sensible for her think that supermarket sometimes sell more meat for less money compared to some other times.