Question

1. How many dates show you go on to decide when to marry someone? Does the 18th date provide as much additional information as the 1st date? (Remember diminishing marginal returns.)

2. If there is a shortage of water resources in an area, it is immoral for any business to sell bottled water at double or more prices, rather than providing the best water at the lowest possible price." What does the supply curve for water (or anything else) look like? What does that suggest?

Answer 1

1.The number of dates show I need to go on to decide when to marry someone depends on the amount of information about the person I am dating I gather from each date show. The amount of additional information must increase at an increasing rate upto a certrain time after that it must increase at a decreasing rate and at the end the amount of additional information should start falling. I should keep on dating till the time the additional information I hget from each date increases. And I should marry the person on the very day after which the amount of information I get from another dating starts falling.

The amount of additional information that 18th date provide must be less or may be higher than the amount of additional information one can get from the 1st date depending on the place the 18th date occupies on the graph of additional information and time. The graph is shown below:

In the above diagram the additional amount of information is taken in the vertical axis and number of days is taken on the horizontal axis. The portion OA shows that the additional amount of information is increasing at an increasing rate with more dates. The portion AB shows that the amount of additional informatin increases at a decreasing rate and after point B any additional date provides negative amount of information. Now it depends that 18th date falls on which part of the graph. 1st date must fall on the first part OA. And 18th date should fall on the last part that is the portion on the right side of point B which provide negative amount of information. So the amount of additional information provided on 1st date must be less than tha amount of additional information provided on th e18th date.

2. If there is any shortage of water in an area, it is certainly immoral for any business to sell bottled water at double price. Water is an quintessential product for human being. One cannot live without water. And the most important thing is there is no substitute for water. Hence people cannot have anything as substitution when water is not available. Now water is a natural product for which supply curve is upward sloping. hence ashortage of supply of water must shift the supply curve of water to the leftward direction. As a result price of water must increase. The inelastic nature of supply curve must increase the price of water to a large extent.

Now we know that water is an essential thing in human life We cannot live without water. Hence government should interven in this and should look to provide water at free of cost in crisis situation. Or government may fix a price ceilling on water above which price water cannot be sold in the market where crisis has occured. This may keep the price of bottled water at a reasonable rate and people should be able to buy bottled water at their required amount.