Question

What is your dream school for completing your undergraduate degree? Let's assume for a moment that you received an admission letter from that school. However, you also realize that tuition and fees are extremely high.

Would you accept the invitation to study at your dream school? Why or why not?

Also, bring an example when you got deterred to purchase an item because the price was too high. What does this mean in terms of elasticity? What reasons made you decided not to buy the item?

Let's say my dream school is USC

Answer 1

The decision associated with a particular purchase, transaction or action depends on the respective cost-benefit analysis associated with it. An economic agent will carry out a transaction or purchase if the benefit from the transaction outweighs the cost. Benefits are measured by the marginal utility while costs are measured by marginal costs. So, my decision to accept the invitation to my dream school will depend on the marginal utility of attaining the dream school. The costs of attending Usc is very high.  So, even if I want to attend school, I will be deterred from joining it owing to the high costs associated with it. If only I am sure that I will be able to recover the costs associated with attending the school in some way in the future, then only I will consider joining the school.

Like a dream university, people have dream cars. The dream cars are often luxurious brands with sophisticated features and exorbitant prices. SO, even though the good is highly preferable by me, I will be deterred from buying it dut to the very high price. This reflects the high price elasticity associated with luxury goods. Even if the goods are highly desirable, higher price elasticity indicates a slight change in prices affects the quantity sold by a significant amount.