1. Based on what you have learned in the chapter explain the following statement

Question

1. Based on what you have learned in the chapter explain the following statement. "When there is an exceptionally large crop it causes farmers' incomes to fall."

Could someone please explain this? I think it means that because of the large crop, farmers' incomes will fall because of the increase supply per farmer. Prices would then have to be competitively low to sell due to the high supply and as such the income of the farmers will fall.

2. Based on utility maximization, explain the following: "It is irrational for an individual to take the time to be completely rational in economic decision making."

This second question I am not so sure about.

Any input? Thanks!

Explanation / Answer

1) since the supply is more than demand , the price will take a fall, hence his income will also fall

2)Disagree. The marginal utility of a unit beyond the first may be sufficiently great (relative to

product price) to make it a worthwhile purchas

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