Answer to Question #125705 in Microeconomics for ismail lodin

Question

Question # 02
A university is deciding between two meal plans. One plan charges a fixed fee of $600 per semester and allows students to eat as much as they want. The other plan charges a fee based on the quantity of food consumed. Under which plan will students eat the most? Explain through economic theory.

Answer 1

At all times students/people will prefer a less costly commodity/goods/services. The must way the benefits against the cots of everything before making purchase or making expenditure. Paying a fixed amount of $600 will make students consume more as they does not incur more expenses as they eat more and more food. On the other hand, if they are allowed to pay depending on the quantity consumed, they may prefer to take less as they will prefer to safe more. The more they eat the more they pay. As such they may not prefer to eat much. There under the option of paying $600 they will eat more.