An Economist Explains (October 2010)

An Economist ExplainsMaximizing utility with marginal advice

Dear EE,

My daughter earns ten dollars a week in allowance for doing household chores. For her birthday last week, her grandfather gave her a $200 check. Now she won’t take out the trash or feed the goldfish. Why the sudden indifference?

-Adversely Affected

Dear Affected,

Your whole problem can be explained by the wealth and substitution effects. To see what I mean, simply draw a convex line and a straight line and then draw a different straight line but also remember another dotted straight line below the new, parallel convex line that you should have drawn in the meantime taking care to align the tangency points so as to equilibrate the marginal rates of substitution. Subtract B from A but add C to the result if it’s Thursday or Giffen and there you have it. If that doesn’t help, two words: college fund.


Dear EE,

I have 500 pages of reading to do by Monday, but I’d rather spend all weekend watching football and drinking beer. How can I tell which readings are the most valuable to skim in the ten minutes I’ve allotted to schoolwork?

-#1 Redskins Fan

Dear #1,

The only way to find the value of something is to sell it. Since the library charges 7 cents per page to print, and getting to use the printers is highly competitive, price therefore equals marginal cost. Your readings are worth $35, which is exactly what you could pay the other people in your reading group to take notes for you in a google doc.


Dear EE,

My ficus won’t grow. I’ve given it plenty of capacity in terms of a large pot. I fertilize liberally. I imported dirt from out West. I even propped it up with the aid of a neighbor. What the hell?

-On the Brink of Being Institutionalized

Dear OBBI,

I would be happy to share with you a special recipe I’ve developed for plant care so long as you agree to re-form your method of watering first. One, you can’t keep insisting that everyone use your watering can. If the guy in apartment 2A has a more efficient one, let him sprinkle away. Two, you can’t just keep pouring more water whenever you feel like it. Add at most 10% more water to the soil per year. Three, who elected you to be in charge of watering anyway? Let the condominium association pick a new plant caretaker by May or I’m shutting off your tap.

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