Explain how microeconomics provides answers to this, outlining key insights from microeconomics theory on Choice under Uncertainty. How and why might an individual’s attitude to risk affect this decision?

Intermediate Microeconomics

1. How do rational individuals decide what to buy?

a) Explain how microeconomics provides answers to this, outlining key insights from microeconomics theory on Rational Consumer Choice.

b) Why might optimal choices vary between individuals?

c) Why might optimal choices change over time?

With respect to parts b) and c), provide interesting illustrative example(s) to compare and contrast different outcomes under different scenarios.

2. How do individuals decide how much they are willing to pay for insurance?

a) Explain how microeconomics provides answers to this, outlining key insights from microeconomics theory on Choice under Uncertainty.

b) How and why might an individual’s attitude to risk affect this decision?

c) How and why might an individual’s life situation (e.g. age) affect this decision? With respect to parts b) and c), provide interesting illustrative example(s) to compare and contrast different outcomes under different scenarios.

3. How do firms decide the best combination of labor and capital in production planning?

a) Explain how microeconomics provides answers to this, outlining key insights from microeconomics theory on Production and Costs (in the long run).

b) Why might optimal use of capital and labor vary between firms?

c) Why might optimal use of capital and labor change if a new production process is invented?

With respect to parts b) and c), provide interesting illustrative example(s) to compare and contrast different outcomes under different scenarios.