Tradeoff between speed and acceleration and safety features

Assignment Help Business Economics

Reference no: EM131244527

When it comes to vehicle performance, there is often a tradeoff between speed & acceleration and safety features (high performance sports cars often have fewer safety features than do, say, minivans). Superior speed and acceleration are generally desirable but greater speeds increase the probability of car accidents, some fatal, some not fatal.

Consider a consumer who is choosing between safety features and speed when buying a car. From his car-buying budget, he is willing to pay Ps for a one percent reduction in the probability of a fatal accident. He is willing to Pa for a one percent increase in speed & acceleration. As far as indifference curves go, he does consider speed and safety to be imperfect substitutes with diminishing marginal rates of substitution between the two attributes.

Suppose the government mandates safety features (the cost of which are borne only by car manufacturers) on all cars that will reduce fatal accident probabilities by 25 percent. Will the safety feature mandates guarantee and reduction in overall car accidents? Explain your answer graphically using consumer theory.

Reference no: EM131244527

Questions Cloud

In terms of the equilibrium price and equilibrium quantity : In terms of the equilibrium price and equilibrium quantity, what happens when. supply and demand shift to right?supply and demand shift to the left? demand shift to the right and supply to the left? demand shift to the left and demand to the right?

Revenue functions for classic-professional model sharpeners : EZ Sharp Industries, Inc., manufactures the Kleen Edge(TM) line of diamond-abrasive cutlery sharpeners for home use. EZ Sharp holds a patent on its unique design and can earn substantial economic profit if it prices its Kleen Edge(TM) products wisely..

Security exchange commission in the madoff scandal : What factors have to be at work to allow something like the Bernie Madoff "Ponzi Scheme" to be as successful as it was for as long as it was? What is the role of the Security Exchange Commission in the Madoff Scandal.

Consider the plight of two equally skilled economists : Consider the plight of two equally skilled economists, Ann and Bill. Ann lives in Ohio, where she pays a monthly rent of $1000 for a 1000 square foor apartment. Bill lives in Okaland in an 800 square foot apartmentthat is otherwise identical to Ann's..

Tradeoff between speed and acceleration and safety features : When it comes to vehicle performance, there is often a tradeoff between speed & acceleration and safety features (high performance sports cars often have fewer safety features than do, say, minivans). Consider a consumer who is choosing between safet..

Economy as function of the real wage and the capital stock : Consider an economy with the following Cobb-Douglas production function: derive the equation describing labor demand in this economy as a function of the real wage and the capital stock.

Draw the consumers budget constraint and indifference curve : Suppose a consumer uses his income to buy food (F) and clothing (C) (note, his preferences are to not go without either). The current composite market price of food is $2.00 per unit and the current composite market price of clothing is $5.00. Draw t..

Effects necessary to produce these elasticity measures : Suppose the Marshallian own price elasticity of demand for soda pop is -1.3 and the Hicksian own price elasticity of demand for soda pop is -0.9. Use indifference curves and budget constraint analysis to illustrate the income and substitution effects..

The first of series of equal monthly cash flows : The first of a series of equal monthly cash flows of $2000 occurred on April 1,2008, and the last of the monthly cash flows occurred on February1, 2010. This series of monthly cash flows is equivalent to aseries of semi-annual cash flows.

User Account

All Pages