If Jane Is Willing to Pay $200 for Shoes That

question 2

Multiple Choice

If Jane is willing to pay $200 for shoes that reduce her risk of death from sore feet by .0001 (1/10,000) , what is her implied value of life?

• A)$200,000
• B)$1,000,000
• C)$2,000,000
• D)$10,000
• E)Infinity

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Definitions:

Elastic Demand

A condition where the quantity demanded of a good or service is highly responsive to changes in its price.

Output Effect

The impact on total revenue when a firm changes its output level, considering demand elasticity.

Substitution Effect

The change in consumption patterns due to a relative change in prices leading consumers to substitute one product for another.

Derived Demand

The demand for a good or service that arises from the demand for another good or service; for example, the demand for steel is derived from the demand for cars.