The Rational Consumer Personal Statement Example | Topics and Well Written Essays - 250 words

The Rational Consumer - Personal Statement ExampleThe alternative I permit for buying gasoline is use of other types of fuels and public means of transport. However, in substituting these alternatives with buying gasoline, I must incur an probability cost. According to Hussain (2010), an opportunity cost is the cost incurred when one turns from using a product to using its best alternative. In this particular case, the opportunity cost for buying gasoline is the unhinge of using public means of transport and engine malfunctions due to use of other fuels. Due to this opportunity cost, I go out not be able to turn to zero consumption in the rook run. However, I might later turn to zero consumption by acquiring an engine specifically made to use other fuels.In the short run, when the price of gasoline increases, the expenses on other goods will increase especially for make out of gasoline. The reason for this is substitution effect. Substitution effect is the relative change in co nsumption of a product as consumers substitute it with cheaper substitutes (Hirschey, 2008). As the price of gasoline increases, I would substitute it with its cheaper alternatives and thus the income I spend on those other goods would