Lesson 7A: The Spending Decision— Colas and Hot Dogs

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Lesson 7A: The Spending Decision— Colas and Hot Dogs Unit 7: Spending Lesson 7A: The Spending Decision— Colas and Hot Dogs ©2017, Minnesota Council on Economic Education. Developed in partnership with the Federal Reserve Bank of St. Louis.

How do people decide what combination of goods and services to buy? Compelling Question How do people decide what combination of goods and services to buy? Lesson 7A

Visual 7A.1: Joe’s Satisfaction Index Colas Units of total satisfaction () 1 10 2 18 3 24 4 28 5 31 6 33 Hot dogs Units of total satisfaction () 1 12 2 21 3 27 4 31 5 33 6 34 7 34.8 8 35.2 Lesson 7A

Visual 7A.2: Joe’s Satisfaction Alternatives Colas Units of cola satisfaction Hot dogs Units of hot dog satisfaction Units of TS* (Total ) — 8 35.2 1 10 6 34 44 2 18 4 31 49 3 24 21 45 28 NOTE: *TS, total satisfaction. Lesson 7A

Visual 7A.3: Joe’s Diminishing Returns Colas Units of TS* (Total ) Units of MS** (M) Units of M per $ (M ÷ $2) 1 10 5 2 18 8 4 3 24 6 28 31 1.5 33 Hot dogs Units of TS (Total ) Units of M Units of M per $ (M ÷ $1) 1 12 2 21 9 3 27 6 4 31 5 33 34 7 34.8 0.8 8 35.2 0.4 Lesson 7A NOTE: *TS, total satisfaction. **MS, marginal satisfaction (M)

Visual 7A.4: Joe’s Marginal Satisfaction Colas Units of TS* (Total ) Units of MS** (M) Units of M per $ (M ÷ $1) 1 10 2 18 8 3 24 6 4 28 5 31 33 Hot dogs Units of TS (Total ) Units of M Units of M per $ (M ÷ $2) 1 12 6 2 21 9 4.5 3 27 4 31 5 33 34 0.5 7 34.8 0.8 0.4 8 35.2 0.2 Lesson 7A NOTE: *TS, total satisfaction. **MS, marginal satisfaction (M)