One type of systematic error arises because people tend to think of benefits in percentage terms rather than in absolute dollar amounts. As an example, Samir is willing to drive 20 minutes out of his way to save $4 on a grocery item that costs $10 at a local market. But he is unwilling to drive 20 minutes out of his way to save $10 on a laptop that costs $400 at a local store. a. In percentage terms, how big is the savings on the grocery item?b. In absolute terms, how big is the savings on the grocery item? c. If Samir is willing to sacrifice 20 minutes of his time to save $4 in one case, shouldn’t he also be willing to sacrifice 20 minutes of his time to save $10?

Answers

She is better off by $40,

Please kindly go through the explanation section for rest of the answers.

Explanation:

From the Question,

Grocery saving = 40%

Laptop saving = 2.5%

Absolute saving in grocery = $4

Absolute saving in Laptop =$10

Yes he should sacrifice 20 mins to save $10 since he does the same for less savings

Second case:

Since Ted is depositing money for only 6 months at 10% interest rate, he is giving up half his annual interest of (0.1*750)/2 = $37.5

Third case:

Interest accrued on student loan = 0.07*2000 = $140

Interest on credit card = $75 + (0.07*1500) = $180

She is better off by $40.

A. Grocery= 40%, Laptop= 5%

B. Grocery= $4, Laptop= $10

C. Yes

Explanation:

A. The percentage savings for grocery

= $4/$10 x 100 = 40%

The percentage savings for laptop

=$20/$400 x 100 = 5%

C. Considering the value of the saving, Samir should be more willing to sacrifice 20 minutes of his time to save to save $10 because a $20 dollar savings has higher economic value.

(A) In percentage terms,

Savings on the grocery item:

=\frac{savings\ on\ grocery\ item}{cost\ of\ grocery\ item}\times100

=\frac{4}{10}\times100

      = 40%

Savings on the laptop:

=\frac{savings\ on\ laptop}{cost\ of\ laptop}\times100

=\frac{10}{400}\times100

      = 2.5%

(B)  In absolute terms,

savings on the grocery item = $4

savings on the laptop = $10

(C) Yes, he should sacrifice 20 mins to save $10 since he does the same for less savings. Hence, he should also sacrifice his time to save $10 from laptop which is greater than the savings from grocery item.



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