The Rise of the Staycation

Staycation is a closer-to-home vacation. With higher gas prices, some families don’t want to drive as far as they previously would. For many families, less money spent on gas means more trips closer to home with more to spend on tours and food.—travelplus.com

Answer the following questions to check your understanding of the story.

1) The Adamson family have a $5,000 annual budget to spend on staycations and vacations further from home. What is the effect of the rise in the price of gas on marginal utility per dollar from vacations further from home and staycations?

The family’s marginal utility per dollar from vacations further from home _____________ and their marginal utility per dollar from staycations _______________.

a) decreases; doesn’t change

b) doesn’t change; doesn’t change

c) increases; increases

d) decreases; decreases

2) The Adamson family are initially in consumer equilibrium, and then the price of gas rises. If the Adamsons are one of the many families described in the news clip, how does the Adamson family move to their new consumer equilibrium following the rise in gas prices?

The Adamson family ______________.

a) maximizes total utility by increasing staycation days, decreasing vacation days, and spending all their budget

b) increases staycation days and decreases vacation days, but no longer maximizes total utility

c) increases marginal utility per dollar from staycation days and decreases marginal utility per dollar from vacation days, and maximizes total utility

d) maximizes marginal utility from staycation days and minimizes marginal utility from vacation days, and spends all their budget

The Rise of the Staycation

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