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    realmemo1905
    This document contains 4 questions related to consumer choice theory and indifference curves: 1. It asks to draw the budget line and find the optimal consumption bundle for an individual with $40 to spend on hot dogs and Coke given their prices. 2. It asks to draw indifference curves for two individuals with different preferences over pepperoni and anchovy pizza. 3. It asks about the preferences of individuals with indifference curves that are parallel to the axes or positively or negatively sloped. 4. It asks to sketch indifference curves for individuals with three different utility functions.

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    PS1 PDF

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    realmemo1905
    272 views1 page
    This document contains 4 questions related to consumer choice theory and indifference curves: 1. It asks to draw the budget line and find the optimal consumption bundle for an individual with $40 to spend on hot dogs and Coke given their prices. 2. It asks to draw indifference curves for two individuals with different preferences over pepperoni and anchovy pizza. 3. It asks about the preferences of individuals with indifference curves that are parallel to the axes or positively or negatively sloped. 4. It asks to sketch indifference curves for individuals with three different utility functions.

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    This document contains 4 questions related to consumer choice theory and indifference curves: 1. It asks to draw the budget line and find the optimal consumption bundle for an individual with $40 to spend on hot dogs and Coke given their prices. 2. It asks to draw indifference curves for two individuals with different preferences over pepperoni and anchovy pizza. 3. It asks about the preferences of individuals with indifference curves that are parallel to the axes or positively or negatively sloped. 4. It asks to sketch indifference curves for individuals with three different utility functions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    272 views1 page

    PS1 PDF

    Uploaded by

    realmemo1905
    This document contains 4 questions related to consumer choice theory and indifference curves: 1. It asks to draw the budget line and find the optimal consumption bundle for an individual with $40 to spend on hot dogs and Coke given their prices. 2. It asks to draw indifference curves for two individuals with different preferences over pepperoni and anchovy pizza. 3. It asks about the preferences of individuals with indifference curves that are parallel to the axes or positively or negatively sloped. 4. It asks to sketch indifference curves for individuals with three different utility functions.

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    ECO 201 PS 1 Fall 2010

    1. Brenda likes hot dogs and Coca-Cola. Hot dogs cost $1 each and Cokes cost $.50 per
    bottle. There is a special promotion for Coke that will last for one month. If Brenda sends
    in the bottle tops from the Cokes she drinks during the next month, she will get a refund of
    $.20 for every bottlecap beyond the first 12 that she returns. For example, if she returns 25
    bottle caps she will get back $2.60 = $.20(25 - 12). Brenda has $40 to spend on hot dogs
    and Coke during the next month. Draw her budget line with Coke on the horizontal axis
    and hot dogs on the vertical axis. Find the points where the budget line hits the axes and
    the point where it has a kink. At each of these three points write down the quantities of
    each good consumed.


    2. Draw graphs with quantities of pepperoni pizza on the horizontal axis and anchovy pizza
    on the vertical axis to illustrate the following situations. In each case draw two different
    indifference curves and make a little arrow pointing in the direction of greater preference.

    a) Marvin loves pepperoni pizza and hates anchovy pizza.

    b) Mavis hates anchovy pizza and is completely indifferent about pepperoni pizza.


    3. If good X is measured on the horizontal axis and good Y on the vertical, what can you say
    about the preferences of someone whose indifference curves are

    a) Parallel to the Y axis?

    b)Positively sloped with more desirable indiffernce curves as one moves to the right?

    c) Negatively sloped with more desirable indifference curves as one moves to the left?


    4. Use separate graphs to sketch two indifference curves for people with each of the
    following utility functions:

    a) U(x, y) = x+ 2y

    b) U(x, y) = Min {x, 2y}

    c) U(x, y) = Max {x, 2y}

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