Question

(5 pts each) Draw indifference curves that reflect the following preferences under the given circumstance. 8. 1. a) When taking an exam: blue pen and black pen 2. b) When show skiing: left glove and right glove 3. c) When grocery shopping: calories from vegetables and calories from fruit 4. d) When choosing an apartment: distance to campus and distance to sewer treatment plant

Answer 1

1. a. Blue pen and black pen are perfect substitutes. Thus, the marginal rate of substitution will be constant.

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2.b. Left gloves and right gloves are perfect complements, thus the indifference curves are L shaped.

3.c. These represent the normal preferences for any 2 goods. All the combinations on the IC gives equal satisfaction and the satisfaction increases for the higher IC.

4.d. Here the consumer does not prefer being located near sewer treatment plant but instead will prefer being located near the campus. Thus, if the consumer has to move closer to sewer plant then the consumer should also be located near to the campus in order to compensate for being located near sewer plant or else the level of utility may fall.