Question

Hi, Please help solve question 6 only. Thanks

5. (6 points) Draw an indifference map for a typical person's preferences over five-dollar bills and ten-dollar bills using the vertical axis for five-dollar bills and the horizontal axis for ten- dollar bills. What is the marginal rate of substitution (MRS)? 6. (10 points) Victoria eats vanilla ice cream and Oreo cookies only together, and then only if they are mixed in a fixed ratio of 1 pint of ice cream to 3 crushed Oreos. a. Draw an indifference map, which represents Victoria's preferences over vanilla ice cream and Oreo cookies using the vertical axis for Oreo cookies and the horizontal axis for pints of vanilla ice cream. b. Which assumption does Victoria's preferences over these two goods violate?

Answer 1

(a)Goods that are consumed together are called complementary goods.

The indifference map represents two or more indifference curves that show different levels of utility.

Let pint of ice cream be x1

and crushed oreo be x2,

u(x1,x2) = min{3x1,x2}
min (3442)=9 min (3x, H2) = 6 1 1 munn, 2) = 3 1 2 3 x x : : pint of icecream crushed oreo

Refer to the image attached for IC map.

(b) Victoria's preferences over these two goods violate the following assumptions:

1. Unrelated products:- the assumption of unrelated products that is the utility of x1 is not affected by x2 is violated.

2.MRS:- MRS is infinite or zero or not defined and it's not falling continuously as in the case of convex IC.