Question

1) Draw representative indifference curves for Garbage and pollution. Explain the slope. 2) Draw representative indifference curves for an individual who consumes 3 Dove dark chocolates with one cup of milk and at exactly that ratio. 3) Draw representative indifference curves for penny and nickel. 4) John is willing to give up 2 apples for one orange and always at that ratio. Kate is willing to give up 3 apples for an orange and always at that ratio. Draw representative indifference curve for each of them and compare the slopes. Intuitively what does the slope represent?

Answer 1

Here Carbage and pollution are two in "bads which means an entra mit of Consumption of garbage or & pollutions is not good for our well being. Hence the closch the consmption of two goods to zno the belt it is for an Individual 2 2 Now, suppose we denote X Carbage by x and pollution by ly ar t Hue the ability function can be writtmas Us 0 (x,y)D A S TO And, Marginal utility of a MUX: (x,y) = I 2 WIND S ax - Norin and Marginal utility of you at Jould whole cmuy . o ou (Xoy) w loved 2 y Now, we know that the slope of indiffuence covet at M OX самоу an DMH the both X and Y are 'bads, hence I Marginal utility from conswing an entia unit of Coul bage or pollution will reduce the marginal ut litig. huid Hunce MUX Lo and Muy Lo Hice slope of the indifference cure 000 LC-MUX) 800, GT 5*(-MUY)</ Fanned with Cham Scanner

Hnce here the in difference muc will be concave to the origin and the closu, the in diffuence Guve to the origin the higher the utility consues will derive as it ne duas both the consumption of x and ty Ica Icz IC2 Iela Mona X E here leure consueen deriva higuest utility from indiftuence ! Ici as it is closest to the origin. Hue Douk chocolaty and milk are pnfect Complements as both of it is to be consmed in a fined 3: 1 ratios the the utility huiction will be all [asswind we denote dark chocolate by X and mill о ми қах , bif - here a=3 and b=1 Hunce il u min (3x11) or U min 8 3k, y} sdanned with cmScanner

und the the indifference Core will be L Shaped the role IC 3 are a püfect substitute usually 5 of one Pennies nickel, os Hue tihe ist intility function will be a u= ant by here X penniss dys nickels. ar 5 b = 1 Hmce. US 5X + Y D an dal D A whee here Muy= 5 kr ARM bus and Moy. .1 : Hunce slope of in difference Cavi is constant at s and we will git Straight line - in diffcrence emuls. Scanne with CamScanner

- 102 John is willing to give up 2 apples for One orange and always at that natio Hue a apples and one substitutes and the orange utility is perfect function will b. u= ax + Y here x= orange apples - y = orange Here slope of the indifluence Cuve Mux muy - mox= 2 and muy = 1 tuce, slope - 2 - 2 Hence it is a straight line with slope 2 (Fique A). [ Kate is willing to give up 3 apples for an orange scanned with Calh Scanner

Hunce here substituty will be 3 and apples and Kate's orange is pufact Utility fuction U= 3X + Y and slope of the MUX muy Indiftunce (auc will be = 3 [fique B] TCT S ITL - fique A I Hue the slope of in diffueuse care in case of Kate i.c. 3 is more than the slope of мьим 0 Cщос и Сес - John f. d. 2. The slope is the Marginal rate of substituition between good X and Y which staty that how may apples John and Kate are willing | tо giv° 4 + q o@ OYorqд sdinned with mScanner