Question

please answer part e) only. i have already dealt with a,b,c,d.

Exercise 5. Transportation for Away Games (Perfect Substitutes) Your college football team is playing an away game against their division rival. As president of the fan club your utility is represented by the maximum number of fans you can transport to the game. You have to choose between vans (xi) that hold 10 students, drbuses (x2) that hold 50 students. You determine that your utility function is u=10x1 + 50x2. a) Draw the indifference curves for Ua=50, up=100, uc=150, up=200, ue=250. Make sure to label both horizontal and vertical intercepts for all three indifference curves. b) Your fan club has a budget of m=2000, and you find out that each bus costs you p2=500, while each van costs you pi=200. Draw your budget line. c) Are all indifference curves affordable? Do all indifference curves exhaust your budget? Which are and which aren't? d) of those that you can afford, which do you prefer? How many students go to the game with this choice? e) Suppose that only 160 students are interested, and you realize that you can accommodate all with either the (0,4) bundle, or the (1,3) bundle? Do you have a preference between these two (x1,x2) points or are you indifferent? Hint: Consider that you do not get to keep any left over budget as you return it to the University.

Answer 1

E) your utility is depends on the number of the total students you transport to the game .

Because both combination of van and buses will only transport 160,( only 160 are interested in going) so your utility from both combinations are same and equals to 160. So you will be indifferent between these two bundles { more space for each students in vehicle ,can give you directly or indirectly any satisfaction and you would like to prefer (0,4) bundle but it is not mentioned ,so we would ignore it.}