Question

4. I consume two goods, Ice Cream and Biscuits. I shop once a week, spending £100, at either Sainsbury or Tesco (two-well-known supermarkets). Interestingly, I've noticed that the bundle I purchase when I visit Tesco costs more at Sainsbury. Similarly, the bundle I purchase when I visit Sainsbury costs more at Tesco. And yet, I find that I get the same utility from shopping at either store (i.e. the Sainsbury shopping bundle gives me the same utility as the Tesco shopping bundle). Explain how it is possible for all of these statements to be true. (Hint: draw a single indifference curve and have me maximize utility given a £100 budget and different prices in the two stores).