(Indifference Curves) Holly loves dogs, hates cats and is completely indifferent
ID: 1183133 • Letter: #
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(Indifference Curves) Holly loves dogs, hates cats and is completely indifferent to rabbits. For each of the following set of goods, draw and label two indifference curves, U1 and U2 with U2>U1 Draw each graph with the amount of the first good on the horizontal axis. You do not need to use graph paper Dogs and Cats b. Rabbits and dogs Cats and rabbits (Budget Constraints) Answer each of the following on a separate, large, neat graph using graph paper (available on blackboard). Be sure to carefully label any intercepts or relevant points so I know you understand how the budget constraint should be drawn. Brad likes to purchase round trip airline Sights between Syracuse and Boston on Econ-Air. He has $8000 to spend on flights this year Lucky for Brad. Econ-Air offers a frequent flyer program. Typically these round trip tickets cost $400 (for the first ten round trip flights), but for any customer making more than ten flights, additional flights can be purchased for only $200. Using the idea of a composite good when labeling your axes (with flights on the horizontal axis), carefully and clearly draw Brad's budget constraint Ross spends most of his time m Central Perk:, a coffee shop in Manhattan. Ross has $12 a week to spend on coffee and muffins. Central Perk sells muffins for $2 each and coffee for $1.00 per cup. Central Perk has a frequent-buyer card so that for even- 6 cups of coffee purchased at the regular price. Ross receives a free seventh cup. Carefully draw and label his budget constraint, with cup: of coffee on the X-axis. (Basic Utility Max) The utility that Sarah receives by consuming files (F) and cake (C) is given by: U (F,C)= FC. Carefully draw the indifference curves associated with utility level of 24 and utility level of 43. Use a table to show various points on each indifference curve Use graph paper, make your graph very large, and put cake on the horizontal axis. Are these indifference curves typically shaped (ie: convex)? THINK (use your class handout): What does this tell you about Sarah's preferences for fries and cake? Suppose fries cost $3 a unit, cake costs $2 a unit, and Sarah has $24 to spend on fries and cake Graph the budget constraint she faces. Calculate the equation of the budget constraint (show work) Your final answer should start with F= Label the utility-maximizing choice of fries and cake point B in your diagram. How many fries and how much cake will she consume to maximize her utilitv? What are the two criteria that must be met for utility maximization? Carefully explain why these two criteria are met at your answer to pan (e). You may need to make a calculation (Special Case) Mur alee is a caffeinated-cola drinker He spends his entire soft drink budget on Coca-Cola and Jolt Cola and cares only about the total caffeine content of what he drinks. (Frank. 2006) Suppose Jolt costs $4/six-p3ck and Coke costs S3/six-pack. On a carefully labeled diagram, draw Muralee's budget constraint (in a large, neat graph using graph paper) assuming he has $36 month to spend on soft drinks Place Jolt on the vertical axis. Based only on the description provided at the beginning of the question, what types of goods are Coca-Cola and Jolt Cola? Explain If Jolt has twice the caffeine of Coke, draw several indifference curves. Carefully explain how you drew the indifference curves What shape are the curves? Does this match your answer to part (b)? How much of each drink will Muralee consume in a month? Explain.Explanation / Answer
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