Suppose that you are on a desert island and possess exactly 20 coconuts. Your ne

Question

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also
a fisherman, and he is willing to trade 3 fish for every 1 coconut. LO4
a. On a single figure, draw budget lines for trading with Friday and for trading with Kwame. (Put coconuts on the vertical axis.)
b. What is the slope of the budget line from trading with Friday?
c. What is the slope of the budget line from trading with Kwame?
d. Which budget line features a larger set of attainable combinations of coconuts and fish?

Explanation / Answer

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also
a fisherman, and he is willing to trade 3 fish for every 1 coconut. LO4

a. On a single figure, draw budget lines for trading with Friday and for trading with Kwame. (Put coconuts on the vertical axis.)

Slope = -1/2

Trade with Kwame Slope = -1/3

20 60 40 Fish

b. What is the slope of the budget line from trading with Friday?

The slope of the budget line from trading with Friday equals -(1/2). This implies that for every coconut I give up, Friday must give up two fish. Or, for every fish that Friday gives up, I must give up (1/2) a coconut.

c. What is the slope of the budget line from trading with Kwame?

The slope of the budget line from trading with Kwame equals -(1/3). This implies that for every coconut I give up, Kwame must give up three fish. Or, for every fish that Friday gives up, I must give up (1/3) a coconut.

d. Which budget line features a larger set of attainable combinations of coconuts and fish?

The budget line from trading with Kwame features a larger set of attainable combinations of coconuts and fish.

Because Kwame is willing to give up more fish per coconut, I can consume more of both (assuming I make a trade). This implies that you would prefer to trade with Kwame.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.