Suppose Michael purchases only two goods, hamburgers (H) and Cokes (C). a) What

Question

Suppose Michael purchases only two goods, hamburgers (H) and Cokes (C).

a) What is the relationship between MRS H,C and the marginal utilities MU H and MU C ?

b) What is a typical indifference curve for the case in which the marginal utilities of
both goods are positive and the marginal rate of substitution of hamburgers for Cokes
is diminishing. Explain the relationship between the indifference
curve and the marginal rate of substitution of hamburgers for Cokes.

c) Suppose the marginal rate of substitution of hamburgers for Cokes is constant. In
this case, are hamburgers and Cokes perfect substitutes or perfect complements?

d) Suppose that Michael always wants two hamburgers along with every Coke. Draw
a typical indifference curve. In this case, are hamburgers and Cokes perfect substitutes
or perfect complements?

Explanation / Answer

b.an indifference curve is a graph showing different bundles of goods between which a consumer is indifferent. That is, at each point on the curve, the consumer has no preference for one bundle over another. One can equivalently refer to each point on the indifference curve as rendering the same level of utility (satisfaction) for the consumer. Utility is then a device to represent preferences rather than something from which preferences come. The main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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