403ps3 - Economics 403 Spring 2009 Professor Alexander...

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1 Economics 403 Spring 2009 Professor Alexander Problem Set 3 Due: Monday, January 26, at 11:00 A.M. R1. ( 4 pts. ) Plot the bundles and then draw dotted lines through bundle A (see graph below) to form four quadrants. Bundle B lies in the northeast quadrant and, therefore, Beth would prefer this bundle to A. Why? She gets more of both goods with bundle B as compared to bundle A. Bundle C lies in the southeast quadrant and, therefore, Beth is possibly indifferent between bundle A and bundle C. Why? With bundle A she gets more Y and less X relative to bundle C. Thus, we would predict that Beth would like bundle B the best. We cannot, however, predict which bundle Beth would like the least.
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2 5. ( 10 pts. ) In this problem typing and filing are “bads.” a.) Pick any bundle (call it A) and then draw dotted lines through the bundle to form four quadrants. We know bundles in the northeast quadrant are now least preferred to bundle A, whereas bundles in the southwest quadrant are more preferred to bundle A. However, you are possibly indifferent between bundles in either the northwest or southeast quadrants and bundle A. Therefore, your indifference curves slope downward.
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This note was uploaded on 02/04/2009 for the course ECON 403 taught by Professor Alexander during the Spring '09 term at Western Michigan.

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403ps3 - Economics 403 Spring 2009 Professor Alexander...

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