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ps1x313_f08 - Econ 3130.1 Wissink Fall 2008 PS#1 XtraQ DUE...

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1) Charlie likes both apples and bananas. He consumes nothing else. The consumption bundle where Charlie consumes “A” bushels of apples per year and “B” bushels of bananas per year is written as (A, B). Last year, Charlie consumed 20 bushels of apples and 5 bushels of bananas. Suppose Charlie tell us that the set of consumption bundles (A, B) such that he is indifferent between (A, B) and the bundle (20, 5) is the set of all bundles such that B = 100/A. He also tells us that the set of bundles (A, B) such that he is just indifferent between (A, B) and the bundle (10, 15) is the set of bundles such that B = 150/A. a) Putting units of bananas (B) on the vertical and units of apples (A) on the horizontal plot several points that lie on the indifference curve that passes through the bundle (20, 5) and sketch this indifference curve. Do the same for the indifference curve passing through the bundle (10, 15). b) Shade in the set of commodity bundles that Charlie weakly prefers to the bundle (10, 15).
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