Fall 2008
Econ 3130
Problem Set 2:
Preferences and Utility
This problem set must be done on graph paper. If a problem calls for two or
more graphs on the same axes, use different colors.
1. Adam likes both pizza and wings.
More,of course, is always better.
Let (
x
p
, x
w
) denote the consumption bundle wherein Adam consumes
x
p
units of pizza and
x
w
units of wings in a month.
Last month he
consumed the bundle (20
,
5). The set of consumption bundles (
x
p
, x
w
)
such that Adam is indifferent between (
x
p
, x
w
) and (20
,
5) is the set of
bundles such that
x
p
= 100
/x
w
.
(a) Plot several points that lie on the indifference curve, and sketch
the curve.
(b) Indicate on your graph those bundles which are better than (20
,
5)
and those which are worse than (20
,
5).
(c) Is (10
,
15) preferred to (20
,
5)? Prove your answer.
(d) What is the marginal rate of substitution of wings for pizza at the
bundle (20
,
5)?
2. Studying economics is fun. Studying field
x
is boring. Preferences are
convex. Choose a consumption bundle, and sketch an indifference curve
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 Fall '06
 MASSON
 Microeconomics, Utility, Adam, consumption bundle

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