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Unformatted text preview: on the vertical axis, plot Uncle Milt’s indiﬀerence curves for coﬀee. • 2 points How many cups of coﬀee from each store will Milt buy if Starbucks coﬀee costs $2 a cup, and Coﬀee Bean coﬀee costs $2.50 a cup? 2 Question 2 Your weird Uncle Milt has grown unhappy with Starbucks. Because of this, coﬀee from Coﬀee Bean is twice as satisfying to him as coﬀee from Starbucks, though still perfect substitutes. • 2 points Draw his new indiﬀerence curves, with Starbucks coﬀee on the horizontal axis, and Coﬀee Bean coﬀee on the vertical axis. • 2 points How much of each kind of coﬀee will Milt buy if he has these new preferences while the price of coﬀee does not change? • 2 points What is one possible utility function that represents Milt’s new preferences for coﬀee? 3...
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This note was uploaded on 01/31/2010 for the course ECON 100A/ 100B taught by Professor Staff during the Winter '08 term at UCSB.
- Winter '08