Introduction to Microeconomics(assignment#7-1)

Introduction to Microeconomics(assignment#7-1) - Assignment...

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1 Assignment #7 Introduction to Microeconomics Student Name: Student #: Chapter11 (p.292-294) Q1. For each of the following situations, draw a diagram containing three of Isabella’s indifference curves. a. For Isabella, cars and tires are perfect complements, but in a ratio of 1:4; that is, for each car, Isabella wants exactly four tires. Be sure to label and number the axes of your diagram. Place tires on the horizontal axis and cars on the vertical axis. Answer: b. Isabella gets utility only from her caffeine intake. She can consume Balley Dew or cola, and Balley Dew contains twice as much caffeine as cola. Be sure to label and number the axes of your diagram. Place cola on the horizontal axis and Valley Dew on the vertical axis. (Hint: Balley Dew and cola are perfect substitutes) Answer: Straight line difference curves: three goods are perfect substitutes. The slope of difference curves shows the rate of substitution. I 1 I 2 I 3 0 1 2 3 0 2 4 6 8 10 12 Quantity of cars Quantity of tires
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2 c. Isabella gets utility from consuming two goods: leisure time and income. Both have diminishing marginal utility. Be sure to label the axes of your diagram. Place leisure on the horizontal axis and income on the vertical axis. Answer: I 1 I 2 I 3 0 1 2 3 0 1 2 3 4 5 6 Quantity of Valley Dew Quantity of cola I 1 I 2 1 1 Quantity of income Quantity of leisure
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3 d. Isabella can consume two goods: skis and bindings. For each ski she wants exactly one binding. Be sure to label and number the axes of your diagram. Place bindings on the horizontal axis and skis on the vertical axis. Answer: e. Isabella gets utility from consuming soda. But she gets no utility from consuming water: any more, or any less, water leaves her utility level unchanged. Be sure to label the axes
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Introduction to Microeconomics(assignment#7-1) - Assignment...

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