CHAPTER 21THE THEORY OF CONSUMER CHOICE4892.Draw a consumer’s indifference curves for wine andcheese. Describe and explain four properties of theseindifference curves.3.Pick a point on an indifference curve for wine andcheese and show the marginal rate of substitution. Whatdoes the marginal rate of substitution tell us?4.Show a consumer’s budget constraint and indifferencecurves for wine and cheese. Show the optimalconsumption choice. If the price of wine is $3 a glassand the price of cheese is $6 a pound, what is themarginal rate of substitution at this optimum?5.A person who consumes wine and cheese gets a raise, sohis income increases from $3,000 to $4,000. Show whathappens if both wine and cheese are normal goods.Now show what happens if cheese is an inferior good.6.The price of cheese rises from $6 to $10 a pound, whilethe price of wine remains $3 a glass. For a consumerwith a constant income of $3,000, show what happens toconsumption of wine and cheese. Decompose thechange into income and substitution effects.
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