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microeconomics book solution 11

# microeconomics book solution 11 -...

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Solution Consumer Preferences and Consumer Choice 1. 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. b. Isabella gets utility only from her caffeine intake. She can consume Valley Dew or cola, and Valley 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. 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. 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. e. Isabella gets utility from consuming soda. But she gets no utility from consuming water: any more, or any less, water leaves her total utility level unchanged. Be sure to label the axes of your diagram. Place water on the horizontal axis and soda on the vertical axis. 1. Following are Isabella’s indifference curve maps for each of the situations described. a. 48 1 2 0 3 2 1 Quantity of cars Quantity of tires I 1 I 2 I 3 S-157 11 chapter: S157-S170_Krugman2e_PS_Ch11.qxp 9/16/08 9:22 PM Page S-157

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S-158 CHAPTER 11 CONSUMER PREFERENCES AND CONSUMER CHOICE b. c. d. e. 2. Use the four properties of indifference curves for ordinary goods illustrated in Figure 11-4 to answer the following questions. a. Can you rank the following two bundles? If so, which property of indifference curves helps you rank them? Bundle A: 2 movie tickets and 3 cafeteria meals Bundle B: 4 movie tickets and 8 cafeteria meals Quantity of soda Quantity of water I 2 I 1 I 3 123456 0 3 2 1 Quantity of skis Quantity of bindings I 1 I 2 I 3 Quantity of income Quantity of leisure I 1 I 2 246 0 3 2 1 Quantity of Valley Dew Quantity of cola I 1 I 2 I 3 S157-S170_Krugman2e_PS_Ch11.qxp 9/16/08 9:22 PM Page S-158
Solution b. Can you rank the following two bundles? If so, which property of indifference curves helps you rank them? Bundle A : 2 movie tickets and 3 cafeteria meals Bundle B : 4 movie tickets and 3 cafeteria meals c. Can you rank the following two bundles? If so, which property of indifference curves helps you rank them? Bundle A : 12 videos and 4 bags of chips Bundle B : 5 videos and 10 bags of chips d. Suppose you are indifferent between the following two bundles: Bundle A : 10 breakfasts and 4 dinners Bundle B : 4 breakfasts and 10 dinners Now compare bundle A and the following bundle: Bundle C : 7 breakfasts and 7 dinners Can you rank bundle A and bundle C ? If so, which property of indifference curves helps you rank them? ( Hint:

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microeconomics book solution 11 -...

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