Economics 431

Economics 431 - 1. The following bundles (A-E) contain...

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1. The following bundles (A-E) contain various amounts of goods X and Y. Bundles Units of X Units of Y A 4 6 B 7 6 C 7 3 D 8 2 E 11 2 a. Given the information above, can you rank the baskets? If possible, give the rankings of the baskets from most preferred to least preferred. If not possible, explain why. b. Suppose you get some additional information. You find out the consumer is indifferent between baskets A, C and E. Can you now rank the baskets? If possible, give the ranking of the baskets below from most preferred to least preferred. If not possible, explain why. 2.Below are consumer preferences for ketchup and mustard. Draw indifference curves to represent the preferences of each one. Describe the marginal rate of substitution for each. Consumer 1: I don’t care whether I use ketchup or mustard on my food. I like them both equally. Consumer 2: I always want to mix exactly 1 tablespoon of ketchup with 2 tablespoons mustard.
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Consumer 3: I like to use ketchup and mustard together. I don’t care about the proportions, but I
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Economics 431 - 1. The following bundles (A-E) contain...

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