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HW1 Sol

# HW1 Sol - Suggested Solutions – HW1 Instructors – Dror...

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Unformatted text preview: Suggested Solutions – HW1 Instructors – Dror Brenner and Ryan Miller 1. Right-hand gloves and left gloves are perfect complements. That is, holding the amount of left-hand gloves constant, having more right-hand gloves doesn’t increase one’s utility because the consumer only cares about the number of pairs of gloves. 2. Now, if the consumer hurts his left hand, he only cares about the number of right gloves, so the amount of right gloves fully determines his utility, regardless of the number of left gloves. Thus, the indifference Left-hand gloves Right-hand gloves Left-hand gloves Right-hand gloves curves are straight lines parallel to the “Left-hand gloves” axis, because given some quantity of right-hand gloves, the consumer is indifferent between any quantity of left-hand gloves. 3. Because people only care about the alcohol in their drink, 3 units of Tequila will be no different from 4 units of Rum. Or put another way, if the consumer were enforced to have 1 unit less of rum (0.4 units less units of Rum....
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HW1 Sol - Suggested Solutions – HW1 Instructors – Dror...

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