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Unformatted text preview: Problem Set 2. Due on Monday, May 16 th , 2011. University of Waterloo, Microeconomic Theory 201, Spring 2011. Question 1. Ying&s preferences satisfy the following indi/erence relations and strict pref erence relations: (2 oranges, 1 apple) & (2 orange, 0 apples) (2 oranges, 0 apples) (0 oranges, 2 apples) (0 oranges, 2 apples) & (1 orange, 1 apple) (1 orange, 1 apple) & (1 orange, 0 apples) (1 orange, 0 apples) (0 oranges, 1 apple) (0 oranges, 1 apple) & (0 oranges, 0 apples) Ying&s preferences are also transitive, complete and reexive. a) In a carefully labeled diagram, depict a set of possible indi/erence curves for Ying that go through the following points: (0 oranges, 1 apple) (1 orange, 0 apples) (1 orange, 1 apple) (0 oranges, 2 apples) (2 oranges, 0 apples) b) Do Ying&s preferences exhibit diminishing marginal rate of substitution between apples and oranges? Explain. c) If the price of an orange is $1 and the price of an apple is $1 might Ying ever buy 2 oranges and 0 apples? Explain....
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This note was uploaded on 05/23/2011 for the course ECON 201 taught by Professor Vandewaal during the Spring '09 term at Waterloo.
 Spring '09
 VANDEWAAL

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