PS3Test - UNIVERSITY OF WASHINGTON Department of Economics...

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UNIVERSITY OF WASHINGTON Department of Economics Economics 200 Scott Problem Set 3: Consumer Behavior 1. Draw a few indifference curves for: a. An individual who loves wine and hates bourbon (assume the individual can throw away anything he doesn’t want at no cost). b. An individual who believes that Starbucks coffee is indistinguishable from Tully’s. c. An individual who enjoys scotch only if he has soda with it. Scotch and soda are perfect complements as far as he is concerned. 2. Consumer A lives in a world of 2 goods – chocolate milk shakes and vanilla milk shakes. It is always the case for consumer A that a vanilla shake’s marginal utility (MU) divided by the MU for a chocolate shake is 3. The consumer faces the following prices: the price of a vanilla shake is $4 and the price of a chocolate shake is $2. Show graphically the consumer’s indifference curves and find one possible equilibrium. 3.
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PS3Test - UNIVERSITY OF WASHINGTON Department of Economics...

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