A if she cared somewhat for warren her optimum point

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(a)If she cared somewhat for Warren, her optimum point would be somewhere like eJ. Herindifference map would be north-west of Warren’s, with the tangency point to her highestpossible indifference curve at eJ.(b)If she loved him ‘as herself’, the optimum point would be at eE.
58Chapter 4Page109(Box 4.6) 2. In the case where they both love each other ‘as themselves’, will their two sets ofindifference curves be identical?It depends on what precisely is meant by ‘loving each other as themselves’. Even if the optimumpoint for both Warren and Judy were at eE, the slope of their indifference curves may be verydifferent at points other than along the line of equality OE. In other words they may gain a differentindividual utility from an unequaldistribution of income.110(Box 4.7) 1. Make a list of the characteristics of shoes. Which are ‘objective’ and which are‘subjective’?Objective: size, durability, colour, material. Subjective: brand image, the appearance (pleasurable orunpleasurable), comfort.(Box 4.7) 2. If two houses had identical characteristics, except that one was near a noisy airport andthe other in a quiet location, and if the market price of the first house was £80000 and the secondwas £100000, how would that help us to put a value on the characteristic of peace and quiet?It would suggest that purchasers are prepared to pay an extra £20000 for peace and quiet (seeChapter 11, section 4, on cost–benefit analysis).Diagram 4.3(a)Decrease in price of X(b)Increase in price of Y
59Chapter 4111Are there any Giffen goods that you consume? If not, could you conceive of any circumstances inwhich one or more items of your expenditure would become Giffen goods?It is unlikely that any of the goods you consume are Giffen goods. One possible exception may begoods where you have a specific budget for two or more items, where one item is much cheaper:e.g. fruit bought from a greengrocer. If, say, apples are initially much cheaper than bananas, youmay be able to afford some of each. Then you find that apples have gone up in price, but are stillcheaper than bananas. What do you do? By continuing to buy some of each fruit you may feel thatyou are not eating enough pieces of fruit to keep you healthy and so you substitute apples forbananas, thereby purchasing more apples than before (but probably less pieces of fruit thanoriginally).
60Chapter 2

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