Answer Key for Chapter 3
Exercis:
2. Draw indifference curves that reprent the following individuals’ preferences for hamburgers and soft drinks. Indicate the direction in which the individuals’ satisfaction (or utility) is increasing.
a. Joe has convex preferences and dislikes both hamburgers and soft drinks.
Since Joe dislikes both goods, he prefers
less to more, and his satisfaction is
increasing in the direction of the origin.
Convexity of preferences implies his
indifference curves will have
the normal
shape in that they are bowed towards the
direction of increasing satisfaction.
Convexity also implies that given any two bundles between which the Joe is indifferent, any linear combination of the two
bundles will be in the preferred t, or will leave him at least as well off. This is true of
the indifference curves shown in the diagram.
b. Jane loves hamburgers and dislikes soft drinks. If she is rved a soft drink,
she will pour it down the drain rather than drink it.
Since Jane can freely dispo of the soft drink if
it is given to her, she considers it to be a neutral
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good. This means she does not care about soft
drinks one way or the other. With hamburgers
on the vertical axis, her indifference curves are
horizontal lines. Her satisfaction increas in
the upward direction.
Soft Drinks
c. Bob loves hamburgers and dislikes soft drinks. If he is rved a soft drink, he
will drink it to be polite.
Since Bob will drink the soft drink in order
to be polite, it can be thought of as a “bad”.
When rved another soft drink, he will
require more hamburgers at the same time
in order to keep his satisfaction constant. More soft drinks without more hamburgers
will worn his utility. More hamburgers and fewer soft drinks will increa his utility, so his satisfaction increas as we move upward and to the left.
d. Molly loves hamburgers and soft drinks, but insists on consuming exactly one
soft drink for every two hamburgers that she eats.
Molly wants to
consume the two goods in a
fixed proportion so her
indifference curves
are L-shaped. For a fixed amount of one
good, she gets no extra satisfaction from
having more of the other good. She will
only increa her satisfaction if she has more
of both goods.
新春祝词e. Bill likes hamburgers, but neither likes
nor dislikes soft drinks.
Like Jane, Bill considers soft drinks to be a
neutral good. Since he does not care about
soft drinks one way or the other we can
assume that no matter how many he has, his
utility will be the same. His level of
satisfaction depends entirely on how many
hamburgers he has, so his satisfaction increas in the upward direction only.
Soft Drinks Soft Drinks 1 1.5我要去香港
f. Mary always gets twice as much satisfaction from an extra hamburger as she
does from an extra soft drink.
How much extra satisfaction Mary gains from
an extra hamburger or soft drink tells us
something about the marginal utilities of the
two goods and about her MRS. If she always
receives twice the satisfaction from an extra
hamburger, then her marginal utility from
consuming an extra hamburger is twice her
marginal utility from consuming an extra soft drink. Her MRS, with hamburgers on the vertical axis, i
s 1/2 becau she will give up one hamburger only if she receives two soft drinks. Her indifference curves are straight lines with a slope of -1/2.
14. Connie has a monthly income of $200 that she allocates among two goods: meat and potatoes.
a. Suppo meat costs $4 per pound and potatoes $2 per pound. Draw her budg et
constraint.
Let M = meat and P = potatoes. Connie’s budget constraint is
4M + 2P = 200, or
M = 50 - 0.5P .
As shown in the figure below, with M on the vertical axis, the vertical intercept is
50 pounds of meat. The horizontal intercept may be found by tting M = 0 and
solving for P . The horizontal intercept is therefore 100 pounds of potatoes.
Soft Drinks
蔺相如简介diagram above. Connie’s utility is equal to 100 when she buys 50 pounds of meat
聊and no potatoes or no meat and 100 pounds of potatoes. The indifference curve for
U= 100 coincides with her budget constraint. Any combination of meat and
potatoes along this line will provide her with maximum utility.
c.Connie’s supermarket has a special promotion. If she bu ys 20 pounds of potatoes高中学生综合素质评价
(at $2 per pound), she gets the next 10 pounds for free. This offer applies only to the first 20 pounds she buys. All potatoes in excess of the first 20 pounds (excluding bonus potatoes) are still $2 per pound. Draw her budget constraint.
With potatoes on the horizontal axis, Connie’s budget constraint has a slope of -1/2 until Connie has purchad twenty pounds of potatoes. Then her budget line is flat from 20 to 30 pounds of potatoes, becau the next ten pounds of potatoes are free, and she does not have to give up any meat to get the extra potatoes. After 30 M eat
Potatoes
pounds of potatoes, the slope of her budget line becomes 1/2 again until it intercepts the potato axis at 110.
is maximized when his MRS (of food for clothing) equals P F/P C, the price ratio. The price ratio is 2/10 = 0.2, so Julio’s MRS will equal 0.2 when his utility is maximized.
高锰酸钾的化学式大阅兵观后感b.Suppo instead that Julio is consuming a bundle with more food and less clothing than
his utility maximizing bundle. Would his marginal rate of substitution of food for clothing be greater than or less than your answ er in part a? Explain.
