Question

Kathy, an aggressive skier, spends her entire income
on skis and bindings. She wears out one pair of skis
for every pair of bindings she wears out.
(a) Graph Kathy's indierence curves for skis and
bindings.
(b) Now draw her indierence curves on the assump-
tion that she is such an aggressive skier that she
wears out two pairs of skis for every pair of bind-
ings she wears out.
(c) Suppose Kathy has $3,600 to spend on skis and
bindings each year. Find her best aordable
bundle of skis and bindings under both of the
preferences described in the previous problem.
Skis are $480 per pair and bindings are $240 per pair

Answer 1

a) Indifference curves for skis and bindings.

b)Indifference curve on the assumption that she is an aggressive skier that she wears out two pairs of skis for binding she wears out.

c)

Kathy’s budget constraint can be derived B=15-2S (480S + 240B = 3600 which is 2S + B = 15 or B = 15-2S). In the beginning, the number of skis and binding required by her are equal (S = B). Applying this in her budget constraint, we can get B = 15-2B (As S=B), or 3B = 15 or B = 5 and S = 5

On the other hand, as an aggresive skier, she needs twice the number of skis as bindings (S = 2B). Using that in the equation, we get B = 15-4B (As S = 2B) or 5B = 15. This can be solved as B= 3 and thus S = 6. She ends up using more skis and fewer bindings. This can be seen in the graph below.

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