For the following preferences, sketch the indifference curves. Also explain whether the preferences satisfy weak convexity and strict convexity.

Question 1: For the following preferences, sketch the indifference curves. Also explain whether the preferences satisfy weak convexity and strict convexity.

Preferences #1: The two goods in the commodity space are cats and dogs. The consumer loves cats but hates dogs. Their preferences are determined by the number of cats minus the number of dogs (i.e. one bundle is preferred to another it has more cats minus the number of dogs.

Preferences #2: The two goods in the commodity space are plants and plant pots. The consumer will put 3 plants in every plant pot. They will not use plant pots with more or less than three plants. All they care about is the number of pots with three plants that they can make.

Question 2: This question concerns a consumer who is choosing how many of two goods to buy: Footballs (the round ones, that you kick with your foot) and cricket balls (like baseballs, but better). The consumer has an income of $20, and the cost of a football is $4 and a cricket ball is $2. A new government is elected that hates all sports. They tax both footballs and cricket balls at 50%. Write down the equation for the consumer budget constraint and graph it in the commodity space.

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Rahul Sunny answered 1 year ago

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