Question

Draw two indifference curves for each of the following pairs of goods. Put the quantity of the first good on the horizontal axis and the quantity of the second good on the vertical axis. a. Paul likes pencils and pens, but does not care which he writes with. b. Rhonda likes carrots and dislikes broccoli. c. Emily likes hip-hop iTunes downloads and doesn’t care about heavy metal downloads. d. Michael only likes dress shirts and cufflinks in 1 to 2 proportions. e. Carlene likes pizza and shoes.

Answer 1

(a) Paul likes pencils and pens, but does not care which he writes with

Hence For Paul Pencil and pen are perfect substitutes. Hence IC should be straight downward sloping line.

(b) Rhonda likes carrots and dislikes broccoli

IC represents set of all points at which consumer is indifferent. Suppose Rhonda increase the consumption of carrots and hence get utility will increase. So, to have the same utility as before she should increase brocoli as she dislikes her and hence will decrease utility and hence overall utility will remain same.

(c) Emily likes hip-hop iTunes downloads and doesn’t care about heavy metal downloads

As she doesnt care about metal downloads and likes only hip hop music. Hence IC must represents those points at which amount of hip hop music downloads are same i.e. Vertical straight line because hip hop is on x axis.

(d) Michael only likes dress shirts and cufflinks in 1 to 2 proportions

Hence he considers shirts and cufflikns as perfect compliments because he is consuming to in fixed proportion. Hence Utility function is must be similar to:

U = min{2S,C}

(e)

Carlene likes pizza and shoes

Hence, in order to increase pizza she should decrease shoes in order to have same utility and Hence IC is downward sloping convex curve.