Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly drink one more. After drinking 10 beers, Homer is so drunk that he does not notice any additional bottle he drinks (that is, the benefit of an additional bottle of beer is zero). Drinking more than 17 beers is beyond the processing capability of Homer’s liver and any additional bottle makes him sick (beer is no longer a “good” for Homer). Homer’s preferences for donuts are somewhat similar. As long as he eats less than 15 donuts, an additional donut increases his utility. If he eats more than 15 donuts, then additional donuts make him worse off.

Sketch Homer’s indifference curve passing through point (8 donuts, 8 beers).
Sketch Homer’s indifference curve passing through point (15 donuts, 16 beers)

Expert Solution

Explanation:-

Plot donuts consumed on x-axis and beers consumed on y-axis. The entire graph can be divided into 6 sub segments.

By definition, goods are commodities which increases utility the more they are consumed. Neutrals are commodities which do not change the utility the more they are consumed. Bads are commodities which decreases utility the more they are consumed.

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Rahul Sunny answered 1 year ago

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly drink one more. After drinking 10 beers, Homer is so drunk that he does not notice any additional bottle he drinks (that is, the benefit of an additional bottle of beer is zero). Drinking more than 17 beers is beyond the processing capability of Homer’s liver and any additional bottle makes him sick (beer is no longer a “good” for Homer). Homer’s preferences for...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly drink one more. After drinking 10 beers, Homer is so drunk that he does not notice any additional bottle he drinks (that is, the benefit of an additional bottle of beer is zero). Drinking more than 17 beers is beyond the processing capability of Homer’s liver and any additional bottle makes him sick (beer is no longer a “good” for Homer). Homer’s preferences for...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly...

Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly drink one more. After drinking 10 beers, Homer is so drunk that he does not notice any additional bottle he drinks (that is, the benefit of an additional bottle of beer is zero). Drinking more than 17 beers is beyond the processing capability of Homer’s liver and any additional bottle makes him sick (beer is no longer a “good” for Homer). Homer’s preferences for...

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Homer consumes only donuts and beer. When he consumes less than 10 beers, Homer would gladly...

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