1. PERFECT COMPLEMENTS Marna is knitting scarves for holiday gifts. Each scarf requires red and green yarn in the rado of two to one: two yards of red varn for each yard of green yarn. Thus, for Maria, red and green yarn are perfect complements in consumption. Her utility function is: U(R, G) = min{R, 2G} a. GRAPH Maria's indifference curves for U = 2 and U = 4. b. Consider Maria's choices as her income changes, GRAPH two budget lines to show a change in income and construct her Income-Consumption (I-C) curve. C. Consider Maria's choices as the price of red yarn (PR) varies. GRAPH two budget lines to show a change in PR and GRAPH her Price-Consumption (P-C) curve.
1. PERFECT COMPLEMENTS Marna is knitting scarves for holiday gifts. Each scarf requires red and green yarn in the rado of two to one: two yards of red varn for each yard of green yarn. Thus, for Maria, red and green yarn are perfect complements in consumption. Her utility function is: U(R, G) = min{R, 2G} a. GRAPH Maria's indifference curves for U = 2 and U = 4. b. Consider Maria's choices as her income changes, GRAPH two budget lines to show a change in income and construct her Income-Consumption (I-C) curve. C. Consider Maria's choices as the price of red yarn (PR) varies. GRAPH two budget lines to show a change in PR and GRAPH her Price-Consumption (P-C) curve.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 3SQP
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I’m unsure what the formula in this example problem is asking for, in terms of how to answer a-c. Im also not positive I understand how to graph I-C and P-C curves is there a formula to follow?
Transcribed Image Text:tob 000 M yidnomen
1. PERFECT COMPLEMENTS
Maria is knitting scarves for holiday gifts. Each scarf requires red and green yarn in the
ratio of two to one: two yards of red varn for each yard of green yarn. Thus, for Maria,
red and green yarn are perfect complements in consumption.
Her utility function is:
U(R, G) = min{R, 2G}
W 16
a. GRAPH Maria's indifference curves forU = 2 and U = 4.
b. Consider Maria's choices as her income changes, GRAPH two budget lines to show a
change in income and construct her Income-Consumption (1-C) curve.
C. Consider Maria's choices as the price of red yarn (PR) varies. GRAPH two budget lines
to show a change in PR and GRAPH her Price-Consumption (P-C) curve.
Income-Consumption Curve
Price-Consumption Curve
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