Charlie likes both apples and bananas. He consumes nothing else. The consumption bundle where Charlie consumes xA bushels of apples per year and xB bushels of bananas per year is written as (xA,xB). Last year, Charlie consumed 20 bushels of apples and 5 bushels of bananas. It happens that the set of consumption bundles (xA,xB) such that Charlie is indifferent between (xA,xB)and(20,5) is the set of all bundles such that xB = 100/xA. The set of bundles (xA,xB) such that Charlie is just indifferent between (xA,xB) and the bundle (10,15) is the set of bundles such that xB = 150/xA. (a) On the graph below, plot several points that lie on the indifference curve that passes through the point (20,5), and sketch this curve, using blue ink. Do the same, using red ink, for the indifference curve passing through the point (10,15). (b) Use pencil to shade in the set of commodity bundles that Charlie weakly prefers to the bundle (10,15). Use blue ink to shade in the set of commodity bundles such that Charlie weakly prefers (20,5) to these bundles. (c) What is his marginal rate of substitution at the point (20,5)?
Charlie likes both apples and bananas. He consumes nothing else. The consumption bundle where Charlie consumes xA bushels of apples per year and xB bushels of bananas per year is written as (xA,xB). Last year, Charlie consumed 20 bushels of apples and 5 bushels of bananas. It happens that the set of consumption bundles (xA,xB) such that Charlie is indifferent between (xA,xB)and(20,5) is the set of all bundles such that xB = 100/xA. The set of bundles (xA,xB) such that Charlie is just indifferent between (xA,xB) and the bundle (10,15) is the set of bundles such that xB = 150/xA. (a) On the graph below, plot several points that lie on the indifference curve that passes through the point (20,5), and sketch this curve, using blue ink. Do the same, using red ink, for the indifference curve passing through the point (10,15). (b) Use pencil to shade in the set of commodity bundles that Charlie weakly prefers to the bundle (10,15). Use blue ink to shade in the set of commodity bundles such that Charlie weakly prefers (20,5) to these bundles. (c) What is his marginal rate of substitution at the point (20,5)?
ChapterA: Working With Diagrams
Section: Chapter Questions
Problem 1QP
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Charlie likes both apples and bananas. He consumes nothing else. The consumption bundle where Charlie consumes xA bushels of apples per year and xB bushels of bananas per year is written as (xA,xB). Last year, Charlie consumed 20 bushels of apples and 5 bushels of bananas. It happens that the set of consumption bundles (xA,xB) such that Charlie is indifferent between (xA,xB)and(20,5) is the set of all bundles such that xB = 100/xA. The set of bundles (xA,xB) such that Charlie is just indifferent between (xA,xB) and the bundle (10,15) is the set of bundles such that xB = 150/xA.
(a) On the graph below, plot several points that lie on the indifference curve that passes through the point (20,5), and sketch this curve, using blue ink. Do the same, using red ink, for the indifference curve passing through the point (10,15). (b) Use pencil to shade in the set of commodity bundles that Charlie weakly prefers to the bundle (10,15). Use blue ink to shade in the set of commodity bundles such that Charlie weakly prefers (20,5) to these bundles.
(c) What is his marginal rate of substitution at the point (20,5)?
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