Chuck and Diane are both currently consuming 15 apples and 3 bananas each week, which we can call bundle A. Assume that bananas are the horizontal axis good for both consumers. Let's say both Chuck and Diane consume one more banana each week (4 bananas in total), moving to their respective bundle B on their own indifference curves. In order for Chuck and Diane to remain on the same indifference curve: • Chuck must give up 3 apples, to account for the marginal utility gained from a fourth banana • Diane must give up 5 apples, to account for the marginal utility gained from a fourth banana Based on the information above, what can we tell about Chuck and Diane's preferences?

Chuck and Diane are both currently consuming 15 apples and 3 bananas each week, which we can call bundle A. Assume that bananas are the horizontal axis good for both consumers. Let's say both Chuck and Diane consume one more banana each week (4 bananas in total), moving to their respective bundle B on their own indifference curves. In order for Chuck and Diane to remain on the same indifference curve: • Chuck must give up 3 apples, to account for the marginal utility gained from a fourth banana • Diane must give up 5 apples, to account for the marginal utility gained from a fourth banana Based on the information above, what can we tell about Chuck and Diane's preferences?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.9P

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please only do: if you can teach explain each partc: what does it mean? can you show graphs: For these to be optimal choices with such preferences, the indifference curve through a must lie entirely on or above the budget line associated with (p, w), and simi- larly for r' for the budget line associated with (p', w'). how do you know this:Because each of these bundles lies below the other budget line, this implies that the indifference curves must cross, which is impossible. can you show graphs: note that (3,1) is a conver combination of x and x', so for conver preferences must be weakly preferred to x (the less preferred bundle between a and a'). But then the bundle (3,5/3) must be strictly preferred z, contradicting that is optimal given the initial budget set
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