1) Ms A’s indifference curves for water and diamonds satisfy the assumption of strict convexity, and she is endowed with a great deal of water and very few diamonds. Which of the following does this imply? Explain. (a) Diamonds are more valuable to her than water. (b) She would give up a lot of water to get one more diamond. (c) She would give up more water for an extra diamond than would be the case if she had a combination, indifferent to the first, of less water and more diamonds.
1) Ms A’s indifference curves for water and diamonds satisfy the assumption of strict convexity, and she is endowed with a great deal of water and very few diamonds. Which of the following does this imply? Explain. (a) Diamonds are more valuable to her than water. (b) She would give up a lot of water to get one more diamond. (c) She would give up more water for an extra diamond than would be the case if she had a combination, indifferent to the first, of less water and more diamonds.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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1) Ms A’s indifference
(a) Diamonds are more valuable to her than water.
(b) She would give up a lot of water to get one more diamond.
(c) She would give up more water for an extra diamond than would be the case if she had a combination, indifferent to the first, of less water and more diamonds.
2) Is the
3) Examine the responses of an electricity consumer to changes in the connection charge and prices of electricity.
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