Anna is indifferent between bread and rolls for her sandwiches. She believes that 2 slices of bread is always just as good as 1 roll. Let bread be the x-good measured in slices and rolls be the y-good measured in number of rolls. Suppose Anna has $1 to spend on bread and rolls.a) Given our assumptions on preferences and the information above, Illustrate indifference curves that represent Anna's preferences. What is her MRS?b) If the price of a slice of bread is $.10 and the price of a roll is $.25 then what bundle will she choose? Show that her MRS is not equal to the price ratio at that bundle. Illustrate your answer in your diagram for part (a).c) If the price of a slice of bread rises to $.20 then what bundle will she choose? Show that her MRS is not equal the price ratio at that bundle. In a new diagram illustrate her best bundle.d) Briefly explain why her MRS is not equal to her best bundles in parts (b) and (c).e) Illustrate her demand curve for bread.

Guruji (1) According to the above given question, it's mentioned that 2 slices of bread is almost…

Answered: Anna is indifferent between bread and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Anna is indifferent between bread and rolls for her sandwiches. She believes that 2 slices of bread is always just as good as 1 roll. Let bread be the x-good measured in slices and rolls be the y-good measured in number of rolls. Suppose Anna has $1 to spend on bread and rolls.

a) Given our assumptions on preferences and the information above, Illustrate indifference curves that represent Anna's preferences. What is her MRS?
b) If the price of a slice of bread is $.10 and the price of a roll is $.25 then what bundle will she choose? Show that her MRS is not equal to the price ratio at that bundle. Illustrate your answer in your diagram for part (a).
c) If the price of a slice of bread rises to $.20 then what bundle will she choose? Show that her MRS is not equal the price ratio at that bundle. In a new diagram illustrate her best bundle.
d) Briefly explain why her MRS is not equal to her best bundles in parts (b) and (c).
e) Illustrate her demand curve for bread.

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