Assume you like to drive but dislike pollution (who says economists lack understanding of reality!). (a) On a graph with pollution on the vertical axis, draw your indifference curves between driving (in miles) and pollution (in globs of pollution). Be sure to indicate the direction of increasing utility. (b) Suppose that for every 10 miles you drive, you always must breath in exactly 1 unit of pollution. Draw this as a “budget constraint". (Hint: here are some points on the constraint: (0,0), (10,1), etc...) (c) Illustrate graphically where the optimal consumption bundle will lie with an appropriately drawn indifference curve. (d) Under what circumstances would the optimal bundle contain zero pollution. Again, draw this possibility on a graph. Answer all four
Assume you like to drive but dislike pollution (who says economists lack
understanding of reality!).
(a) On a graph with pollution on the vertical axis, draw your indifference
curves between driving (in miles) and pollution (in globs of pollution).
Be sure to indicate the direction of increasing utility.
(b) Suppose that for every 10 miles you drive, you always must breath
in exactly 1 unit of pollution. Draw this as a “budget constraint".
(Hint: here are some points on the constraint: (0,0), (10,1), etc...)
(c) Illustrate graphically where the optimal consumption bundle will lie
with an appropriately drawn indifference curve.
(d) Under what circumstances would the optimal bundle contain zero
pollution. Again, draw this possibility on a graph.
Answer all four
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