Using a new sheet of paper, draw 4 graphs, and in each one put olives on the horizontal axis and salami on the vertical axis, and mark the points for the bundles M=(10 olives, 4 slices of salami) and N=(0 olives, 10 slices of salami). Then for each of the four consumers listed below, draw the indifference curves that go through those points (and more, if you wish), in a way that is consistent with the preferences described below. When possible, indicate the slope of indifference curves at those points, and show clearly which of the two bundles is preferred. A. Abigail likes olives but doesn't like salami (if she has any, she just ignores it) B. Bob likes to consume exactly 2 olives with each slice of salami, and never eats them separately

Using a new sheet of paper, draw 4 graphs, and in each one put olives on the horizontal axis and salami on the vertical axis, and mark the points for the bundles M=(10 olives, 4 slices of salami) and N=(0 olives, 10 slices of salami). Then for each of the four consumers listed below, draw the indifference curves that go through those points (and more, if you wish), in a way that is consistent with the preferences described below. When possible, indicate the slope of indifference curves at those points, and show clearly which of the two bundles is preferred. A. Abigail likes olives but doesn't like salami (if she has any, she just ignores it) B. Bob likes to consume exactly 2 olives with each slice of salami, and never eats them separately

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Abby likes tangerines and oranges. For every 4 tangerines, Abby is equally happy to consume 2 oranges instead. Let x be the number of tangerines, and y be the number of oranges. (a) Graph Abby's indifference curves. Make sure to mark the direction of the preferred bundles. (b) Write down an utility function that represents Abby's preferences. (c) Write down another utility function different from your previous answer but also represents Abby's preferences. (d) Does v(x, y) = x + y represent Abby's preferences? (e) What is Abby's marginal rate of substitution? (f) Suppose that px = 1, py = 1, and Abby has Y = 20. Compute Abby's optimal consumption bundle.
1. Jim's preferences for pears and apples can be summarized by the following utility function: U(Xa,Xp)=XaXp where xa is the quantity of apples and xp is the quantity of pears. a) Draw an indifference curve for Jim by calculating a series of bundles that all produce the same level of "utility" and plotting them. Interpret the slope of the indifference curve (the marginal rate of substitution). b) Calculate the formula for Jim's marginal rate of substitution, as a function of apples and pears consumed.¹ c) What happens to the numeric value of Jim's marginal rate of substitution along an indifference curve (i.e., holds his utility constant) as he increases the number of pears he consumes and decreases the number of apples? For example, compare his MRS for a bundle consisting of 9 apples and 4 pears to his MRS for a bundle consisting of 9 pears and 4 apples and interpret the change. d) Suppose something increases Jim's desire for apples (for example, apples are found to reduce the risk of…
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