Question

# You have to draw indifference curves and budget constraints to express your answers. The test will...

You have to draw indifference curves and budget constraints to express your answers.

The test will be held 15 hours later. Sally has yet to study for it. Suppose an hour of study can increase the score by 5 in the test.

(a) Draw the budget constraint of Sally. (Hint: good x is sleeping in hours, and good y is test score)

(b) The test is unexpectedly delayed for 5 hours. Do you think that Sally’s test score must be higher? Explain your answer intuitively and graphically.

(c) Although the test is delayed for 5 hours, Sally finds that some of the course materials are much more difficult than expected. For the first 10 hours, an hour of study can increase the score by 5. For the rest, an hour of study can increase the score by 3 only. Draw the new budget constraint of Sally.

(d) Suppose Sally choose to sleep for 10 hours in part c. Will Sally be worse off in part d? Explain your answer intuitively and graphically.

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