Question

Tom’s income is $600. Assume that he consumes only two goods, watching basketball games and football games. Tom had the same Total Utility for the following five options (i.e. he is indifferent between these options).

Options	# Basketball games	#Football games
1	100	10
2	60	15
3	30	30
4	15	50
5	10	90

1. Assume that the price of a basketball game is $6, and the price of a football game is $15. Draw Tom’s indifference curve along with budget constrain and find his optimal choice. Draw a graft to answer the question

Number of Basketball Games:                       Number of football games:                               

Answer 1

An indifference curve is a combination of two goods where the consumer gets equal utility. The consumer would be indifferent to these combinations.

If basketball game cost $ 6 and football game cost $15 then above Budget line AB shows all combinations of the goods which can be brought with Tom's income of $600.

Given Budget line B1, Tom will maximize his utility where the highest Indifference Curve is tangential to the Budget line B1 i.e. Point C. At point C, Tom will enjoy 20 football games & 50 basketball games.