Question

Bob consumes only apples and bananas. He always prefers more apples to fewer, but he gets tired of bananas. If he consumes fewer than 29 bananas per week, he thinks that 1 banana is a perfect substitute for 1 apple. But you would have to pay him 1 apple for each banana beyond 29 that he consumes. His indifference curve that contains the consumption bundle with 30 apples and 39 bananas also contains the bundle with 21 bananas and how many apples? (Please show all work and explain)

Answer 1

Solution: 28 apples

Working:

When the consumption of bananas is more than 29 per week, 1 banana becomes perfect complement for 1 apple; and when the consumption of bananas is lesser than 29 per week, 1 banana is a perfect substitute for 1 apple. Thus we can notice that the current indifference curve includes the consumption bundle with 39 bananas and 30 apples.

Now with bundle 21 bananas lies on this indifference curve with the consumption bundle with 39 bananas and 30 apples. To reduce the consumption of bananas from 39 to 21, we will first reduce the consumption to 29 bananas. From 39 bananas to 29 bananas has to give 10 apples and for 29 to 21, 8 apples will be taken away as these are substitutes for bananas. In total 10 apples are taken way while 8 are provided thus a total of 2 apples should be taken from him. Thus, the number of apples with 21 bananas has to be 28 apples