Question

Assume there are only two goods: wine and cheese, and three different individuals, whose preferences can...

Assume there are only two goods: wine and cheese, and three different individuals, whose preferences can be described as follows:

Bob likes both wine and cheese. He has a constant marginal rate of substitution (wine for cheese): he is always willing to give up 1 unit of wine for exactly 2 units of cheese.

Jimmy demands specific proportions of wine and cheese: 1 part wine for every 3 parts cheese, and any wine or cheese in excess of that proportion is worth nothing to him.

Peter likes both wine and cheese and has a declining marginal rate of substitution. However, at every bundle, his marginal rate of substitution is greater than 2.

a) Find a utility function that describes Bob’s preferences. Draw the indifference curve that contains bundle (5, 2) and write the equation of that indifference curve, given the utility function that you provided. What is the MRS at that point?

b) Find a utility function that describes Jimmy’s preferences. Draw the indifference curve that contains bundle (5, 2) and write the equation of that indifference curve, given the utility function that you provided. What is the MRS at that point?

c) Sketch Peter’s indifference curve containing bundle (5, 2). How does the fact that MRS > 2 translate into your graph?

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Answer #1

sorry i dont confirm about the answer of (c)

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