Question

If Marcus is currently willing to trade 4 hockey tickets for 1 basketball ticket, then he...

If Marcus is currently willing to trade 4 hockey tickets for 1 basketball ticket, then he must like basketball more than hockey.
True or False: Explain your answer with the use of an appropriate diagram.

Homework Answers

Answer #1

TRUE

reason- If Marcus always likes 4 hockey tickets for 1 basketball ticket, then he likes basketball more than hockey.

Since Marcus is willing to give up more hockey tickets in exchange for 1 basketball ticket.

This is true if the MRS is constant and Marcus considers basketball ticket and hockey ticket as substitute goods.

There is another possibility however that the preferences are convex and he is at a bundle where he has lots of hockey tickets relativw to basketball tickets. This means the MRS is diminishing and as he gives up more hockey tickets and consumes more basketball tickets and MRS will fall.

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