Question

There are two goods: sushi and fried chicken. Let S represents weekly consumption of sushi and F represent weekly consumption of fried chicken. A unit of sushi contains 200 calories, while a unit of fried chicken contains 600 calories. Choose two of the four following descriptions of a consumer’s preferences, to explain the preferences as described in economics words and meanings and draw the corresponding indifference curves in a graph with S on the horizontal axis and F on the vertical axis :
a. Food is food. I do not care how I get my calories. The more calories I get, the happier I am.
b. I am on a strict diet. I like food but I just cannot consume more than 1800 calories a day. Any food in excess of this, I just throw away (at no cost to me). I also like to keep a balanced diet: 2 units of sushi for each unit of fried chicken.
c. I like fried chicken but I hate sushi. If I am served sushi, I just throw it away.
d. I am very particular about what I eat. I always try to consume 20 units of sushi and 15 units of fried chicken a week. Any departure from this routine makes me unhappy. The greater the departure, the greater my unhappiness.

Answer 1

a) The more Calories I get, the happier I am. This means that both S and F are good. As I consume more food, I move on a higher IC, and therefore get higher utility.

b) The total amount of Calories that I can consume = 1800 per day

I consume 2 units of sushi for each unit of fried chicken. So, the utility function can be described as:

U(S,F) = min (F, 2S)

The IC are given below:

c) I like fried chicken but I hate sushi. If I am served sushi, I just throw it away. This means I just care about the amount of F that I have and the more F that I have, the better off I will be

d)  I always try to consume 20 units of sushi and 15 units of fried chicken a week. Any departure from this routine makes me unhappy.

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