In the graph below, you see a representation of Sarah Gamp€™s indifference curves between cucumbers and other goods. Suppose that the reference price of cucumbers and the reference price of €œother goods€ are both 1.

(a) What is the minimum amount of money that Sarah would need in order to purchase a bundle that is indifferent to A?
(b) What is the minimum amount of money that Sarah would need in order to purchase a bundle that is indifferent to B?
(c) Suppose that the reference price for cucumbers is 2 and the reference price for other goods is 1. How much money does she need in order to purchase a bundle that is indifferent to bundle A?
(d) What is the minimum amount of money that Sarah would need to purchase a bundle that is indifferent to B using these new prices?
(e) No matter what prices Sarah faces, the amount of money she needs to purchase a bundle indifferent to A must be (higher, lower) than the amount she needs to purchase a bundle indifferent to B.

Transcribed Image Text:

Other goods 30 20 10 0 10 20 30 40 Cucumbers