15. For Mitzi, shampoo and conditioner are perfect complements. She likes to use 1 squirt of shampoo

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15. For Mitzi, shampoo and conditioner are perfect complements. She likes to use 1 squirt of shampoo and 1 squirt of conditioner each time she washes her hair.

a. Draw a set of indifference curves for Mitzi that illustrate the utility she derives from using shampoo and conditioner.

b. Assume that shampoo costs $4 and conditioner costs $2. Construct a budget constraint for Mitzi and describe her purchasing habits. What is her optimal bundle likely to look like? (Hint: Assume some level of income for Mitzi.)

c. Suppose that prices change so that shampoo costs $2 and conditioner costs $4. What is likely to happen to Mitzi’s optimal bundle as a result? Explain.

d. How would your answer to

(c) change if Mitzi used 2 squirts of shampoo and 1 squirt of conditioner each time she washed her hair?

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Microeconomics

ISBN: 9780716759751

1st Edition

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

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