A. Some goods are called "perfect substitutes," meaning an individual is completely indifferent between consuming either one. For example, if you cannot tell the difference between the taste of Coke and Pepsi, and you have no brand loyalty, then 1 can of Coke and 1 can of Pepsi are perfect substitutes: 1 can of Coke gives me just as much utility as 1 can of Pepsi.

i. What is the MRS for 2 perfect substitutes?

ii.Draw an indifference curve for 2 perfect substitutes. Hint: these indifference curves may appear to violate one of our required properties of indifference curvesthat they get flatter as you move to the right. If we instead phrase this property as "indifference curves do not get steeper as you move to the right," then the indifference curve you draw will satisfy this property.

iii.Provide 1 more example of two goods that are perfect substitutes, and explain your reasoning.

B. Other types of goods are called "perfect complements," meaning that a consumer is only interested in consuming them in fixed proportion. For example, if you offer me one more right shoe, I only get additional utility from it if you also give me an extra left shoe. If you give me an additional right shoe without an additional left shoe, my utility doesn't increase. Left and right shoes are thus perfect complements.

i. Draw an indifference curve for 2 perfect complements. (Hint: start at one arbitrary allocation of the goods on the horizontal and vertical axis, then figure out which bundles give the consumer equal utility to that bundle.)

ii.Which property of indifference curves do these curves appear to violate?

iii.Provide 1 more example of two goods that are perfect complements, and explain your reasoning.