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Chapters 3 and 4: 1) Charlie likes both apples and bananas- He consumes nothing else. The consumption bundle where Charlie consumes XA bushels of apples
Chapters 3 and 4: 1) Charlie likes both apples and bananas- He consumes nothing else. The consumption bundle where Charlie consumes XA bushels of apples per year and X3 bushels of bananas per year is written as (EA: KB). Last year? Charlie consumed 20 bushels of apples and 5 bushels of bananas. It happens that the set of consumption bundles (EAI XE] such that Charlie is indifferent between (XA: XE] and (20, 5) is the set of all bundles such that xB=IUU/XA, the set of bundles (Km XE} such that Charlie is just indifferent between (XL; KB) and the bundle (10, 15] is the set of bundles such that XB=150[xA_ (a) On a graph: plot several points that lie on the indifference curve that passes through the point (203 5)1 and sketch this curve (1e. connect the dots). On the same graph plot points for the indifference curve that passes through (10315). (b) Redraw the graph from (a)- Now add two things: 1} shade in the set of bundles that Charlie weakly prefers to the bundle [10; 15). 2} Use a different color to shade in the set of commodity bundles such that Charlie weakly prefers (2035} to these bundles. (c) You should be able to use your graph to answer the following questions. Is (30, 5) ~ (10, 15}? Is (102 15] a [203 5]? Is (2302 5) t (10; 10)? Is (24, 4) t (11; 9.1]? Is (112 14] a [2, 49)? Is the set of bundles that Charlie weakly prefers to (201 5] a convex set? Is the set of bundles that Charlie considers inferior to (201 5] a convex set? 1What is the Marginal rate of Substitution at the point (10? 10:]? l.I"hat is the Marginal rate of Substitution at the point (5, 20}
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