Question
Ginger enjoys one cup of coffee with cake. She always enjoys more cake, but more than one cup of coffee per day makes her jumpy,
Ginger enjoys one cup of coffee with cake. She always enjoys more cake, but more than one cup of coffee per day makes her jumpy, which cancels out any enjoyment she gets from drinking it. Ginger is thus indifferent between 1 and 10 cups of coffee. After the first cup of coffee, only cake makes her happier. When she has some of each, Ginger values coffee and cake equally, so she is indifferent between one cup of coffee with one piece of cake and two pieces of cake with no coffee.
On the graph below, use the straight-line tool to plot Ginger's indifference curve that goes through (0,2).
At the point (0,2), what is Ginger's marginal rate of substitution?
At the point (2,1), what is Ginger's marginal rate of substitution?
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