Jon is always willing to trade one can of Coke for one can of Sprite, or one can of Sprite for one can of

Coke.

a. What can you say about Jon's marginal rate of substitution

b. Draw a set of indifference curves for Jon

c. Draw two budget lines with different slopes and illustrate the satisfaction-maximizing choice.

What conclusion can you draw?

Q4

What happens to the marginal rate of substitution as you move along a convex indifference curve? A

linear indifference curve?

Q5

Explain why an MRS between two goods must equal the ratio of the price of the goods for the consumer

to achieve maximum satisfaction.