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Question 6 Suppose that a person's indifference curves are given by equations of the form x2 = max (u - 2x1, 0.5u -0.5x1), where u
Question 6 Suppose that a person's indifference curves are given by equations of the form x2 = max (u - 2x1, 0.5u -0.5x1), where u is some positive number. That is, for each fixed value of u you get an indifference curve, and an indifference curve with a higher value of u contains consumption bundles that the consumer prefers to those that have a lower level of u. (a) Graph the indifference curves for u = 10, and u = 20. (b) Find two different points on the indifference curve for u = 10 such that the marginal rates of substitution are different. Determine the marginal rates of substi tutions graphically. (c) In your graph indicate six consumption bundles, A, B, C, D, E, and F such that A > B, B ~ C, C > D, D > E, and E > F. This ranking should be clear in your graph just by having drawn the two indifference curves
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