Suppose Aisha and Kyra are identical in every way - same exogenous income, same tastes, same everything. The only difference is that Aisha has a coupon for smoothies that allows her to buy as many smoothies as she wants at half the regular price. Under what circumstances might Aisha be willing to sell this coupon to Kyra?

1. On a graph with Smoothies on the horizontal axis and dollars of other consumption on the vertical axis, illustrate Kyra's optimum consumption of Smoothies. Then indicate, as a vertical distance, the most she would be willing to pay Aisha for the coupon. Call this distance F. (hint, draw both the budget constraint Kyra faces as well as the one she would face if she had the coupon and think about the income she would have to give up to get the coupon)

2. On a separate graph with Smoothies on the horizontal axis and dollars of other consumption on the vertical axis, illustrate Aisha's optimum consumption of Smoothies. Then indicate, as a vertical distance, the least she would be willing to accept from Kyra to hand her the coupon. Call this distance G. (hint, draw both the budget constraint Aisha faces as well as the one she would face if she sold the coupon and think about the income she would earn by selling it)

3. In order for Aisha to be willing to sell Kyra the coupon, what must be true about F and G?

4. Below each of these graphs you drew in 1. and 2., illustrate F and G (as areas) along the appropriate marginal willingness to pay curves.

5. Is F larger or smaller than G? What does your answer depend on? (hint, by overlaying the two MWTP curves, what would it mean if they lay on top of each other making F = G? What if one was to the right of the other? Then which would be bigger?

6. True or False: Kyra and Aisha will be able to make a deal so long as smoothies are normal goods? Explain your answer.