Question
Suppose there are only two goods in the economy: Yo-yos and Marbles. Bob only cares about his consumption of Yo-yos; the more Yo-yos he has
Suppose there are only two goods in the economy: Yo-yos and Marbles. Bob only cares about his consumption of Yo-yos; the more Yo-yos he has the happier he is, regardless of his consumption of Marbles. In contrast, Lucy only cares about his consumption of Marble; the more Marble she has the happier she is, regardless of her consumption of Yo-yos. (a) Draw Bob's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (b) Draw Lucy's indifference curves, putting Yo-yos in the x-axis and Marbles in the y-axis. (c) Do Bob's and Lucy's preferences comply with the property of diminishing marginal rate of substitution? (d) Are Bob's and Lucy's preferences transitive?
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