Question
The brothers Shem, Ham, and Japheth all have preferences for raisins and chocolate pieces. Who likes raisins and chocolate together, so that he thrives best
The brothers Shem, Ham, and Japheth all have preferences for raisins and chocolate pieces. Who likes raisins and chocolate together, so that he thrives best with n raisins together with n chocolate pieces. For Ham, a raisin is always as good as a piece of chocolate. Jafet loves chocolate pieces, but hates raisins.
a) Illustrate each brother's indifference curves for these items.
b) If Sem has SEK 40, Ham has SEK 30, and Japheth has SEK 50, is this enough information to deduce either brother's consumption of raisins or chocolate pieces? Explain why, or why not.
c) The brothers' father has found a bag of 45 raisins, and intends to donate these to his sons. He wants to be fair and gives each son 15 raisins.
Evaluate, based on what is known about the brothers' preferences, what each of them will do with their 15 raisins. Suggest suitable barter deals between the brothers if possible. Assume that they made optimal consumption choices before the gift, and that they could not foresee the gift.
d) The father himself is indifferent to both raisins and chocolate pieces. He has an income of 1000 kronor a month and buys for this money wood and nails to build a boat.
Suppose that the father's income doubled to SEK 2,000 per month. The prices of wood and nails are unchanged at the same time. Is it possible to claim on sound economic grounds that the father will buy a smaller amount of nails after the increase in income than before? Explain why or why not.
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