The utility that Julie receives by consuming food F and clothing C is given by U(F, C) = FC. For this utility function, the marginal utilities are MUF = C and MUC = F.
a) On a graph with F on the horizontal axis and C on the vertical axis, draw indifference curves for U = 12, U = 18, and U = 24.
b) Do the shapes of these indifference curves suggest that Julie has a diminishing marginal rate of substitution of food for clothing? Explain.
c) Using the marginal utilities, show that the MRSF,C = C/F. What is the slope of the indifference curve U = 12 at the basket with 2 units of food and 6 units of clothing? What is the slope at the basket with 4 units of food and 3 units of clothing? Do the slopes of the indifference curves indicate that Julie has a diminishing marginal rate of substitution of food for clothing? (Make sure your answers to parts (b) and (c) are consistent!)