Draw a set of indifference curves relating two “bads” such as smog and garbage. What characteristics do these curves have?
Answer to relevant QuestionsIs it inconsistent to claim that (a) people’s preferences differ and (b) at their current consumption levels, their marginal rates of substitution are equal?Using indifference maps, explain how Kraft’s makeover of the Oreo successfully accounted for different consumer preferences in China versus for low-sugar, wafer-like cookies versus higher- sugar, biscuit-like cookies in ...In the tax-plus-rebate example discussed in the text, suppose that the government adjusts the size of the rebate so that the consumer stays on her initial indifference curve (U2 in Figure 4.4). Show the results in a diagram. ...Suppose that George is interested in only two goods, cigars and scotch. Employ the indifference curve/ budget line apparatus to show a case where a decrease in the price of cigars leads to an increase in George’s scotch ...“For a person who saves in year 1, a higher interest rate will increase consumption in year 2 but may either increase or reduce the amount saved in year 1.” Explain this statement, using the concepts of income and ...
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