Pierre consumes bread and wine. For Pierre, the price of bread is 4 francs per loaf, and the price of wine is 4 francs per glass. Pierre has an income of 40 francs per day. Pierre consumes 6 glasses of wine and 4 loaves of bread per day.
Bob also consumes bread and wine. For Bob, the price of bread is
1/2 dollar per loaf and the price of wine is 2 dollars per glass. Bob has an income of $15 per day.
(a) If Bob and Pierre have the same tastes, can you tell whether Bob is better off than Pierre or vice versa? Explain.
(b)Suppose prices and incomes for Pierre and Bob are as above and that Pierre’s consumption is as before. Suppose that Bob spends all of his income. Give an example of a consumption bundle of wine and bread such that, if Bob bought this bundle, we would know that Bob’s tastes are not the same as Pierre’s tastes.