Gabriella divides her food budget between fancy dinners and casual dinners. Two of her indifference curves are

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Gabriella divides her food budget between fancy dinners and casual dinners. Two of her indifference curves are shown in Figure EP-5. When casual dinners are $12 and fancy dinners are $25, she chooses 5 casual dinners and 4 fancy dinners. This is shown in Indifference Curve 1 (IC1). A new restaurant opens near her apartment, and she can get a casual dinner for $6. At this new price, she chooses 8 casual dinners and 5 fancy dinners. This is shown on Indifference Curve 2 (IC2).

a. Draw Gabriella’s demand curve for casual dinners.

b. What do we know about Gabriella’s demand for fancy dinners?

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Microeconomics

ISBN: 978-1259813337

2nd edition

Authors: Dean S. Karlan, Jonathan J. Morduch

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