Dwights preferences over beer and whiskey satisfy more is better, but are concave (thus violating the usual
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Question:
Dwight’s preferences over beer and whiskey satisfy “more is better,” but are concave (thus violating the usual assumption of convexity).
a. On a diagram, sketch what such indifference curves would look like.
b. Do Dwight’s preferences exhibit decreasing, constant, or increasing MRS? Explain.
c. Sketch the shape of Dwight’s demand curve for beer. Hint: It may help to start by adding a budget constraint to your diagram from part (a) and think about how he would react to changes in the price of beer.
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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