Susan is presented with the following bundles of apples and oranges, and she divides the bundles...

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Susan is presented with the following bundles of apples and oranges, and she divides the bundles into 3 groups, as shown. She claims that within each group, she likes each bundle equally well, but that is not the case between groups. Group A Apples 4 7 10 14 20 26 a. Oranges 20 14 10 7 5 4 Group B Apples 3 4 f. 6 10 16 26 Oranges 20 14 8 5 3 2 Group C Apples 7 9 12 16 24 Oranges 20 16 12 10 8 Draw Susan's indifference map. Use straight line segments to draw the indifference curves. Indicate which indifference curve has the highest utility level and which has the lowest. b. Suppose Susan's income is $6. Initially, oranges cost $0.30 each, and apples cost $0.30 each also. Draw the budget constraint on the graph above. Which bundle does Susan purchase? c. Suppose the price of apples falls to $0.20. Which bundle is purchased now? Is Susan's utility higher or lower than it was in part (b)? d. Suppose the price of apples now rises to $0.60 each. Which bundle is purchased now? How does Susan's utility compare with parts (b) and (c)? e. Suppose now that prices are back to $0.30 for each type of fruit. In part (b), you found which bundle Susan would buy, given her $6 income. Suppose now that Susan's income falls to $4.20. Which bundle will she buy? Are apples a normal good for Susan? Return to when Susan had an income of $6, and prices of both fruit were $0.30 each. In part (b), you found the bundles Susan bought. Now, inflation sets in, and the prices of both fruits double to $0.60. Fortunately for Susan, she has a strong union that wins a new wage contract, raising Susan's income to $12 (twice what it was before). Which bundle does she now buy? Is she better off or worse off than before? Susan is presented with the following bundles of apples and oranges, and she divides the bundles into 3 groups, as shown. She claims that within each group, she likes each bundle equally well, but that is not the case between groups. Group A Apples 4 7 10 14 20 26 a. Oranges 20 14 10 7 5 4 Group B Apples 3 4 f. 6 10 16 26 Oranges 20 14 8 5 3 2 Group C Apples 7 9 12 16 24 Oranges 20 16 12 10 8 Draw Susan's indifference map. Use straight line segments to draw the indifference curves. Indicate which indifference curve has the highest utility level and which has the lowest. b. Suppose Susan's income is $6. Initially, oranges cost $0.30 each, and apples cost $0.30 each also. Draw the budget constraint on the graph above. Which bundle does Susan purchase? c. Suppose the price of apples falls to $0.20. Which bundle is purchased now? Is Susan's utility higher or lower than it was in part (b)? d. Suppose the price of apples now rises to $0.60 each. Which bundle is purchased now? How does Susan's utility compare with parts (b) and (c)? e. Suppose now that prices are back to $0.30 for each type of fruit. In part (b), you found which bundle Susan would buy, given her $6 income. Suppose now that Susan's income falls to $4.20. Which bundle will she buy? Are apples a normal good for Susan? Return to when Susan had an income of $6, and prices of both fruit were $0.30 each. In part (b), you found the bundles Susan bought. Now, inflation sets in, and the prices of both fruits double to $0.60. Fortunately for Susan, she has a strong union that wins a new wage contract, raising Susan's income to $12 (twice what it was before). Which bundle does she now buy? Is she better off or worse off than before?

Answer rating: 100% (QA)

a Drawing Susans indifference map To draw Susans indifference map we can start by plotting the points from the three groups she provided We can see that the bundles in Group A are all preferred to the ... View the full answer