Question One a) State the Axioms of rational choice and show how they affect indifference curves...

Transcribed Image Text:

Question One a) State the Axioms of rational choice and show how they affect indifference curves where possible. b) If 2 goods, good X and good Y, draw an indifference curve such that good X is a normal good and good Y is an economic bad. c) Given two goods, good K and good T. If the price of good K is K2 per unit and good is K3 per unit for purchases less than 5 and K1 for purchases more than 5. Draw a budget line for Moses who has an income of K30. If Moses utility function is given by find his optimal combination of the two goods if the price of K is K2, the price of T is K1 and his income is 10. What is his utility? Question One a) State the Axioms of rational choice and show how they affect indifference curves where possible. b) If 2 goods, good X and good Y, draw an indifference curve such that good X is a normal good and good Y is an economic bad. c) Given two goods, good K and good T. If the price of good K is K2 per unit and good is K3 per unit for purchases less than 5 and K1 for purchases more than 5. Draw a budget line for Moses who has an income of K30. If Moses utility function is given by find his optimal combination of the two goods if the price of K is K2, the price of T is K1 and his income is 10. What is his utility?

Answer rating: 100% (QA)

SOLUTION a The axioms of rational choice are 1 Completeness The consumer has complete information about the goods and their prices 2 Transitivity The ... View the full answer