Suppose that there are only two goods, books and coffee. Justine gets utility from both books and
Question:
a. Draw a set of indifference curves for Justine.
b. What do these particular indifference curves tell you about Justine's marginal rate of substitution between books and coffee?
c. What will Justine's utility-maximizing bundle look like?
d. Compare your answer to (b) to real-world behaviors. Does the comparison shed any light on why economists generally assume convex preferences?
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Related Book For
Microeconomics
ISBN: 978-1464187025
2nd edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
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