This is a puzzle—just for fun. Lewis Carroll (1832-1898), author of Alice in Wonderland and Through the Looking Glass, was a mathematician, logician, and political scientist. Carroll loved careful reasoning about puzzling things. Here Carroll’s Alice presents a nice bit of economic analysis. At first glance, it may seem that Alice is talking nonsense, but, indeed, her reasoning is impeccable.

“I should like to buy an egg, please.” she said timidly. “How do you sell them?”

“Five pence farthing for one—two pence for two,” the Sheep replied.

“Then two are cheaper than one?” Alice said, taking out her purse.

“Only you must eat them both if you buy two,” said the Sheep.

“Then I’ll have one please,” said Alice, as she put the money down on the counter. For she thought to herself, “They mightn’t be at all nice, you know.”

(a) Let us try to draw a budget set and indifference curves that are  consistent with this story. Suppose that Alice has a total of 8 pence to spend  and that she can buy either 0, 1, or 2 eggs from the Sheep, but no fractional  eggs. Then her budget set consists of just three points. The point where she  buys no eggs is (0, 8).  Plot this point and label it A. 

(b) The point where she buys 2 eggs is (2, 6). Plot this point and label it C. If Alice chooses to buy 1 egg, she must like the bundle B better than either the bundle A or the bundle C. Draw indifference curves for Alice that  are consistent with this behavior.