Suppose that James only consumes two things: pizza and beer.
Suppose that James only consumes two things: pizza and beer. For one possible bundle (A), containing 2 pizzas and 10 beers, his MRSPB= – 8. For a second possible bundle (B), containing 6 pizzas and 4 beers, his MRSPB= – 1/2. Those MRS’s are true only at these specific points, as MRS’s change at every point on the curve. Assume that Steve is indifferent between bundle A and bundle B. Draw the indifference curve, with pizza on the X-axis and beer on the y-axis, using information about the MRS to accurately capture the curvature of the indifference curve.
For the following sets of goods, draw two indifference curves, I1 and I2 where U2>U1. Draw each graph, putting the first good on the horizontal axis:
Hamburgers and pizza (the consumer likes both and has a diminishing marginal rate of substitution of hamburgers for pizza)
White sugar and Splenda (the consumer likes both and will accept a gram of sugar or a gram of Splenda with equal happiness)
Peanut butter and jelly (the consumer likes exactly 2 ounces of peanut butter for every ounce of jelly)
Sprinkles (which the consumer neither likes or dislikes) and ice cream (which the consumer likes)
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