Solution To Selected Questions: Chapter 3 Consumer Behavior Worksheet - Chairat Aemkulwat, 2015 Page 3
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6e. Bill likes hamburgers, but neither likes nor dislikes soft drinks.
Hamburgers
Like Jane, Bill considers soft drinks to be a
neutral good. Since he does not care about
soft drinks one way or the other we can
assume that no matter how many he has,
his utility will be the same. His level of
satisfaction depends entirely on how many
hamburgers he has, so his satisfaction
increases in the upward direction only.
Soft Drinks
f.
Mary always gets twice as much satisfaction from an extra hamburger as she
does from an extra soft drink.
How much extra satisfaction Mary gains from
Hamburgers
an extra hamburger or soft drink tells us
something about the marginal utilities of the
two goods and about her MRS. If she always
receives twice the satisfaction from an extra
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hamburger, then her marginal utility from
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consuming an extra hamburger is twice her
marginal utility from consuming an extra soft
drink.
Her MRS, with hamburgers on the
vertical axis, is 1/2 because she will give up one
hamburger only if she receives two soft drinks.
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Soft Drinks
Her indifference curves are straight lines with
a slope of 1/2.
3. If Jane is currently willing to trade 4 movie tickets for 1 basketball ticket, then she
must like basketball better than movies. True or false? Explain.
This statement is not necessarily true. If she is always willing to trade 4 movie
tickets for 1 basketball ticket then yes, she likes basketball better because she
will always gain the same satisfaction from 4 movie tickets as she does from 1
basketball ticket. However, it could be that she has convex preferences
(diminishing MRS) and is at a bundle where she has a lot of movie tickets
relative to basketball tickets. As she gives up movie tickets and acquires more
basketball tickets, her MRS will fall. If MRS falls far enough she might get to
the point where she would require, say, two basketball tickets to give up
another movie ticket.
It would not mean though that she liked basketball better, just that she had a
lot of basketball tickets relative to movie tickets. Her willingness to give up a
good depends on the quantity of each good in her current basket.
P a g e
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