Construct a representative indifference curve fore each of t

Construct a representative indifference curve fore each of the following situations. (Note: Even though some of the goods described exist only in discrete quantities, draw the IC assuming the goods exist in continuous quantities).

a) The goods are right gloves and left gloves

i) The consumer has two hands

ii) The consumer only has a left hand

b) The two goods are water and lobster tails. Eating more than a certain number of lobster tails makes the consumer sick. Other than that, the relationship between the two goods meets our standard assumptions.

i) The consumer is free to discard lobster tails if that is in her best interest

ii) Every lobster tail in the bundle must be eaten.

c) The two goods are Coke and Pepsi. The consumer cannot tell the difference between the two soft drinks.

Solution

The MRS measures the incremental number of pineapples the consumer will forego to get a one unit increase in coconuts. A has relatively flat ICs (needs lots of C to compensate for the loss of P) so A’s MRS is low. B has relatively steep ICs (needs few C to compensate for the loss of P) so B’s MRS is high. C’s MRS is infinite (as utility is not affected by P, he will give up all P (infinite) to increase C). D’s MRS is infinite when Q_p>Q_c, zero when Q_c>Q_p.