Please help me with this question Thanks In recent years fre

Please help me with this question. Thanks!!

In recent years fresh bagel sales have been growing at about 30% per year.

Once considered an ethnic food to be eaten with cream cheese and lox, bagels

now \"have become the new donut to bring to the office;\' according to Michael

Goldstein of Goldstein\'s Bagel Bakery in Pasadena, California. But one problem

with bagels is that they get stale fast. In the words of Ray Lahvic, editor

emeritus of Bakery Production and Marketing, \"the worst thing in the world

is a day-old bagel.\" If a market researcher asserts that the slope of the typical

consumer\'s indifference curves between fresh bagels and day-old bagels is -1,

would you agree with this assertion? Why or why not?

Solution

A slope of -1 implies that the goods are perfect substitutes of each other. In above case, its said that \"the worst thing in the world is a day-old bagel.\" So, if stale bagels are the worst things in the world, a fresh bagel cannot be a perfect substitute for it. A consumer would not accept any number of stale bagels for a fresh bagel. So, the assertion of slope of -1 consumer\'s indifference curves between fresh bagels and day-old bagels is not correct. I disagree with it.