The market for sports performance drinks experienced a big s

The market for sports performance drinks experienced a big shift in 2012 as sales of low-calorie sports drinks grew by over 25%. Many attributed this shift to greater use by women who wanted a sports drink without many calories. a. If a woman desires two containers of low-calorie sports drink as much as one container of high-calorie sports drink, what do her indifference curves (between low- and high-calories sports drinks) look like? b. Do they have the typical shape of indifference curves? Why or why not?

Solution

a. If a woman desires two containers of low-calorie sports drink as much as one container of high-calorie sports drink, it means that she is willing to give away two container of low calorie drink for a high calorie drink. Thus, the MRS between high calorie drink and low calorie drink is constant, i.e they are perfect substitutes for each other. Therefore, the indifference curve for low calorie and high calorie drink would be straight line with a negative slope.

b. No, they do not have a typical shape of indifference curves. A typical IC is convex and MRS keeps on changing as move down the IC. But, in the above case the slope remains constant.