Chapter 3: Problem 2

Draw indifference curves that represent the following individuals' preferences for hamburgers and soft drinks. Indicate the direction in which the individuals' satisfaction (or utility) is increasing. a. Joe has convex indifference curves and dislikes both hamburgers and soft drinks. b. Jane loves hamburgers and dislikes soft drinks. If she is served a soft drink, she will pour it down the drain rather than drink it. c. Bob loves hamburgers and dislikes soft drinks. If he is served a soft drink, he will drink it to be polite. d. Molly loves hamburgers and soft drinks, but insists on consuming exactly one soft drink for every two hamburgers that she eats. e. Bill likes hamburgers, but neither likes nor dislikes soft drinks. f. Mary always gets twice as much satisfaction from an extra hamburger as she does from an extra soft drink.

Short Answer

Expert verified

The shape and direction of the indifference curves will vary based on each individual's preferences. For example, Jane's curves will be right angles at the hamburger axis and Bob's will be L-shaped leaning towards the hamburgers. On the other hand, Molly's will be a downward sloping straight line with a slope of -2.

Step by step solution

For Joe, who dislikes both hamburgers and soft drinks

The indifference curve will be convex to the origin, with the satisfaction increasing as we move towards the origin. So, indifference curves will be drawn that are downward sloping towards the origin showing lesser consumption of both goods implies more satisfaction.

For Jane, who loves hamburgers and dislikes soft drinks

The indifference curves will be right angles at the hamburger axis, reflecting the fact that she will only consume hamburgers. Adding more soft drinks does not change her level of satisfaction. Therefore, the direction of increased satisfaction is along the hamburger axis, away from the soft drinks axis.

For Bob, who loves hamburgers and will drink soft drinks to be polite

His indifference curves will be like L-shapes leaning towards the hamburgers axis: he prefers more hamburgers but will also have some soft drinks. The direction of increased satisfaction is first along the hamburger axis, and then along the soft drink axis, always staying above a certain soft drink level.

For Molly, who wants exactly two hamburgers for each soft drink

Her indifference curve will be a downward sloping straight line with a slope of -2. The direction of increased satisfaction is along this line, from left to right.

For Bill, who likes hamburgers, but neither likes nor dislikes soft drinks

His indifference curves will be horizontal lines parallel to soft drink axis. He derives satisfaction only from the consumption of hamburgers. The direction of increased satisfaction is moving right along the hamburger axis.

For Mary, who gets twice as much satisfaction from a hamburger as from a soft drink

Her indifference curves will be concave to the origin – steeper close to the hamburger axis and flatter near the soft drink axis reflecting her preference for hamburgers. The direction of increased satisfaction is moving right along the curves towards more hamburgers.