Indifference Curve


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Indifference Curve 1 answer below » My question concern health economic about budget line and indifferent curve. Please provide steps as well as answers Document Preview: Question One:
(Indifferent curve, budget line, income effect & substitution effect) Question
Part 1. Annie has an income of $120 an hour, popcorn cost $6 a bag, and cost $5 a six pack cola.
Draw a graph of Annie’s budget line (with six pack of cola on the x-axis and popcorn on the y axis)?
If we know that Annie maximizes her utility with the purchase View complete question » My question concern health economic about budget line and indifferent curve. Please provide steps as well as answers Document Preview: Question One:
(Indifferent curve, budget line, income effect & substitution effect) Question
Part 1. Annie has an income of $120 an hour, popcorn cost $6 a bag, and cost $5 a six pack cola.
Draw a graph of Annie’s budget line (with six pack of cola on the x-axis and popcorn on the y axis)?
If we know that Annie maximizes her utility with the purchase of 10 bags of popcorn, how many six pack cola will she purchase? (by calculating an estimate from a graph), draw an indifference curve reflecting this optimum.
Part B. If annie’s hourly income income remains $120. The price of cola drops to $2.5 a six pack of can, while the price of popcorn remains at $6 a bag.
Draw the new budget line (with six pack of cola on the x-axis and popcorn on the y axis) and use the indifference curve to identify the change in quantity purchased and illustrate the income and substitution effects.
(Please provide the steps a long with answers) Attachments: Economic-Ques….docx View less » Feb 26 2014 02:43 AM

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