DOGS FISH FISH

CATS CATS DOGS

In each case, the arrows point in the "upward" direction.

3 3

2 2

1 1

1 2 3 1 2 3

a) Either curve is possible. b) In order for the curve to

pass below (1,3), it must
also pass below (2,2)
 All Other Goods

20

10

10 30
Ice Cream

Hours at Circus

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35
6

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MEAT

11
This week

4.4

Last week

B
CHEESE
3.67 5.5

2010
2011

2011.

2011.
。 Other goods

When the price of eggs doubles, Freddy moves from A

to B. If he'd lost six dollars, he could just have afforded B.
Therefore, the "lost six dollars" budget line (shown dashed)
passes through B, and there must be a tangency somewhere
between B and C. This tangency would be on a higher
indifference curve than the one passing through B, so
Freddy prefers losing $6.

A
6 B

Eggs

Peaches

a) If Aubrey is equally happy in both months,

a single indifference curve must be tangent to both
budget lines as shown. She therefore definitely
eats more apples in July, i.e. TRUE.

June July

Apples

Peaches
b) If Aubrey eats exactly 8 apples in June,
the picture looks like this. Her July
tangency must lie on a higher indifference
curve (like the dashed one), so TRUE.

c) The dashed indifference curve could in

fact be tangent to the July line slightly LEFT of
the quantity 8, (as inidicated by the arrow) so
FALSE.

June July

8 Apples
2 1 3
Wine

Homer
J

Inez

Eggs
12
8
TEA

JESSICA

KAREEM

COFFEE

TEA

JESSICA

KAREEM

COFFEE

TEA

KAREEM JESSICA

COFFEE
BANANAS

APPLES

bananas bananas

Acme Star Acme

Star

GREGORIAN apples BOUDICCA apples

All other goods

10

Q
original

10
Sodas

Oranges

10

Monday
Tuesday

10 14
Apples
 15

Oranges
10

Tuesday
Monday

5 10
Apples

Oranges

Apples
Goods 11 Goods 11 Goods 11
Next Next Next
Year Year Year

10 10 10
b) c) d)
Goods Today Goods Today Goods Today

Goods
Next
Year

Original

Goods Today

Goods
Next
Year

Original

Goods Today
INCOME

$200

160

16 20
LEISURE

W
AOG

10 X

10
APPLES
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14.50

7.50

M
LEISURE
14 24