Question

3. Judy drinks both Coke and Pepsi. Suppose the formula for her indifference curves is U(C P) = C +1.2P, where C stands for liters of Coke and P stands for liters of Pepsi consumed over a month (a) Draw three of Judy's indifference curves in her family of indifference curves. (b) Does she prefer a consumption bundle consisting of three liters of Coke and no Pepsi or a consumption bundle consisting of three liters of Pepsi and no Coke? Why?

Answer 1

V(c, p) = c + 1.2 p a) Family of Indifference curve: - C + 1.2 P = k b). 3 liter of coke & no pepri rightdoublearrow x_1 = (3, 0) rightdoublearrow U(3, 0) = 3 .3 liter of pepri & no coke rightdoublearrow x_2 = (0, 3) rightdoublearrow u(0, 3) = 1,2 times 3 = 3.6 since U(0, 3) > U(3, 0) rightdoublearrow 3 liter of pepri with no coke is preferred to 3 liter of coke with no pepri. There facte arrive because coke and pepsi are perfect substitater where weight factor of pepri is greater than that of coke.