Question

3. Indifference curves and preferences Edison likes both chocolate and ice cream. Assume that the more is better" principle applies to Edison; that is, he would always prefer to consume more of either good, holding the consumption of the other good constant. The points on Figure 1 represent combinations of ice cream and chocolate that Edison might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Edison's indifference curves: 11, 12, and Is. These curves show more information about Edison's preferences than Figure 1. Figure 1 Figure 2 11 12 13 G E CHOCOLATE (Bars) CHOCOLATE (Bars) B ICE CREAM (Cones) ICE CREAM (Cones)

Answer 1

Answer

Information Given By... А B с E F G H Figure 1 Figure 2 4

figure 1 only bundle H is clearly better than bundle D as both the nuber of ice creams and chocolates are higher.

In figure 2, as point C is at a higher Indifference curve we can determine that it is also better.

Statement True False Figure 1 indicates that Edison is indifferent among bundles C and bundles G. Figure 2 indicates that Edison is indifferent among bundles C and G.

The first statement is false as it cannot be detemined, for statement 2, C is a better bundle than G as it is in a higher indifference curve.

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