1. Indifference curves and preferences Sharon likes both soda and ice cream. Ass

Question

1. Indifference curves and preferences Sharon likes both soda and ice cream. Assume that the "more is better" principle applies to Sharon; that is, she 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 soda that Sharon might choose to consume. Figure 2 shows the same points as Figure 1, but it also shows some of Sharon's indifference curves: I1, I2, and I3. These curves show more information about Sharon's preferences than Figure Figure 1 Figure 2 ICE CREAM (Cones) CE CREAM (Cones) Complete the following table by indicating which bundles Sharon strictly prefers to H given only the information in each figure. Information Given ByA Figure 1 Figure 2 Indicate whether each of the following statements is true or false given the graphs. True False Statement Figure 1 indicates that Sharon prefers bundle E to A. Figure 2 indicates that Sharon prefers bundle E to bundle A.O

Explanation / Answer

Figure 1 - D

Figure 2- D, E

For figure 1 consumer will prefer bundles that will give more of either good without decreasing other good than H bundle.

For future 2 consumers will prefer the bundles which are on the higher indifference curve.

Figure 1 indicates that Sharon prefers bundles E to A- false

Figure 2 indicates that Sharon prefers bundles E to bundle A- true

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