Suppose that Jones and Smith have each decided to allocate $1000 per year to an

Question

Suppose that Jones and Smith have each decided to allocate $1000 per year to an entertainment budget in the form of hockey games or rock concerts. They both like hockey games and rock concerts and will choose to consume positive quantities of both goods. However, they differ substantially in their preferences for these two forms of entertainment. Jones prefers hockey games to rock concerts, while Smith prefers rock concerts to hockey games. In the figure to the right, two indifference curves are drawn for Jones for successive levels of utility and two indifference curves are drawn for Smith for successive levels of utility. Jones's indifference curves are the

Explanation / Answer

U1R and U2R are the indifference curves of Jone because these 2 indifference curve shows that John sacrifice more rock concerts just to increase small proportion of hockey games. So, it shows the preference of hockey games to rock concerts.

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