Suppose that midterm grades determine your nal course grade Putting the Midterm

Question

Suppose that midterm grades determine your nal course grade Putting the Midterm 1 grade on the horizontal axis and the Midterm 2 grade on the vertical axis, draw indiference curves describing your preferences in the following scenarios. In addition, write down a utility function that is consistent with the preferences in each case.

(a)  Each midterm is worth 50% of your nal grade.

(b)  Midterm 1 is worth 25% and Midterm 2 is worth 75% of your nal grade.

(c)  The lower of your two midterms is worth 100% of your nal grade.

(d) The higher of your two midterms is worth 100% of your nal grade.

Explanation / Answer

Economic theory identifies important economic variables and attempts to explain their relationships. Economists frequently rely on graphs to illustrate these relationships. Economics: A Tool for Critically Understanding Society contains numerous graphs, so it is important to be clear about how they are constructed and what they show.

Let

TABLE 1 Monthly Cost of Oil for a Household Point on Graph Amount of Oil Used (Gallons per Month) Cost ($) origin 0 0 a 20 20 b 40 40 c 60 60 d 80 80 e 100 100

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