Micro economics question

[harish]

Can someone explain how to solve this ?

Manuel consumes only apples and bananas. He prefers more apples to less, but he gets tired of bananas. If he consumes fewer than 17 bananas per week, he thinks that one banana is a perfect substitute for one apple. But you would have to pay him one apple for each banana beyond 17 that he consumes. The indierence curve that passes through the consumption bundle with 25 apples and 26 bananas also passes through the bundle with A apples and 11 bananas, where A equals:

(a) 21
(b) 22
(c) 24
(d) 26
(e) None of the above

Answer is (b)22 apparently, but how ?

[RichaS]

Bundle (25,26) has 26 bananas , so 26-17=9. These 9 bananas give the consumer negative utility which is balanced one for one by apples. So we need 9 apples to compensate for this : -9+9=0.
Thus the final utility could be the sum of apples and bananas i.e. 17+(25-9)=17+16= 33

Now the second bundle (A,11) has 11 bananas, so to be on the same IC it needs utility=33 which we get from 33-11=22 Apples.

I hope this is the correct method to do it, I'm not entirely sure.

[harish]

Thanks for the answer, is there any way you can solve this question using Preferences alone ? This question is from preferences which is the third chapter in Hal Varian book and Utility comes later on.

[Abhitesh]

IC are constant utility curves. Level curves of utility function (in other words). Richa's approach is fine.
Alternatively you can write the equation of IC's which will be
A+B if B<=17
A+17-(B-17) = A-B+34 if B>17.
From here you can say that is the consumer is indifferent between two bundles then they should lie on same IC and solve above equations to get A=22.

[Rautparul]

How are you preparing for Microeconomics? Can you tell me which books to solve, where should I focus In order to solve such type of questions?

[harish]

I am studying H.Varian text book and I am solving questions from H.Varian test bank. Both are available online, you just need to google H.Varian text book pdf and H.Varian test bank pdf and you will get links you can download from.