Micro economics question

[harish]

I have three questions, I have doubts in, if anyone can help me tell how the solution has been arrived at,I would be grateful.

Topic - Budget constraint

Questions

2.26 Young Alasdair loves lollipops and hates oatmeal. To induce him to eat enough oatmeal and to restrain him from eating too many lollipops, his mum pays him 10 pence for every quart of oatmeal that he eats. The only way that he can get lollipops is to buy them at the sweet shop, where lollipops cost 5 pence each. Besides what he earns from eating oatmeal, Alasdair gets an allowance of 10 pence per week. If Alasdair consumes only oatmeal and lollipops and if his consumption bundles are graphed with quarts of oatmeal on the horizontal axis and lollipops on the vertical axis, then Alasdair's budget line:

(a) has a slope of 2.
(b) has a slope of less than 2.
(c) has a slope of 2.
(d) has a slope of 1=2.
(e) has a slope greater than 2.

Topic - Preferences

3.16 Ambrose has indi erence curves with the equation x2 = constant 4x1=2 1 where larger constants correspond to higher indi erence curves. If good 1 is drawn on the horizontal axis and good 2 on the vertical axis, what is the slope of Ambrose's indi erence curve when his consumption bundle is (16;9)?

(a) 16=9
(b) 9=16
(c) 0:50
(d) 13
(e) 4

3.20 If we graph Mary Granola's indi erence curves with avocados on the horizontal axis and grapefruits on the vertical axis, then whenever she has more grapefruits than avocados, the slope of her indi erence curve is2. Whenever she has more avocados than grapefruits, the slope is 1=2. Mary would be indi erent between a bundle with 11 avocados and 23 grapefruits and another bundle that has 19 avocados and:

(a) 15 grapefruits.
(b) 19 grapefruits.
(c) 11 grapefruits.
(d) 13 grapefruits.
(e) 14 grapefruits

Answers to these questions and how they have been arrived at would be very helpful. Thanks.

[RichaS]

Is the answer to the first question slope=2?

[RichaS]

is the answer to the 3rd question 19 grapefruits?

[harish]

Hello Richa, thanks for attempting. Yes first answer is indeed 2 but apparently second answer is option D. But thanks again for attempting. The graph you drew has given me added clarity.

[harish]

sorry, I mean third answer is option D or 13 grapefruits.

[Rautparul]

3.20

It is a kinked indifference curve.
(Avacado, Grapefruit) = (11,23) (19,y)
Both these points are on same indifference curve.
Along with these points, there will be a bundle say (p,p) such that it lies on x=y line.

Plot graph being grapefruit on Y-axis and Avacado on X-axis.

This (p,p) will satisfy both the slopes.

slope = (y2-y1)/(x2-x1)

a) between (11,23) and (p,p)
   -2 = 23-p/11-p
    p= 15
    kinked point (15,15)

b)between (15,15) and (19,y)
   -1/2 = y-15/19-15
    y = 13

I am assuming this to be a correct approach. But if there is any other method, then please share.

[harish]

Yes that may be the right approach although I'm not sure why you feel it will be kinked indifference curve because slope of indifference curve would be 0 I assume.

[Rautparul]

Because in the question itself, it is given that indifference curve satisfies both (11,23) and one with 19 avocado and possess two slopes and hence is kinked.

[harish]

+1