Varian Doubt

classic Classic list List threaded Threaded
2 messages Options
Reply | Threaded
Open this post in threaded view
|

Varian Doubt

Ashima
Elmo finnds himself at a Coke machine on a hot and dusty Sunday.
The Coke machine requires exact change|two quarters and a dime. No
other combination of coins will make anything come out of the machine.
No stores are open; no one is in sight. Elmo is so thirsty that the only
thing he cares about is how many soft drinks he will be able to buy with
the change in his pocket; the more he can buy, the better.

If Elmo had arrived at the Coke machine on a Saturday, the drugstore
across the street would have been open. This drugstore has a soda fountain
that will sell you as much Coke as you want at a price of 4 cents an
ounce. The salesperson will take any combination of dimes and quarters
in payment. Suppose that Elmo plans to spend all of the money in his
pocket on Coke at the drugstore on Saturday. On the graph above, use
pencil or black ink to draw one or two of Elmo's indi erence curves between
quarters and dimes in his pocket.

Describe these new indi fference
curves in words.
Reply | Threaded
Open this post in threaded view
|

Re: Varian Doubt

Arushi :))
The new indifference curves would be straight lines,
as in case of perfect substitutes.
the total of quarters and dimes must equal 4 cents.
The only problem in this question is determining the slope of the IC. because we don' t know how many quarters equal one dime or vice a versa.
Consider it this way,
Price of coke is 10 Rs.
Then RS + PAISA = 10( the salesperson will accept any combination of Rs and paisa, all matters to him is 10 Rs)
Taking, Rs on x - axis and paisa on y - axis.
then dy/dx=100
and equation would be,
100RS+ P = 10RS = 1000P
In the varian question , the curves would be straight line but slope can't be told for sure until the relation between quarters, dimes and cents is known.