Homework answers / question archive /  Problem 1 Consider two commodities: toy cars and batteries

 Problem 1 Consider two commodities: toy cars and batteries

Economics

Share With

 Problem 1 Consider two commodities: toy cars and batteries. Each toy car takes three batteries to operate. Suppose Andy enjoys a toy car only if it moves and Andy has no other toy that needs battery. That is, one toy car and three batteries are a set of perfect complements to Andy. Task 1: Let x1 2 0 be the quantity of toy cars and x2 2 0 be the quantity of batteries. Find a function U(x1,x2) that represents this preference. Task 2: Draw Andy's indifference curves going through bundles (2,3), (4,3) and (5,5) in the commodity space in the same graph. How does Andy's preference order these 3 bundles in terms of  or ~?