Jamie likes consuming beer and wine. He does not consume anything else (unfortunately for his liver). Let xb be the liters of beer and xw the liters of wine he consumes per week. His preferences can be represented by a utility function given by: u(xb , xw ) = xb + xw .
- Find and draw the indifference curve that passes through the bundle (xb = 4, xw = 6). Find and draw the indifference curve that passes through the bundle (xb = 8, xw = 12).
- What is Jamie’s marginal rate of substitution? Is the MRS diminishing along his indifference curves?
- Rank the following 4 bundles: (9,3); (4,6); (5,5); (12,1)