Each of the combinations of song and movie downloads shown in the table below give Kathleen an equal level of utility.
Quantity of songs | Quantity of movies |
---|---|
0 | 8 |
1 | 6 |
2 | 4 |
3 | 2 |
4 | 0 |
Graph Kathleen’s indifference curve.
Economists believe that each individual indifference curve for ordinary goods exhibits what two properties?
Does Kathleen’s indifference curve exhibit the two properties from part b? Explain.
1 point: Axes labeled “Quantity of songs” and “Quantity of movies”
1 point: Correctly plotted indifference curve points
1 point: Negative slope
1 point: Convex shape
1 point: Negative slope—
1 point: As more movies are downloaded, there must be fewer song downloads to give Kathleen the same level of utility as before. This trade-
1 point: Convex shape—
1 point: The indifference curve is a straight line with a constant slope, rather than being a convex line with a slope that decreases in absolute value from left to right.
Kathleen has $20 to spend on song and movie downloads each week. The price of a song download is $2 and the price of a movie download is $5.
Graph Kathleen’s budget line.
Suppose all of Kathleen’s indifference curves have the same shape and slope as the one in Question 1. How many song and movie downloads will Kathleen purchase to maximize her utility? Explain.
(4 points)
What would it indicate about your preferences for two items if your indifference curves were vertical? Can you think of examples of pairs of items for which this is the case?
Suppose that on a Saturday afternoon you must divide your time between studying and playing sports, and both activities are free. Could you use a budget constraint and indifference curves to model this decision? Explain your answer.
Consider the dilemma of how much money to spend now and how much to set aside for the future. Is this another trade-