What would a set of indifference curves for michelle

Reference no: EM132198037

Question: Barack and Michelle Obama both like to have an alcoholic drink at the end of their day. Although Michelle does like beer, she usually has a bourbon on the rocks at the end of the day. Although Barack does like bourbon, he usually has a bottle of beer at the end of the day. They each budget and spend $200 a month on beer and bourbon. The beer the Obamas buy cost $10 a six pack and the bourbon the Obamas buy cost $20 a fifth.

A) What would a set of indifference curves for Michelle and a set of indifference curves for Barack look like? Draw separate graphs for Michelle and Barack, with the vertical axis being bourbon.

B) Using the budget constraint lines for Michelle and Barack on graphs showing their indifference curves, indicate how many bourbons and beers Michelle will purchase in a month and how many bourbons and beers Barack will purchase in a month. (You do not have to show numbers for bourbons and beers purchased, only draw the respective indifference curves and the appropriate budget constraints and show at which points each will maximize their satisfaction)

C) The price of the bourbon the Obamas buy increases from $20 a fifth to $25 a fifth. Will Barack or Michelle will have a greater decrease in their purchase of bourbon in response to the price increase in bourbon? Use your indifference curves and budget constraints for Michelle and Barack to support your answer.

Reference no: EM132198037

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