If Mrs. Breader views butter and margarine as perfect substitutes, draw a set of indifference curves that describe her preference for these two commodities

      

If Mrs. Breader views butter and margarine as perfect substitutes, draw a set of indifference
curves that describe her preference for these two commodities

  

Answers


Wilfred
Perfect substitutes are goods whose consumption is mutually exclusive and the marginal rate of
substitution of one good for the other is constant, such that the representative indifference curve takes
the form of a downward sloping straight line with a constant slope.
If butter and margarine are taken as perfect substitutes the relevant set of indifference curves
would be as shown below:
curve96220191127.png
AC, A1C1 and A2 C2 are indifference curves which are downward sloping straight lines with a Constant negative slope implying that the marginal rate of substitution of butter for margarine (MRSbm ) and margarine for butter (MRSmb ) is equal to one (i.e. MRSbm & MRSmb = 1), that is, B and M are mutually exclusive in consumption (total income can be spent on either B or M while deriving the same level of satisfaction).

Wilfykil answered the question on February 6, 2019 at 07:33


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