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For Mitzi, shampoo and conditioner are perfect complements. She likes to use 1 squirt of shampoo and 1 squirt of conditioner each time she washes her hair.

a. Draw a set of indifference curves for Mitzi that illustrate the utility she derives from using shampoo and conditioner.

b. Assume that shampoo costs $4 and conditioner costs $2. Construct a budget constraint for Mitzi and describe her purchasing habits. What is her optimal bundle likely to look like? (Hint: Assume some level of income for Mitzi.) c. Suppose that prices change so that shampoo costs$2 and conditioner costs $4.

What is likely to happen to Mitzi's optimal bundle as a result? Explain?

d. How would your answer to (c) change if Mitzi used 2 squirts of shampoo and 1 squirt of conditioner each time she washed her hair?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91239719

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