Question

Draw indifference curves that represent the following individuals' preferences for hamburgers and soft drinks. Indicate the direction in which the individuals' satisfaction (or utility) is increasing.

a. Joe has convex indifference curves and dislikes both hamburgers and soft drinks.

b. Jane loves hamburgers and dislikes soft drinks. If she is served a soft drink, she will pour it down the drain rather than drink it.

c. Bob loves hamburgers and dislikes soft drinks. If he is served a soft drink, he will drink it to be polite.

d. Molly loves hamburgers and soft drinks, but insists on consuming exactly one soft drink for every two hamburgers that she eats.

e. Bill likes hamburgers, but neither likes nor dislikes soft drinks.

f. Mary always gets twice as much satisfaction from an extra hamburger as she does from an extra soft drink.

Short answer

The following are the diagrams:

a. Joe's satisfaction level increases in the direction of origin.

b. Jane's indifference curve is upward sloping, and she consumes more soft drinks only if she receives more hamburgers.

c. Bob's indifference curve will be upward sloping curve as he likes hamburgers and dislikes soft drinks.

d. Molly's indifference curve shows the consumption bundle at point A.

e. Bill's indifference curve will show a corner solution where he consumes only hamburgers.

f. Mary's indifference curve can't be determined.

Step-by-step solution

Indifference curve for Joe's preference

Joe dislikes both hamburgers and soft drinks. His indifference curve will be bowed inward (concave towards origin), and as in the normal case, less will be preferred to more.

Given that Joe dislikes both, his satisfaction increases in the direction of origin.

Indifference curve for Jane's preference

When one of the two goods represented in the indifference curve is bad, the consumer prefers less of that good (the bad) rather than more of the good.

Jane likes hamburgers but dislikes soft drinks. Thus, the hamburger is preferred, and the soft drink is disliked by Jane.

Jane has a unique set of indifference curves sloping upward. The positive slope means that the consumer will accept more of the bad good only if she receives more of the other good in return.

Indifference curve for Bob's preference

Bob likes hamburgers and dislikes soft drinks; thus, he treats hamburgers as good and soft drinks bad.

But he will consume more of soft drinks only when he receives more hamburgers. The indifference curve and the direction of satisfaction level are shown in the figure above.

Indifference curve for Molly's preference

Molly consumes 2 units of hamburgers and 1 unit of soft drink.

Molly's consumption bundle is shown in the diagram by point A.

Indifference curve for Bill's preference

Bill neither likes nor dislikes soft drinks. So, Bill is not consuming soft drinks and consumes only hamburgers.

The above diagram shows that Bob consumes zero soft drinks and spends all his income on hamburgers. Bob's satisfaction level will increase as the indifference curve moves upward from IC₁to IC₃ shown in the above figure.

When a consumer consumes, zero amount of a good and the highest level of satisfaction is achieved by consuming all other good such that indifference curves cut one of the axes, which is called corner solution.

Indifference curve for Mary's preference

A satisfaction level can be measured on an ordinal scale (not quantifiable) and can be just ranked according to preference.

From the assumption of 'completeness,' there is an indifference curve through every bundle. But Mary's indifference curve can't be determined because an indifference curve shows the same level of satisfaction for any combination of goods.