Dominick Salvatore Schaums Outline of Microeconomics, 4th edition Schaums Outline Series 2006

80 CONSUMER DEMAND THEORY [CHAP. 4
Fig. 4-15 Fig. 4-16
same commodity from the consumer’s point of view. For example, X and Y could be two brands of beer and the
consumer is indifferent as to which to drink.
4.15 On the same set of axes, draw three indifference curves showing perfect complementarity between X and Y.
Refer to Fig. 4-15. For X and Y to be perfect complements, the MRS xy and the MRS yx must both be equal to
zero. For example, points D, E, and F are all on indifference curve I, yet point F involves the same amount of Y but
more of X than point E. Thus, the consumer is saturated with X and so the MRS xy ¼ 0. Similarly, point D involves
the same amount of X but more of Y than point E. Thus, the consumer is saturated with Y and so the MRS yx ¼ 0.
Car and gasoline may be regarded as perfect complements. In general, indifference curves are neither straight lines
nor right-angle bends, but show some curvature. The closer the shape of the indifference curve to a straight line, the
greater the degree of substitutability between X and Y.
4.16 On the same set of axes, draw three indifference curves showing increasing MRS xy as we move down the
indifference curves.
The indifference curves in Fig. 4-16 are concave to the origin and thus show increasing MRS xy as we move
down the indifference curves. For example, in going from point G to point H on indifference curve III, the
MRS xy ¼ 1. In going from H to J, the MRS xy ¼ 2. We will explore the implication which this type of indifference
curve has for consumer equilibrium in Problem 4.23.
BUDGET CONSTRAINT LINE
4.17 Suppose that the price of commodity Y is $1 per unit while the price of commodity X is $2 per unit and
suppose that an individual’s money income is $16 per time period and is all spent on X and Y. (a) Draw
the budget constraint line for this consumer and (b) explain the reason for the shape and the properties of
the budget constraint line in part (a).
(a)
Fig. 4-17