Intermediate Microeconomics
Choice Under Certainty Graph Exercise
Name(s)__________________________________________________________
___________________________________________________________
Please answer the following questions using the graph on this page.
1. Write the letter(s) of the bundle(s) that are feasible:
2. Write the letter(s) of the bundle(s) that are NOT feasible:
3. Write the letter of the bundle that is optimal:
4. What are the units on the X and Y axes?
5. Which is more expensive per unit, food or shelter?
6. If food costs $10 per unit, what is the total budget?
7. If food costs $10 per unit, how much does shelter cost
per unit?
Starting with the numbers from the graph above, please
draw the following on the blank graph on the reverse side. You do NOT need exact numbers for the optimal bundles. Just draw the optimal
bundles where you think they should go. Please draw all new budget lines, indifference curves and optimal bundles on the same graph.
8. If the consumer loses $20 per week (e.g. new tax, pay cut) draw a new budget line, a new indifference curve, identify the new optimal bundle and
label it H.
9. With the new budget from #8 above, if the price of food increases by 25%, draw the new budget line, new indifference curve and new optimal
bundle and label it I.
10. With the new budget from #8 above and new price of food from #9 above, if the price of shelter decreases by 20%, draw the new budget line,
new indifference curve and new optimal bundle and label it J.
11. What assumptions allow you to draw the answers in #8 – 10 and why? NOTE: You will not earn full credit without explaining why each
assumption is necessary to draw your graph!
12. Write a mathematical formula that describes the optimal bundle.
J. Kohn
Page 1 of 3
Last Updated 12/16
J. Kohn
Page 2 of 3
Last Updated 12/16
J. Kohn
Page 3 of 3
Last Updated 12/16