Evelyn Lips' preferences are depicted by the set of indifference curves in the diagram below. Her budget line is also shown in the diagram. Use the information in the diagram to answer the following questions. 
a. Which of the basic assumptions of consumer preferences are violated by E. Lips' indifference curves? Explain.
b. The price of food is $5 per unit. What is E. Lips' income and what is the price of clothing?
c. Show the market basket of food and clothing that maximizes E. Lips' satisfaction. When satisfaction is maximized, has E. Lips equated the marginal rate of substitution (of food for clothing) to the ratio of the prices (of food to clothing)? If so, explain why. If not, explain why not.
Definitions:
Extemporaneous
Speaking or performing with little or no preparation, often in a spontaneous and fluid manner.
Appeal To Misplaced Authority
An argumentative fallacy where someone attempts to support a claim by citing an authority or witness who is not an expert on the issue at hand.
Putting Skills
Techniques and abilities related to successfully completing putting strokes in golf.
Red Herring
A fallacy or distraction that leads away from the main issue or argument, often used to mislead or divert attention.
Q34: The problem of adverse selection in insurance
Q35: Access to the movie "Casablanca," showing in
Q50: Suppose the marginal rate of substitution is
Q75: Increasing returns to scale in production means<br>A)
Q79: Refer to Scenario 17.5. The owners can't
Q110: Which of the following is true about
Q113: Refer to Scenario 2.2. Under what circumstances
Q115: Refer to the indifference curve in Figure
Q140: Sandra lives in the Pacific Northwest and
Q167: Bill's utility function takes the form U(I)