Suppose the Only Characteristic of Beer That a Consumer Cares

question 2

Essay

Suppose the only characteristic of beer that a consumer cares about is alcohol content.Currently, Bud Light and Miller Lite both have the same alcohol content.
a.Illustrate the consumer's indifference curves in a graph with ounces of Miller Lite on the horizontal and ounces of Bud Light on the vertical axis.
b.Suppose that the producers of Bud Light lower the price of Bud Light.How will your answer to (a) change?
c.Suppose that the producers of Bud Light lower the alcohol content of their beer by 50%.How will your answer to (a) change?
d.Since we identify tastes with indifference maps, would you say that the consumer's tastes have changed in (b) or (c)?
e.How could we change the units we use to measure Miller Lite in order to get the indifference map in (c) to again look like the one in (a)?

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Definitions:

Interest

A charge for borrowed money, generally a percentage of the borrowed amount.

Months

Units of time, each roughly corresponding to one cycle of the moon’s phases, used in planning and scheduling.

Accrued Interest

Interest that has accumulated over time but has not yet been paid.

Loan

An amount of money borrowed that is expected to be paid back with interest.