Unit 1 - Economics
Chapter 2 review questions 6, 11 and 20
2-6 Perfect substitutes have straight-line indifference curves which are parallel lines since the consumer would be willing to trade at a fixed ratio. The marginal rate of substitution is constant. As we get more of the good, we trade off with the substitute at a constant rate because we are indifferent between them. Examples of this are Coke and Pepsi or Minute Maid Orange Juice and Tropicana Orange Juice or Betty Crocker, Pillsbury or Duncan Hines cake mixes. Perfect complements have right-angled indifference curves. If goods can only be used together, there is no satisfaction in having more of A without additional amounts of B (i.e. left and right shoe). In general, the better substitutes goods are, the straighter the indifference curve.
“BASIC ECONOMICS: Theory of Consumer Choice”, http://www.basiceconomics.info/theory-of-consumer-choice.php
2-11 Most people leave a tip in a restaurant to reward the waitress (or waiter) for good service (filling tea glasses, keeping coffee hot, bringing food to table, etc.) and to encourage better service when they return to the restaurant. However, there are those few who take advantage of the situation. I really expect waitresses or waiters in residential area restaurants would earn more tips. They develop their clientele who return on regular basis and leave today’s tip in anticipation of next week’s service. People traveling the interstate eat at a restaurant one time and quite possibly never revisit that same one. Leaving a tip is optional since they probably won’t return.
2-20-A I don’t think the economic model would explain this in detail. It is probability and hypothesis that New Yorkers are not as honest as Japanes ...