Charlie likes both apples and bananas. He consumes nothing else. The consumption

Question

Charlie likes both apples and bananas. He consumes nothing else. The consumption bundle where Charlie consumes xA bushels of apples per year and xB bushels of bananas per year is written as (xA. XB). Last year, Charlie consumed 20 bushels of apples and 5 bushels of bananas It happens that the set of consumption bundles (xA, XB) such that Charlie is indifferent between (XA, xB) and (20,5) is the set of all bundles such that xB-100/XA. Thus, Charlie is indifferent between (20, 5) and the bundle (10, imilarly, Charlie is indifferent between (20, 5) and the bundle (4,

Explanation / Answer

Charlie set of bundles can be written as : xB = 100/ xA

Thus, Charlie is indifferent between (20,5) and the bundle (10, 100/10)= (10,10).

Similarly, Charlie is indifferent between (20,5) and the bundle (4,100/4) =(4, 25)

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