Suppose that Jones and Smith have each decided to allocate $1000 per year to an
ID: 1219014 • Letter: S
Question
Suppose that Jones and Smith have each decided to allocate $1000 per year to an entertainment budget in the form of hockey games or rock concerts. They both like hockey games and rock concerts and will choose to consume positive quantities of both goods. However, they differ substantially in their preferences for these two forms of entertainment. Jones prefers hockey games to rock concerts, while Smith prefers rock concerts to hockey games. In the figure to the right, two indifference curves are drawn for Jones for successive levels of utility and two indifference curves are drawn for Smith for successive levels of utility. Jones's indifference curves are the pair.Explanation / Answer
If a person prefers good X to good Y, then the IC will be steeper. And if a person prefers good Y to good X, then the IC will be flatter.
In this case, Jones prefer hockey games ( good X) to rock concerts (Good Y ).So, his IC will be steeper. This is denoted by red pair.