1. Henry the Geek likes books (B) and computer games (C). We have observed that he preferred the bundle (12,8) over (9,15), bundle (20,6) over (15,10), and bundle (4,16) over (13,9). Assume that his preferences satisfy the properties of completeness, transitivity, and non-satiation. Indicate whether Henry prefers one bundle over another, is indi?erent, or you cannot tell.
(a) Does Henry prefer (4,17) or (8,15)?
(b) Does Henry prefer (4,15) or (12,8)?
(c) Does Henry prefer (19,7) or (13,9)?
(d) Does Henry prefer (13,9) or (9,15)?
2) Sally the Greek’s preferences can be described by the utility function U(x,y) = (2x^1/2 + y^1/2)2.
(a) What is equation for the indi?erence curve for a utility of 25?
(b) By how much does utility increase when Freddy increases consumption of good y by one (small) unit, when initially U = 25 and x = 4?
(c) Holding utility constant at 25, if initially x = 4, how many additional (small) units of y does Freddy have to consume if his consumption of x drops by 6 (small) units?