Saturday
December 20, 2014

Homework Help: micro

Posted by aloha on Saturday, May 26, 2007 at 12:28pm.

On one society A the price of an apple is $3 and the price of an orange is $7,
while on socity B the apple and orange are the same price, $4.
society A people consume 10 apples and 8 oranges while societyB people consume
8 apples and 12 oranges. Which society is better off? Explain your
answer and any assumptions you make.

can anyone help me what assumption should i make ? weak axiom reveal preference and all society has same indifferent curve?

I would make the economic assumption that money saved is money earned.

SocietA spends 10*3 + 7*8
SocietB spends 8*4 + 12*4

the question already tell u
SocietA spends 10*3 + 7*8
SocietB spends 8*4 + 12*4

thanks for help anyway

Ok, sorry for the response. It seemed to me to be the point...the society that spent the most on food would be worse off. Maybe I am wrong on that.

also i think money saved is money earned is bit irrelevant to this question

Should i say the all society has same indifferent curve?(what i think) because from the indifference curve of society B the consumption of 8 apples and 12 oranges showed revealed preference to consumption point of 10 apples and 8 oranges,because society B has chosen to consume of 8 apples and 12 oranges when 10 apples and 8 oranges is affordable.But for society A consumption point 8 apples and 12 oranges is lies outside of their budget line.hence we have no idea about whether 10 apples and 8 oranges better or not.I have no idea make any judgement about which society is better..because from common sense both society should have different taste hence different indifference curve.again should i make assumption all society has same indifferent curve???

I thought that under problem, you were told that both societies have the same preferences. I would interpret that to mean both societies have the same SET of indifference curves.

I would argue that B society is better off -- You can show this by a graph, put apples on one axis, oranges on the other. Draw the budget constraint for Society A and indicate the point of 10 apples and 8 oranges as the revealed preference. Repeat for Society B (on the same graph). Society A's consumption point lies within B's budget constraint. That is, Society B could have chosen 10 apples, 8 oranges. But it didnt, it chose something else. Conversely, society A could not have made B's choice of 8 apples 12 oranges as such a point was outside of A's budget constraint. Now then, my conclusion rests on the given assumption that both societies have the same apples/oranges preferences.

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