A graph is constructed to show the possible distributions of a sum of money between two people, Maria and Carlos. Maria's total money is plotted on the horizontal axis, and Carlos's total money is on the vertical axis. If Maria's indifference curves on this graph are perfect vertical lines, what can be inferred about her preferences?

Interpreting Social Preferences from Indifference Curves

Consider a scenario where an individual's payoff is plotted on the horizontal axis and another person's payoff is on the vertical axis. Match each description of the individual's preferences to the corresponding shape of their indifference curves on this graph.

Consider a graph where an individual's monetary payoff is on the horizontal axis and another person's payoff is on the vertical axis. If this individual's indifference curves are upward-sloping, it implies that for them to feel equally well-off, any increase in the other person's payoff must be offset by an increase in their own payoff.

Graphical Representation of Social Preferences

Explaining Altruistic Preferences via Indifference Curves

Consider a graph where Person A's payoff is on the horizontal axis and Person B's payoff is on the vertical axis. If Person A's satisfaction depends solely on the total combined payoff for both individuals (i.e., the sum of Person A's payoff and Person B's payoff), what will be the shape of Person A's indifference curves?

Predicting Choices Based on Social Preferences

Imagine a scenario where outcomes are represented on a graph, with your monetary payoff on the horizontal axis and another person's payoff on the vertical axis. You are currently at an allocation of ($10 for you, $10 for the other person). If you have altruistic preferences, meaning you derive satisfaction from both your own and the other person's well-being, which of the following alternative allocations would unambiguously place you on a higher indifference curve?

Consider a graph where your monetary payoff is plotted on the horizontal axis and another person's payoff is on the vertical axis. If your indifference curves are downward-sloping but very steep, what does this reveal about your preferences?

Figure 4.10 (Left Panel) - Visualizing Zoë's Altruistic Preferences

Figure 4.10 (Right Panel) - Visualizing Self-Interested Preferences