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Analyzing Consumer Preferences from Indifference Points
A consumer's preferences for weekly coffee consumption (cups) and all other goods (measured in dollars) are being studied. The following two sets of points are known to lie on two different indifference curves for this consumer.
Indifference Curve 1:
- Point A: 4 cups of coffee, $100 in other goods
- Point B: 5 cups of coffee, $97 in other goods
Indifference Curve 2 (representing higher utility):
- Point C: 4 cups of coffee, $150 in other goods
- Point D: 5 cups of coffee, $147 in other goods
Analyze the data provided. Can this consumer's preferences be described as quasi-linear? Justify your conclusion by calculating and comparing the consumer's willingness to pay (the Marginal Rate of Substitution) for the 5th cup of coffee on each indifference curve.
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Analyzing Consumer Preferences from Indifference Points