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

An individual, Sam, is considering two different allocations of a bonus between themself and a colleague, Pat. Sam feels equally satisfied with either of the following outcomes:

• Outcome 1: Sam receives $80, and Pat receives $20.
• Outcome 2: Sam receives $70, and Pat receives $30.

Based on the fact that Sam is indifferent between these two outcomes, what can be inferred about Sam's preferences?

A person is considered altruistic if their satisfaction increases when another person's well-being improves. Therefore, an indifference curve representing combinations of their own and another person's income would be upward-sloping, as more of both leads to higher satisfaction.

Analyzing Altruistic Preferences

Explaining the Shape of Altruistic Preferences

The Shape of Altruistic Preferences

An indifference curve illustrates various combinations of outcomes that provide an individual with an equal level of satisfaction. For an altruistic person who derives satisfaction from both their own income and another person's income, their indifference curves are downward-sloping. What fundamental trade-off does this downward slope represent?

An indifference curve shows combinations of payoffs for two individuals (Person A and Person B) that give Person A the same level of satisfaction. Match each description of Person A's indifference curve shape with the type of preference it represents. Assume Person A's payoff is on the vertical axis and Person B's payoff is on the horizontal axis.

An individual with altruistic preferences derives satisfaction from both their own income and the income of another person. An indifference curve for this individual shows all combinations of their income and the other person's income that provide the same level of total satisfaction. If Point A represents one such combination, what can be concluded about a different combination, Point B, where both the individual and the other person have higher incomes than at Point A?

For an altruistic person's satisfaction to remain constant along a single indifference curve, an increase in another person's well-being must be offset by a ________ in their own well-being.

Consider two individuals, Jordan and Kai, both of whom have altruistic preferences. Their satisfaction depends on both their own weekly allowance and their sibling's weekly allowance. When graphed with their own allowance on the vertical axis and their sibling's on the horizontal axis, both individuals have downward-sloping indifference curves. However, at any given combination of allowances, Jordan's indifference curve is steeper than Kai's. What can be inferred by comparing the steepness of their indifference curves?