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Siblings Ritvik and Roshan each have $50 to spend on Xbox games (X) and all other goods (Y). Games cost $25 each, and all other goods (AOG) have a composite price of $1 each. A friend offers them a $25 Xbox gift card or $25 cash. a . (10 pts) Ritvik loves to play Xbox and finds AOG to be useless. Using an indifference curve and budget line analysis, show Ritviks optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Ritvik prefer? Does your graph match your intuition? Explain.b. (10 pts) Roshan likes both gaming and AOG and will choose to consume positive amounts of both goods. His preferences are convex, and he prefers AOG to gaming. Using a separate graph from part (a), show Roshans optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Roshan prefer? Does your graph match your intuition? Explain.

Siblings Ritvik and Roshan each have $50 to spend on Xbox games (X) and all other goods (Y). Games cost $25 each, and all other goods (AOG) have a composite price of $1 each. A friend offers them a $25 Xbox gift card or $25 cash. a . (10 pts) Ritvik loves to play Xbox and finds AOG to be useless. Using an indifference curve and budget line analysis, show Ritviks optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Ritvik prefer? Does your graph match your intuition? Explain.b. (10 pts) Roshan likes both gaming and AOG and will choose to consume positive amounts of both goods. His preferences are convex, and he prefers AOG to gaming. Using a separate graph from part (a), show Roshans optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Roshan prefer? Does your graph match your intuition? Explain.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Siblings Ritvik and Roshan each have $50 to spend on Xbox games (X) and all other goods (Y). Games cost $25 each, and all other goods (AOG) have a composite price of $1 each. A friend offers them a $25 Xbox gift card or $25 cash. a . (10 pts) Ritvik loves to play Xbox and finds AOG to be useless. Using an indifference curve and budget line analysis, show Ritviks optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Ritvik prefer? Does your graph match your intuition? Explain.b. (10 pts) Roshan likes both gaming and AOG and will choose to consume positive amounts of both goods. His preferences are convex, and he prefers AOG to gaming. Using a separate graph from part (a), show Roshans optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Roshan prefer? Does your graph match your intuition? Explain.
Transcribed Image Text:Siblings Ritvik and Roshan each have $50 to spend on Xbox games (X) and all other goods (Y). Games cost $25 each, and all other goods (AOG) have a composite price of $1 each. A friend offers them a $25 Xbox gift card or $25 cash. a . (10 pts) Ritvik loves to play Xbox and finds AOG to be useless. Using an indifference curve and budget line analysis, show Ritviks optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Ritvik prefer? Does your graph match your intuition? Explain.b. (10 pts) Roshan likes both gaming and AOG and will choose to consume positive amounts of both goods. His preferences are convex, and he prefers AOG to gaming. Using a separate graph from part (a), show Roshans optimal choice for each option (Xbox gift card and cash gift) as well as the initial choice. Which gift would Roshan prefer? Does your graph match your intuition? Explain.
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