Susan is presented with the following bundles of apples and oranges, and she divides the bundles into three groups, as shown. She claims that within each group she likes each bundle equally well, but that this is not so between groups.

Group A.                      Group B.                   Group C
apples oranges          apples oranges          apples oranges
4.          20.                3.       20.                   7.    20
7.          14.                4.       14.                   9.    16
10.          10.                6.       8.                   12.    12
14.          7.                10.       5.                   16.    10
20.          5.                16.       3.                   24.       8
26.          4.                26.       2

a. Draw Susan's indifference map. Use straight-line segments to draw indifference curves. Indicate which indifference curve has the highest utility level and which has the lowest.

b. Suppose Susan's income were $6. Initially oranges cost 300 each and apples cost 300 also. Draw the budget constraint. What bundle does Susan purchase?

c. Suppose Susan's income were $6. Initially oranges cost 300 each and apples cost 300 also. Draw the budget constraint. What bundle does Susan purchase?

d. Suppose the price of apples falls to 20cents. What bundle is purchased now? Is Susan's utility higher or lower than in b?

e. Suppose the price of apples were to rise to 60cents each. What bundle is purchased now? How does Susan's utility compare with b and c?

f. Suppose now that prices return to 300 for each type of fruit, but Susan's income falls to $4.20. What bundle will she buy? Are apples a normal good for Susan?

g. Now inflation sets in. The prices of apples and oranges both double to 60cents. Fortunately for Susan, her income rises to $12. What bundle does she buy now? Is she better or worse off than in b?

Susan is presented with the following bundles of apples and oranges...