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Show a plausible indifference curve for luke

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Reference no: EM132519043

Luke has a monthly income of $80. He spends this money making telephone calls from home (measured in minutes of calls) and on other goods. His mobile phone company offers him two plans:

Plan A: Pay no monthly fee and make calls for $0.50 per minute.

Plan B: Pay a $30 monthly fee and make calls for $0.1 per minute.

a) Graph Luke's budget constraint under each of the two plans.

b) If Plan A is better for him, what is the set of baskets he may purchase if his behavior is consistent with utility maximization? Make sure that your answer is exact, using set notations and/or a clearly labeled graph.

c) What baskets might he purchase if Plan B is better for him?

d) On a separate graph, show a plausible indifference curve for Luke such that the two plans are indifferent for Luke.

Reference no: EM132519043

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