Consumer Utility Assignment

You want to determine student preferences for food and music. Create 20 paper “coupons” that are each good for one food item (e.g., fries). Create 20 similar “coupons” that are each good for one music download. Find at least two students, not in this class, willing to help you. Present them with the hypothetical situation. Tell them the role of the coupons, and that if they were real, they would have to be used within the next hour.

1. Give them 1 music coupon and ask them how many food coupons they would need to trade for their one music coupon. Repeat the process, but start with giving them 5 music coupons, then repeat with 10, 15, and 20. Record each answer.
2. Create a scatter chart to show the indifference curve. Compare the results from each respondent.
3. Compute the marginal rate of substitution at each point on the indifference curve.