Final answer:
Indifference curves represent combinations of goods that yield the same satisfaction to a consumer. These curves vary based on whether the consumer sees goods as perfect substitutes, has a fixed consumption ratio, is neutral to one good, or sees one good as 'bad'. Each indifference curve is labeled I1, I2, and I3 to denote different levels of utility.
Option 'a' is the correct.
Step-by-step explanation:
When considering preferences for cookies and ice cream bars, we can draw different indifference curves based on varying consumer preferences. Indifference curves illustrate combinations of goods that yield the same level of satisfaction or utility to a consumer.
a. Perfect Substitutes
For a consumer who views 2 cookies and an ice cream bar as perfect substitutes, the indifference curves would be straight lines with a slope of -1/2, as the consumer would be willing to substitute one good for the other at a constant rate. These lines would be labeled I1, I2, and I3, each representing a higher level of utility but with the same substitution rate between cookies and ice cream bars.
b. Fixed Consumption Ratio
When a consumer always consumes 2 cookies with one ice cream bar, the indifference curves would be represented by right angles (L-shaped), indicating a fixed combination. These are labeled I1, I2, and I3, each moving outward from the origin representing increasing utility but maintaining the ratio of consumption.
c. Neutral Preference for Cookies
For a consumer who likes ice cream bars but is neutral about cookies, the indifference curves would be horizontal lines. These would indicate that additional cookies do not affect the consumer's utility, while utility increases with more ice cream bars. The curves would again be labeled I1, I2, and I3, with higher levels attained further up the y-axis.
d. Ice Cream Lover, Cookie Hater
If a consumer loves ice cream but hates cookies, the indifference curve for cookies would slope upwards because they are a 'bad'. The consumer would require more ice cream bars to compensate for the increased consumption of cookies to maintain the same level of utility. The labels I1, I2, and I3 represent different levels of this trade-off.