1. Suppose that the price of Chanel perfume is $100 per fluid ounce, while the price of Poland bottled spring water is $1 per gallon. Nancy buys 1 fluid ounce of Chanel and 20 gallons of spring water a month.
a. Illustrate Nancy's demand curve for Chanel perfume. Mark the quantity of demand. What is Nancy's marginal benefit from perfume?
b. Illustrate Nancy's demand curve for spring water. Mark the quantity of demand. What is Nancy's marginal benefit from spring water?
c. How much money does Nancy spend each month on perfume and spring water? Illustrate Nancy's monthly expenditures on the demand curve figures.
d. Use appropriate demand curves to show that perfume gives Nancy more total benefit than water.
e. Use appropriate demand curves to show that perfume gives Nancy less total benefit than water.