Perfect Substitutes: Little Miss Muffet and Her Curds

What are Little Miss Muffet's beliefs regarding curds and whey?

What does it mean for curds and whey to be considered perfect substitutes?

Little Miss Muffet's Beliefs and Perfect Substitutes

Little Miss Muffet spends all her income on curds and whey, considering them as perfect substitutes. She believes that the utility derived from consuming 10 units of whey is equivalent to the utility derived from consuming -10 units of curds. Curds are priced at $4.

Little Miss Muffet's unique perspective on curds and whey reflects her belief that these two items are interchangeable for her in terms of satisfaction or utility. By viewing curds and whey as perfect substitutes, Little Miss Muffet sees no distinction between the utility gained from consuming 10 units of whey and -10 units of curds.

In economics, perfect substitutes refer to goods that provide an equal level of satisfaction or utility when consumed. In this case, despite the negative sign indicating a lack of utility from curds, Little Miss Muffet still chooses to spend all her income on them. This decision highlights her preference for curds over whey, even though they are priced the same.

Given that Little Miss Muffet's income is entirely allocated to curds, priced at $4 per unit, it becomes evident that her income is $4. This reveals her strong preference for curds as she does not derive any utility from consuming them, yet still opts to spend all her funds on this particular item.