88 PART • Producers, Consumers, and Competitive Markets clothing If both are maximizing, you can tell the value of each person’s MRS by looking at the prices of the two goods What you cannot tell, however, is the quantity of each good purchased, because that decision is determined by their individual preferences If the two consumers have different tastes, they will consume different quantities of food and clothing, even though each MRS is the same E XA MPLE 3.3 DESIGNING NEW AUTOMOBILES (II) Our analysis of consumer choice allows us to see how different preferences of consumer groups for automobiles can affect their purchasing decisions Following up on Example 3.1 (page 77), we consider two groups of consumers planning to buy new cars Suppose that each consumer has an overall car budget of $20,000, but has decided to allocate $10,000 to interior size and acceleration and $10,000 to all the other attributes of a new car Each group, however, has different preferences for size and acceleration Size (cubic feet) $10,000 Figure 3.14 shows the car-buying budget constraint faced by individuals in each group Those in the first group, who are typical of Ford Mustang coupe owners with preferences similar to those in Figure 3.7 (page 78), prefer acceleration to size By finding the point of tangency between a typical individual’s indifference curve and the budget constraint, we see that consumers in this group would prefer to buy a car whose acceleration was worth $7000 and whose size was worth $3000 Individuals in the second group, who are typical of Ford Size (cubic feet) $10,000 $7500 $3000 $7000 $10,000 Acceleration (horsepower) (a) $2500 $10,000 Acceleration (horsepower) (b) F IGURE 3.14 CONSUMER CHOICE OF AUTOMOBILE ATTRIBUTES The consumers in (a) are willing to trade off a considerable amount of interior space for some additional acceleration Given a budget constraint, they will choose a car that emphasizes acceleration The opposite is true for consumers in (b)