Explain the three properties of indifference curves.

Solution

The properties of indifference curves are as follows:
(1) Indifference curves slope downward to the right:
This property implies that an indifference curve has a negative slope. If the preferences are monotonic, an increase in the amount of good 1. along the indifference curve is associated with a decrease in the amount of good 2. This implies that the slope of the indifference curve is negative. Thus, monotonicity of preferences implies that the indifference curves are downward sloping to the right.

(2) Indifference curves are convex to the origin:
Another important property of indifference curves is that they are usually convex to the origin.

In other words, the indifference curve is relatively flatter in its right hand portion and relatively steeper in its left hand portion. This is because as the consumers consumes more and more of one good, the marginal utility good fall. In other words, the consumer is willing to sacrifice less and less for each additional unit of the other good consumed. Thus, as we move down the IC, MRS diminishes. This suggests the convex shape of indifference curve.
(3) Slope of IC: The Slope of an IC is given by the Marginal Rate of Substitution (MRS). Marginal rate of substitution refers to the rate at which a consumer is willing to substitute one good for each additional unit of the other good.

Some More Questions From Theory Of Consumer Behaviour Chapter

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Theory Of Consumer Behaviour

Explain the three properties of indifference curves.

Some More Questions From Theory Of Consumer Behaviour Chapter

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

List the factors that cause changes in demand.

What is law of demand?

What is demand schedule?

Why does demand curve slope downwards?

Differentiate between substitute and complementary goods.

What is meant by one good being substitute of other?

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