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| 1. |
State the properties of indifference curves |
| Answer» Following are the properties of an indifference curve\tIndifference curves are always convex to the origin: Due to decreasing MRS, MRS declines continuously because of\xa0the law of diminishing marginal utility.\tIndifference curves never touch or intersect each other: Each indifference curve shows a different level of satisfaction. Intersection point shows the same satisfaction level which is not possible.\tA higher indifference curve represents a higher level of satisfaction:\xa0Due to monotonic preferences, higher indifference curve\xa0shows bundles having more of one commodity and not less of other good in comparison of la ower indifference curve.\tIndifference curve slope downwards:\xa0It implies that as a consumer consumes more of one good, he must consume less of the other good. | |