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What are monotonic preferences ? Explain why is an indifference curve: (i) Downward sloping from left to right and , (ii) Convex.

Answer» <html><body><p></p>Solution :An agent's preferences are said to be strongly monotonic if, given a <a href="https://interviewquestions.tuteehub.com/tag/consumption-931383" style="font-weight:bold;" target="_blank" title="Click to know more about CONSUMPTION">CONSUMPTION</a> bundle , the agent <a href="https://interviewquestions.tuteehub.com/tag/prefers-2227814" style="font-weight:bold;" target="_blank" title="Click to know more about PREFERS">PREFERS</a> all consumption bundles that have more of at least one good, and not less in any other good.i) Indifference Curves are Downward Sloping:Virtually all indifference curves have a negative slope. That is, they slope downward from left to right. The slope of an indifference curve shows the rate of substitution between two goods, i.e. the rate at which an individual is willing to give up some quantity of good A to get more of good B. If we assume that the individual likes both goods, the quantity of good B has to increase as the quantity of good A decreases, to <a href="https://interviewquestions.tuteehub.com/tag/keep-527902" style="font-weight:bold;" target="_blank" title="Click to know more about KEEP">KEEP</a> the overall level of satisfaction the same. Because both axes each represent one of the two goods, this relationship results in a downward sloping curve. This becomes pretty obvious if we look at the illustration below.ii) Indifference Curves are convex (i.e. <a href="https://interviewquestions.tuteehub.com/tag/bowed-7374319" style="font-weight:bold;" target="_blank" title="Click to know more about BOWED">BOWED</a> inward):In most cases indifference curves are bowed inward. This has to do with the marginal rate of substitution (MRS). We know that the marginal utility of consuming a good decreases as its supply increases (see also diminishing marginal utility). Therefore consumers are willing to give up more of this good in order to get <a href="https://interviewquestions.tuteehub.com/tag/another-876628" style="font-weight:bold;" target="_blank" title="Click to know more about ANOTHER">ANOTHER</a> good of which they have little.</body></html>


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