8.8 the left- hand portion of an indifference curve of the perfect complementary goods is a vertical straight line which indicates that an infinite amount of Y is necessary to substitute one unit of X and the right-hand portion of the indifference curve is a horizontal straight line which means’ that an infinite amount …
Can indifference curve be vertical line?
Therefore, an indifference curve cannot be vertical either. Consequently, an indifference curve will be of negative slope, as shown in Figure 4 (D) where A and В combinations give equal satisfaction to the consumer.
How do you interpret an indifference curve?
An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.
What does a steep indifference curve mean?
If the indifference curve (or slope) is steep, then the MRS is high. This means the consumer is willing to give up a lot of good y for an additional unit of good x. … This means the consumer is willing to give up very little good y for an additional unit of good x.What does a higher indifference curve represent?
Higher indifference curves represent a greater level of utility than lower ones.
Can indifference curve be upward sloping?
A set of indifference curves can be upward sloping if we violate assumption number three; more is preferred to less. When a set of indifference curves is upward sloping, it means one of the goods is a “bad” so that the consumer prefers less of that good rather than more.
Why are indifference curves downward sloping?
Indifference curves slope downward because, if utility is to remain the same at all points along the curve, a reduction in the quantity of the good on the vertical axis must be counterbalanced by an increase in the quantity of the good on the horizontal axis (or vice versa).
What is flatter and steeper curve?
Flatter demand curve of elasticity of demand shows that slightly change in the price of the commodity lead to a larger change in the quantity demanded. Steeper demand curve of elasticity of demand shows that large change in the price of the commodity lead to a smaller change in the quantity demanded.Why does a higher indifference curve represents higher level of satisfaction?
Higher indifference curve represents a higher level of satisfaction because higher IC means a bundle consisting more of both the goods or same quantity of one good n more quantity of the other good .
Which indifference curve represents the highest level of satisfaction?Higher indifference curve represents higher level of satisfaction to the consumer.
Article first time published onWhy should Mrs decline?
Well MRS decline continuously in IC curve because of law of diminishing marginal utility. Means when the consumer consumes more and more of good 1 then his marginal utility from another good keeps on declining and he is willing to give up less and less of good 2 for each good 1. Thats why MRS decline in IC curve.
What are the types of indifference curve?
The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, and (4) indifference curves are convex.
Why is indifference curve positively sloped?
Indifference curves in this region are positively sloping indicating that, commodity X being bad in this region increase in its quantity has to be compensated by the increase in the quantity of Y which is desirable in this region to keep the level of consumer’s satisfaction constant.
Can we have positively sloped indifference curve?
The indifference curve is positively sloped when one good is bad and one is good for the consumer.
Why do indifference curves Cannot cross or slope upward?
The indifference curves cannot intersect each other. It is because at the point of tangency, the higher curve will give as much as of the two commodities as is given by the lower indifference curve.
What does a flatter slope mean?
Suppose the slope of a line were to decrease. Then it would get flatter. These conditions are true whether or not the slope was positive or negative to begin with. A higher positive slope means a steeper upward tilt to the line, while a smaller positive slope means a flatter upward tilt to the line.
What does a flat slope indicate?
Negative slope. A slope of zero means that there is a constant relationship between x and y. Graphically, the line is flat; the rise over run is zero.
Does a steeper curve mean higher slope?
Suppose the slope of a line were to increase. Graphically, that means it would get steeper. … A higher positive slope means a steeper upward tilt to the curve, which you can see at higher output levels. A negative slope that is larger in absolute value (that is, more negative) means a steeper downward tilt to the line.
What happens to MU when Tu is maximum?
When MU is Zero, TU is the maximum and it is the point of maximum satisfaction. i.e., point of satiety. When Mu becomes negative, total utility starts diminishing.
Why IC is convex to the origin?
Indifference curves are convex to the origin because the marginal utility of each product consumed decreases with subsequent consumption. This convex relationship is based upon an idea dubbed the marginal rate of substitution, which is represented by the formula (Z = change in X / change in Y).
What is indifferent map?
Definition: The Indifference Map is the graphical representation of two or more indifference curves showing the several combinations of different quantities of commodities, which consumer consumes, given his income and the market price of goods and services.
What are bads in economics?
An economic bad is the opposite of an economic good. A ‘bad’ is anything with a negative value to the consumer, or a negative price in the marketplace. … With normal goods, a two-party transaction results in the exchange of money for some object, as when money is exchanged for a car.
Why does the consumer get the maximum satisfaction when the indifference curve is tangent to the budget line?
Budget line should be tangent to the indifference curve A budget line can be drawn on the basis of expenditure plan. … Thus, the consumer will be in equilibrium (achieve maximum satisfaction at any given level of income) where the budget line is tangent to the indifference curve, i.e. at point E on IC2.
