Examkin

Question

Difficulty: EasyIndifference Curves and Their Properties

Match each property of an indifference curve on the left with its correct economic explanation on the right.

  • Downward slope from left to rightIndicates that consuming more of one good requires giving up some of another to keep utility constant
  • Convexity to the originReflects the principle of diminishing Marginal Rate of Substitution (MRSxyMRS_{xy})
  • Non-intersection of curvesEnsures logical consistency and transitivity in consumer preferences
  • Higher curve lying to the rightRepresents a higher level of total satisfaction or utility

Answer

Downward slope matches giving up one good for another to maintain constant utility; Convexity matches diminishing Marginal Rate of Substitution; Non-intersection matches transitivity and consistency; Higher curve matches higher total satisfaction.
Each property maps directly to its underlying postulate in ordinal utility theory: downward slope represents trade-offs under constant satisfaction, convexity represents diminishing MRSMRS, non-intersection guarantees transitivity, and higher curves denote greater total satisfaction.

Step-by-Step Solution

1
Analyze the downward slope property
Downward slope implies a negative relationship between quantities of the two goods, showing substitution to keep total satisfaction constant.
Since utility is constant along a single curve, increasing consumption of Good XX must be offset by decreasing Good YY.
2
Analyze the convexity property
Convexity reflects diminishing MRSxyMRS_{xy}.
As more of Good XX is consumed, the consumer values additional units of XX less relative to Good YY.
3
Analyze the non-intersection property
Curves cannot cross due to transitivity.
If two curves crossed, a single point of intersection would imply two different levels of satisfaction are equal, violating consistency.
4
Analyze the position of higher curves
Higher curves correspond to greater utility.
Due to monotonicity of preferences, more of a good is preferred to less.

Key Concept

Properties of Indifference Curves and ordinal utility theory assumptions
Rate this question

Topics

Indifference Curves and Their Properties

More questions from this topic