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Difficulty: MediumIndifference Curves and Their Properties

A consumer's preferences for Commodity AA and Commodity BB are illustrated on an indifference map containing multiple indifference curves. When the consumer transitions from a consumption bundle on Indifference Curve IC1IC_1 to a bundle on Indifference Curve IC2IC_2 located further to the northeast, which of the following best explains why IC2IC_2 represents a higher level of satisfaction?

  1. The higher curve contains consumption bundles with larger quantities of at least one good without reducing the quantity of the other.Answer
  2. B
    The marginal rate of substitution remains constant along all points on the higher curve.
  3. C
    The total utility on the lower curve drops to zero as the consumer moves to the right.
  4. D
    The two indifference curves will eventually intersect at the consumer equilibrium point.

Answer

The higher curve contains consumption bundles with larger quantities of at least one good without reducing the quantity of the other.
Under standard ordinal utility theory and the assumption of non-satiation (monotonic preferences), consumers prefer more goods to fewer goods. An indifference curve located higher and further to the northeast of another contains bundles with strictly greater quantities of at least one good without reducing the quantity of the other good, thus providing a strictly higher level of total satisfaction.

Step-by-Step Solution

1
Recall the fundamental properties of an indifference map.
Indifference curves positioned further to the right or northeast represent higher levels of utility.
Economic theory assumes monotonic preferences (more of a good is preferred to less).
2
Analyze what moving northeast on a two-good graph implies geometrically.
Moving northeast means increasing the amount of Commodity AA, Commodity BB, or both.
Higher quantities of normal goods yield higher total utility.
3
Evaluate the offered explanations against indifference curve properties.
The correct explanation directly links position to bundle composition and non-satiation.
The assumption that consumer preferences are non-satiated means larger bundles provide greater utility.

Key Concept

Indifference Map and Utility Levels
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Topics

Indifference Curves and Their Properties

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