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combinations food(x) clothing(y) MRS(xy)
A 1 12 -
B 2 6 6
C 3 4 2
D 4 3 1
A(1,12) B(2,6) C(3,4) D(4,3)
at each combination consumer receives same level of satisfactn.as income is given and constant and there is no scope for underspending when consumer consumes additional unit of one commodity(food) he has to give up some units of clothing.at each level sacrifice in terms of clothing reduces as now clothing becomes scarce in comparison of food.according to law of DMU with every additional consumption utility diminishes and hence consumer starts valuing less food for clothing.hence MRS is falling.
Wiki User
∙ 14y ago
Wiki User
∙ 12y agobecause marginal rate of substitution between goods diminishes
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What are the major characteristics of an indifference curve?
The three major characteristics of an indifference curve are: 1. They are negatively sloped 2. They are convex to the origin 3. Indifference curve cannot be intersected
What are characteristics of an indifference curve?
indifferent curves are convex to their origin, they do not intersect, and have a negative slope
What is indifference curve approach?
indifference curve approach show the combination of two goods that an individual would be willing to buy, and which would make the buyer equally satisfied (or different). indifference curve assume that more is preferred to less. thay are convex as seen from the origin. the indifference curve form an entire map of various level of satisfaction..
What happens to the marginal rate of substitution as you move along a convex indifference curve?
The MRS measures how much of a good you are willing to give up in exchange for one more unit of the other good, keeping utility constant. The MRS diminishes along a convex indifference curve in that as you move down along the indifference curve, you are willing to give up less and less of the one good in exchange for the other. The MRS is also the slope of the indifference curve, which increases (becomes less negative) as you move down along the indifference curve. The MRS is constant along a linear indifference curve, since in this case the slope does not change. The consumer is always willing to trade the same number of units of one good in exchange for the other.
What is the different between indifference map and indiffirence curve?
Indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. Indifference map, on the other hand Indifference curve is a graph of two or more indifference curves.
Features of indifference curve?
two indifference curve never cut each other..
Can a single indifference curve cross itself?
a single indifference curve cannot cross itself.
What is shape of indifference curve?
what will be the shape of indifference curve if one of the two goods is a free commodity
Why indifference curve is convex to origin?
Indifference curve is convex to the origin.This means that the slope of indifference curve decreases as we move the curve from left to right.This can be explained in terms of Marginal rate of substitution of good X for good Y. The marginal rate of substitution is the maximum amount of Y the consumer is willing to give up to get an additional unit of X.This specifies the terms of trade-off between bundles of goods among which the consumer is indifferent. As the consumer moves down the curve he acquires more X and is left with less Y.So the amount of Y he would be willing to give up to get an additional unit of X becomes progressively smaller as is natural. So, the MRSxy diminishes as he moves from left to right.The convexity of the indifference curve illustrate the diminishing rate of substitution of X for Y associated with the movement down the curve from left to right.
Explain the consumer equilibrium with the help of indifference curve?
Explain the consumer equilibrium with the help of indifference curve?
what is the indifference curve for two goods with imperfect substitutes?
the indifference curve has its usual negatively sloping shape
Why does opportunity cost decreases on the Indifference curve?
If our preferences convex, the indifference curve exhibits decreasing marginal rate of substitution. That is, the more you consume of good X, then you are willing to give up less of good Y. Thus, the opportunity cost of exchanging good Y decreases as we get more of good X.
