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What happens to the marginal rate of substitution as you move along a convex indifference curve?
Wiki User
∙ 12y ago
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.
Wiki User
∙ 12y ago
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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.
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.
Why is indifference curve of normal good convex to origin?
Indifference curves are convex to the point of origin of the two axes. The curve is relatively steep at first in its left hand portion and tends to become flatter in its right hand portion. Thus, as we move along the curve from left downwards to the right, the absolute slope of the indifference curve decreases.. This property of indifference curve is based on the principle of diminishing marginal rate of substitution, explained in the previous section. In Fig., as the consumer reduces the consumption of commodity 'Y' and increases the consumption of commodity 'X', his urge for more units of 'X' declines continuously. On the other hand, he is willing to part with fewer and fewer units of commodity' Y' at each stage to obtain each additional unit of 'X'. In other words, the marginal rate of substitution of 'X' for 'Y' declines, as the consumer travels down on an indifference curve.Fig.Suppose, 'A', 'B', 'C', and 'D' are four points on indifference curve IC in Fig.. Initially, the consumer is willing to part with Y1 Y2 units of commodity' Y' to get one unit X1 X2 of commodity 'X'. For additional one unit X2 X3 of 'X', he is ready to sacrifice Y2 Y3 units of 'Y'. For next one unit X3 X4 of 'X', the consumer would like to give up only Y3 Y4 units of 'Y'. Clearly, the increase in 'X' commodity is uniform, whereas 'Y' commodity is decreasing at a diminishing rate. Symbolically,X1 X2=X2 X3=X3 X4,whileY1 Y2 >Y2 Y3 >Y3 Y4Hence, indifference curves are convex to the origin. Concavity of the indifference curves is against the principle of diminishing marginal rate of substitution.
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
Why isoquants convex?
diminshing marginal rate of substitution between factors
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.
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.
Why is indifference curve of normal good convex to origin?
Indifference curves are convex to the point of origin of the two axes. The curve is relatively steep at first in its left hand portion and tends to become flatter in its right hand portion. Thus, as we move along the curve from left downwards to the right, the absolute slope of the indifference curve decreases.. This property of indifference curve is based on the principle of diminishing marginal rate of substitution, explained in the previous section. In Fig., as the consumer reduces the consumption of commodity 'Y' and increases the consumption of commodity 'X', his urge for more units of 'X' declines continuously. On the other hand, he is willing to part with fewer and fewer units of commodity' Y' at each stage to obtain each additional unit of 'X'. In other words, the marginal rate of substitution of 'X' for 'Y' declines, as the consumer travels down on an indifference curve.Fig.Suppose, 'A', 'B', 'C', and 'D' are four points on indifference curve IC in Fig.. Initially, the consumer is willing to part with Y1 Y2 units of commodity' Y' to get one unit X1 X2 of commodity 'X'. For additional one unit X2 X3 of 'X', he is ready to sacrifice Y2 Y3 units of 'Y'. For next one unit X3 X4 of 'X', the consumer would like to give up only Y3 Y4 units of 'Y'. Clearly, the increase in 'X' commodity is uniform, whereas 'Y' commodity is decreasing at a diminishing rate. Symbolically,X1 X2=X2 X3=X3 X4,whileY1 Y2 >Y2 Y3 >Y3 Y4Hence, indifference curves are convex to the origin. Concavity of the indifference curves is against the principle of diminishing marginal rate of substitution.
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
Why is the Graph of the Indifference Curve Convex to the Origin and not Concave?
an indifference curves are convex not concave bcz: when we are using the two coomodities, both are sbtitute to each other, consumer will either use one or the other, he has to select one according to his taste, so MRS is diminishing, 2. the indifference curves are convex to the ogigan, this implies that the slope of IC is decreased as we move from let to right in the graph. this axom is derved from the point that MRS s decreasing. an indifference curves are convex not concave bcz: when we are using the two coomodities, both are sbtitute to each other, consumer will either use one or the other, he has to select one according to his taste, so MRS is diminishing, 2. the indifference curves are convex to the ogigan, this implies that the slope of IC is decreased as we move from let to right in the graph. this axom is derved from the point that MRS s decreasing.
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..
Describe the characteristics of indifference curve?
Properties/Characteristics of Indifference Curve:Definition, Explanation and Diagram:An indifference curve shows combination of goods between which a person is indifferent. The main attributes or properties or characteristics of indifference curves are as follows:(1) Indifference Curves are Negatively Sloped:The indifference curves must slope down from left to right. This means that an indifference curve is negatively sloped. It slopes downward because as the consumer increases the consumption of X commodity, he has to give up certain units of Y commodity in order to maintain the same level of satisfaction.In fig. 3.4 the two combinations of commodity cooking oil and commodity wheat is shown by the points a and b on the same indifference curve. The consumer is indifferent towards points a and b as they represent equal level of satisfaction.At point (a) on the indifference curve, the consumer is satisfied with OE units of ghee and OD units of wheat. He is equally satisfied with OF units of ghee and OK units of wheat shown by point b on the indifference curve. It is only on the negatively sloped curve that different points representing different combinations of goods X and Y give the same level of satisfaction to make the consumer indifferent.(2) Higher Indifference Curve Represents Higher Level:A higher indifference curve that lies above and to the right of another indifference curve represents a higher level of satisfaction and combination on a lower indifference curve yields a lower satisfaction.In other words, we can say that the combination of goods which lies on a higher indifference curve will be preferred by a consumer to the combination which lies on a lower indifference curve.In this diagram (3.5) there are three indifference curves, IC1, IC2 and IC3 which represents different levels of satisfaction. The indifference curve IC3 shows greater amount of satisfaction and it contains more of both goods than IC2 and IC1 (IC3 > IC2 > IC1).(3) Indifference Curve are Convex to the Origin:This is an important property of indifference curves. They are convex to the origin (bowed inward). This is equivalent to saying that as the consumer substitutes commodity X for commodity Y, the marginal rate of substitution diminishes of X for Y along an indifference curve.In this figure (3.6) as the consumer moves from A to B to C to D, the willingness to substitute good X for good Y diminishes. This means that as the amount of good X is increased by equal amounts, that of good Y diminishes by smaller amounts. The marginal rate of substitution of X for Y is the quantity of Y good that the consumer is willing to give up to gain a marginal unit of good X. The slope of IC is negative. It is convex to the origin.(4) Indifference Curve Cannot Intersect Each Other:Given the definition of indifference curve and the assumptions behind it, 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. This is absurd and impossible.In fig 3.7, two indifference curves are showing cutting each other at point B. The combinations represented by points B and F given equal satisfaction to the consumer because both lie on the same indifference curve IC2. Similarly the combinations shows by points B and E on indifference curve IC1 give equal satisfaction top the consumer.If combination F is equal to combination B in terms of satisfaction and combination E is equal to combination B in satisfaction. It follows that the combination F will be equivalent to E in terms of satisfaction. This conclusion looks quite funny because combination F on IC2 contains more of good Y (wheat) than combination which gives more satisfaction to the consumer. We, therefore, conclude that indifference curves cannot cut each other.(5) Indifference Curves do not Touch the Horizontal or Vertical Axis:One of the basic assumptions of indifference curves is that the consumer purchases combinations of different commodities. He is not supposed to purchase only one commodity. In that case indifference curve will touch one axis. This violates the basic assumption of indifference curves.In fig. 3.8, it is shown that the in difference IC touches Y axis at point C and X axis at point E. At point C, the consumer purchase only OC commodity of rice and no commodity of wheat, similarly at point E, he buys OE quantity of wheat and no amount of rice. Such indifference curves are against our basic assumption. Our basic assumption is that the consumer buys two goods in combination.
What happens when you look through a convex lens?
When you look through a convex lens the image appears to be larger
Reflection happens in concave mirrors?
in concave and convex mirrors refraction happens
What are the features of a normal production possibility curve?
Production Possibility curves can assume different slopes. As far as i know it can be either concave, convex or a straight line. The concave curve would be concave and downward sloping.This is explained by the law of diminishing returns and that factors used are not homogeneous.In this case the Marginal Rate of technical substitution would be rising. The curve would be convex in case of rising productivity and decreasing opportunity cost. Finally it would be a straight line when factors are homogeneous. Hope it was helpfull. Akheel.
