Multiple Choice
Which of the following is true about indifference curves?
1
views
18. Consumer Choice and Behavioral Economics
Indifference Curves
Multiple Choice
Why do indifference curves generally slope downward?
A
Because to keep utility constant, an increase in one good must be compensated by a decrease in the other (a negative marginal rate of substitution).
B
Because most goods are perfect substitutes or complements, which causes indifference curves to slope downward.
C
Because budget constraints prevent consumers from buying more of both goods, so the curve slopes downward.
D
Because consumers always prefer more of both goods, so indifference curves slope downward to reflect increasing satisfaction.
Verified step by step guidance1
Understand that an indifference curve represents all combinations of two goods that provide the consumer with the same level of utility or satisfaction.
Recognize that if a consumer wants to maintain the same utility level, an increase in the quantity of one good must be offset by a decrease in the quantity of the other good, so the total satisfaction remains constant.
This trade-off between the two goods is captured by the Marginal Rate of Substitution (MRS), which is the rate at which a consumer is willing to give up one good to get more of the other while keeping utility unchanged.
Since the MRS is typically negative (because giving up some amount of one good requires gaining some amount of the other to stay equally satisfied), the indifference curve slopes downward from left to right.
Therefore, the downward slope of indifference curves reflects the negative relationship between the quantities of the two goods needed to maintain constant utility.
Related Videos
Related Practice
