A ) lower utility . B ) the same utility . C ) higher utility . D ) utility that is sometimes higher , sometimes the same , and sometimes lower . See Page 1. 34. What does a single indifference curve represent? A) a bundle of goods B) a budget C) a …
OR A single indifference curve shows the different combinations of X and Y that yield equal satisfaction to the consumer”. INDIFFERENCE SCHEDULE: An indifference schedule refers to a schedule that indicates different combinations of two commodities which yield equal satisfaction. A consumer, therefore,
View Notes - Review 1 from ECON 100A at University of California, Santa Cruz. 1. What does an indifference curve represent? 2. What is a satiation or bliss point? 3. Utility is given by U = x12x2 .
Indifference curves are typically represented to be: 1. Defined only in the non-negative quadrant of commodity quantities (i.e. the possibility of having negative quantities of any good is ignored). 2. Negatively sloped.
Key Concepts and Summary. An indifference curve is drawn on a budget constraint diagram that shows the tradeoffs between two goods. All points along a single indifference curve provide the same level of utility. Higher indifference curves represent higher levels of utility.
If the indifference curve (or slope) is flat, then the MRS is low. This means the consumer is willing to give up very little good y for an additional unit of good x.
The slope of the indifference curve is called the marginal rate of substitution , which declines as the quantity of X increases relative to the quantity of Y.
A popular alternative to the marginal utility analysis of demand is the Indifference Curve Analysis. This is based on consumer preference and believes that we cannot quantitatively measure human satisfaction in monetary terms.
Indifference curves like Um are steeper on the left and flatter on the right. The reason behind this shape involves diminishing marginal utility—the notion that as a person consumes more of a good, the marginal utility from each additional unit becomes lower.
There are two types of indifference curves: perfect complements indifference curves and perfect substitutes indifference curves.Feb 22, 2022
Indifference Curve An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.
Indifference curves slope downward because, if utility is to remain the same at all points along the curve, a reduction in the quantity of the good on the vertical axis must be counterbalanced by an increase in the quantity of the good on the horizontal axis (or vice versa).
Answer : An indifference curve always slopes downward from left to right, i.e. it has a negative slope. This is so because if a consumer wants to have more units of one commodity; he will have to reduce the number of units of the other commodity, due to his limited income.
The indifference curve technique is used to explain the problem arising from various systems of rationing. Since we are assuming that subsidy paid by the Government is half the market price of food, the consumer would pay half the market price.
In the words of Handerson and Quant, “An indifference map is a collection of indifference curves corresponding to different levels of satisfaction, each curve on the right hand side represents a higher level of satisfaction as compared to the indifference curve on the left hand side as it represents greater quantities ...
Properties of Indifference Curve with DiagramAll Combinations on an Indifference Curve Give Same Level of Satisfaction. ... A Higher Difference Curve Shows a Higher Level of Satisfaction. ... Indifference Curves always Slope Downwards from Left to Right. ... Indifference Curves Never Cut Each Other.More items...•Aug 2, 2020
Reason: Due to the law of diminishing marginal utility a consumer is always willing to sacrifice lesser units of a commodity for every additional unit of another good. Higher indifference curve represents larger bundles of goods i.e. bundles which contain more of both or more of at least one.
The Indifference Map refers to a set of Indifference Curves that reflects an understanding and gives an entire view of a consumer’s choices. The below diagram shows an indifference map with three indifference curves.
Summary. An indifference curve is a contour line where utility remains constant across all points on the line. The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, ...
If a good satisfies all four properties of indifference curves, the goods are referred to as ordinary goods . They can be summarized as the consumer requires more of one good to compensate for less consumption of another good, and the consumer experiences a diminishing marginal rate of substitution when deciding between two goods.
As you go down the curve of an indifference curve, the curve becomes flatter as one good is substituted for the other. It is the individual’s marginal rate of substitution, which is defined as the more an individual consumes good A in proportion to good B, the less of good B the individual will substitute for another unit of good A.
The only way an individual can increase consumption in one good without gaining utility is to consume another good and generate the same amount of utility. Therefore, the slope is downwards sloping. Indifference curves assume a convex shape.
Marginal Propensity to Consume The Marginal Propensity to Consume (MPC) refers to how sensitive consumption in a given economy is to unitized changes in income levels.
The slope of the budget line is the relative price of good A in terms of good B, equal to the price of good A as a ratio of the market price of good B. Moreover, the slope of the budget line subtracted by relative price represents the opportunity cost of consumption. There is an opportunity cost#N#Opportunity Cost Opportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. The#N#because of the consumer’s limited budget. The budget line is shifted outwards by the price of goods becoming proportionally cheaper.
Indifference curves never cross. If they could cross, it would create large amounts of ambiguity as to what the true utility is. The farther out an indifference curve lies, the farther it is from the origin, and the higher the level of utility it indicates. As illustrated above on the indifference curve map, the farther out from the origin, ...
A graphical representation of a consumer's tastes. Each curve reflects a different level of utility. Curves farther from the origin represent greater consumption levels and, therefore, higher levels of utility. Indifference curves in a consumer's indifference map don't intersect. Properties of Indifference Curves.
Because of the law of diminishing marginal rate of substitution, indifference curves bow in toward the origin.
Mathematically, the MRS is equal to the absolute value of the slope of the indifference curve. Recall that the slope of any line is the vertical change between two points on the line divided by the corresponding horizontal change. Law of diminishing rate of marginal substitution.
Because each bundle of goods yields the same level of utility, the consumer is indifferent about which combination is actually consumed. Combinations of goods along an indifference curve reflect some constant, though unspecified, level of utility.
Indifference curves in a consumer's indifference map don't intersect. Properties of Indifference Curves. A particular indifference curve reflects a constant level of utility, so the consumer is indifferent among all consumption combinations along a given curve. Combinations are equally attractive.