Question

Consider the following statements about indifference curves:
1. Indifference curves are convex to the origin.
2. Higher indifference curve represents higher level of satisfaction.
3. Two indifference curves cut each other.Which of the statements given above is/are correct?
A) 1 only B) 1 and 2 C) 2 and 3 D) 3 only

Answer 1

Answer:

option (c)

Explanation:

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Answer 2

Answer:

options C) 2 &3

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.

When two goods are perfect complements, the indifference curves form right angles and the marginal rate of substitution is undefined. The relationship between most goods for most people falls somewhere between these two extremes.