Question

Explain any two features of indifference curve with the help of diagrams

Answer 1

• INDIFFERENCE CURVES ARE CONVEX TO THE ORIGIN. THE CONVEXITY RULE IS DUE TO THE DIMINISHING MARGINAL RATE OF SUBSTITUTION (MRS).
• INDIFFERENCE CURVES SLOPES DOWNWARDS FROM LEFT TO RIGHT OR THEY HAVE NEGATIVE SLOPE. THAT IS IF THE VALUE OF ONE GOOD IN COMBINATION IS INCREASED THE VALUE IF OTHER GOOD IS HIS IS ESSENTIAL TO MAINTAIN THE SAME LEVEL OF SATISFACTION.
• TWO INDIFFERENCE CURVES CANNOT INTERSECT EACH OTHER. IF TWO INDIFFERENCE CURVES INTERSECT EACH OTHER IT WOULD SHOW DIFFERENT LEVELS OF SATISFACTION WHICH IS ABSURD & IMPROBABLE.
• A HIGHER INDIFFERENCE CURVES REPRESENTES A HIGHER LEVEL OF SATISFACTION THAN THE LOWER IC. SPECIFICALLY , IC TO THE RIGHT SHOWS MORE SATISFSCTION THAN TO LEFT & HENCE THE CONSUMER TRIES TO REACH THE HIGHEST IC TO MAXIMIZE HIS SATISFACTION & ATTAIN EQUILIBRIUM .

CHECK THE ATTACHMENT FOR DIAGRAM