If x₁is good and x₂is bad, then indifference curves: A)have a positive slope. B)cannot be linear. C)have a negative slope. D)are not smooth.

Question

Quizplus · Accepted Answer

Based on the information given, we know that xS1U1B11 is preferred over xS1U1B12. This means that as xS1U1B0 increases, the individual is willing to give up less of xS1U1B11 and more of xS1U1B12 to maintain the same level of utility. Therefore, the indifference curves must have a positive slope, reflecting the fact that the trade-off between xS1U1B11 and xS1U1B0 is more favorable than the trade-off between xS1U1B12 and xS1U1B0. Linear and smooth indifference curves are not ruled out by this information.

If X1 is Good and X2 is Bad, Then Indifference

If X₁is Good and X₂is Bad, Then Indifference