The slope of an indifference curve defined over current and future consumption
A) is constant
B) is equal to the rate of interest
C) indicates the consumer's rate of time preference, or impatience
D) is flatter when the curve is farther away from the origin than when it is near the origin
E) is undefined

Question

Quizplus · Accepted Answer

The slope of an indifference curve defined over current and future consumption indicates the consumer's rate of time preference, or impatience. This means that consumers who are more impatient, or have a higher preference for present consumption, will have steeper indifference curves (higher slope) while more patient consumers will have flatter indifference curves (lower slope). The rate of interest is related to time preference, but it does not determine the slope of an indifference curve, so option B is incorrect. Option A is incorrect because the slope of an indifference curve can vary depending on the consumer's preferences. Option D is incorrect because it is generally true that indifference curves are steeper farther away from the origin, but the reason for this is not related to the slope. Option E is incorrect because the slope of an indifference curve is always defined.

The Slope of an Indifference Curve Defined Over Current and Future