The shape of the indifference curve depends on
A) the price of goods.
B) the family income.
C) the substitutability between goods for the household.
D) the level of happiness for the household.
E) the relative price of good Y.

Question

Quizplus · Accepted Answer

The shape of the indifference curve reflects the degree of substitutability between goods for the household. Indifference curves are typically convex to the origin (i.e. bowed inward) because goods are usually not perfect substitutes for each other. This means that as the household consumes more of one good, they must give up more and more of the other good to maintain the same level of satisfaction. However, if the goods are very close substitutes, the indifference curve may be less bowed and closer to a straight line.

The Shape of the Indifference Curve Depends on