Indifference curves are
A) bowed in toward the origin if there is diminishing marginal rate of substitution.
B) straight lines if the goods are perfect complements.
C) right angles if the goods are perfect substitutes.
D) always bowed out and away from the origin.

Question

Quizplus · Accepted Answer

Indifference curves generally are bowed in toward the origin due to the diminishing marginal rate of substitution. As a consumer acquires more of one good, he will be willing to give up less of the other good to get one more unit of the original good, and so the slope of the indifference curve becomes flatter, leading to a bowed shape. This is the case in most real-world scenarios. Perfect substitutes would have straight-line indifference curves and perfect complements would have right-angled indifference curves. However, the statement that indifference curves are always bowed out and away from the origin is incorrect.

Indifference Curves Are