An indifference curve shows:
A)the one most desirable portfolio for a particular investor
B)all combinations of portfolios that are equally desirable to a particular investor
C)all combinations of portfolios that are equally desirable to all investors
D)the one most desirable portfolio for all investors

Question

Quizplus · Accepted Answer

An indifference curve is a graphical representation of all the combinations of two goods that give a consumer equal satisfaction and utility. Hence, it shows all combinations of portfolios that are equally desirable to a particular investor, which is option B. Option A is incorrect because an indifference curve represents a set of portfolios that give the same amount of satisfaction or utility to an investor, not just one portfolio. Options C and D are also incorrect because an indifference curve pertains only to an individual consumer, not all consumers.

An Indifference Curve Shows