Which of the following is true in regards to indifference curve? |
Upward sloping straight line Downward sloping straight line Concave to the origin Convex to the origin |
Convex to the origin |
The correct answer is option 4: Convex to the origin The law of "Diminishing Marginal Rate of Substitution" causes an indifference curve to be convex to the origin. Indifference curves are convex to the origin, reflecting the principle of diminishing marginal rate of substitution. This means that as a consumer substitutes one good for another, the amount of the good being given up increases while the quantity of the other good consumed also increases, leading to a curvature that bows inward. |