Practicing Success
Two commodities are perfect subsitutes for the consumer and the indifference curve will be _________ . Fill in the blank with suitable answer from below : |
concave to the origin Convex to origin Inverted parabola Straight line |
Straight line |
The correct answer is option (4) : Straight line Indifference curves represent combinations of goods that give the consumer equal satisfaction or utility. The law of Diminishing Marginal Rate of Substitution causes an indifference curve to be convex to the origin. This is the most common shape of an indifference curve. But in case of goods being perfect substitutes, the marginal rate of substitution does not diminish. When two goods are perfect substitutes, the consumer is indifferent between them at a constant rate. This results in indifference curves that are straight lines, indicating that the consumer is willing to trade one good for the other at a constant ratio without any change in overall satisfaction.
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