Practicing Success
Practicing Success
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| Rita broke open her piggy bank one day. It consisted of five rupee coins and 5 rupee notes. Her mother played a game with her in which Rita had to give up some five rupee coins in order to obtain one additional 5 rupee note. If we make an indifference curve in such a case, what will be the shape? |
Convex & downward sloping Concave & downward sloping Straight & upward sloping Straight & downward sloping |
| Straight & downward sloping |
| For Rita, it hardly matters whether she gets a five rupee coin or a five rupee note. So, irrespective of how many five rupee notes she has, she will sacrifice only one five rupee coin for a five rupee note. So, these two commodities are perfect substitutes for Rita and indifference curve depicting these will be a downward sloping straight line because marginal rate of substitution for perfect substitutes is constant. |
