Along an indifference curve, a consumer first gets 2 more bananas by giving up 6 mangoes. She then gets 2 more bananas by giving up 2 mangoes. Which of the following is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → The MRS falls from 3 to 1, so the curve is convex to the origin.
MRS is the mangoes given up for one extra banana. Each move here gives 2 bananas, so divide by 2.
First move: MRS = 6/2 = 3
Second move: MRS = 2/2 = 1
The MRS falls as she gets more bananas. A diminishing MRS makes the indifference curve convex to the origin.
Option (3) The MRS falls from 6 to 2, so the curve is convex to the origin. — 6 and 2 are the mangoes given up for 2 bananas; they are not divided by the 2 bananas.
NCERT (2026-27): “2.1.2 Ordinal Utility Analysis … The amount of mangoes that the consumer has to forego, in order to get an additional banana, her total utility level being the same, is called marginal rate of substitution (MRS). In other words, MRS is simply the rate at which the consumer will substitute bananas for mangoes, so that her total utility remains constant. …” “Shape of an Indifference Curve It may be mentioned that 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 substitutes4, the marginal rate of substitution does not diminish. It remains the same. …” |