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Author Question: Indifference curves for perfect substitutes must be parallel lines with a slope of negative one. ... (Read 167 times)

chandani

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on: Jul 1, 2018
Indifference curves for perfect substitutes must be parallel lines with a slope of negative one.
 
  Indicate whether the statement is true or false

Question 2

Indifference curves cannot ever be concave for two goods.
 
  Indicate whether the statement is true or false


yuyiding

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Reply #1 on: Jul 1, 2018
Answer to Question 1

False. Indifference curves for perfect substitutes are parallel lines, but the slope is not necessarily negative one.

Answer to Question 2

False. While indifference curves are typically convex, they can be concave. This means, however, that the MRS of y for x increases as x increases. That is, the consumer places greater value on the next x the more x she has. The interpretation is that a consumer with concave indifference curves prefers to specialize in either x or y but not have a mix of both.


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