No, an indifference curve can’t cross itself. All the points on an indifference curve represent the same level of utility by consuming two goods….
Do indifference curves ever cross in experiments?
1 That indifference curves can intersect has been experimentally verified in a different setting (Kahneman et al. 1991: 197).
Why can’t indifference curves never cross?
Indifference curves never intersect, because by definition, all points on the same curve represent equivalent satisfaction. … The red data point must have the same utility as the place where the curves cross. The green data point will also have the same utility as the place where the indifference curves intersect.
Can indifference curves be thick?
The indifference curves cannot be thick because if they are thick, they would be violating the non-satiation assumption.
Why do consumers prefer higher indifference curves?
Since a higher indifference curve represents a higher level of satisfaction, a consumer will try to reach the highest possible IC to maximize his satisfaction. In order to do so, he has to buy more goods and has to work under the following two constraints: He has to pay the price for the goods and.
How can you tell which indifference curves represent higher or lower levels of utility?
Higher indifference curves represent a greater level of utility than lower ones. … More generally, for any point on a lower indifference curve, like Ul, you can identify a point on a higher indifference curve like Um or Uh that has a higher consumption of both goods.
Are indifference curves always downward sloping?
Indifference curves are downward in slope. An indifference curve measures the value a consumer receives from the consumption of two different products. … Thus, the curve must be downward sloping. This curve shows the overall level of satisfaction for the consumption of two products.
What is the shape of indifference curve?
Description: Graphically, the indifference curve is drawn as a downward sloping convex to the origin. The graph shows a combination of two goods that the consumer consumes.
Why indifference curve is downward sloping?
Indifference curves slope downward because, if utility is to remain the same at all points along the curve, a reduction in the quantity of the good on the vertical axis must be counterbalanced by an increase in the quantity of the good on the horizontal axis (or vice versa).
Can an indifference curve cross itself for example could Figure 3.2 depict a single indifference curve?
Can an indifference curve cross itself? For example, could Figure 3.2 depict a single indifference curve? No, because there are bundles on the indifference curve that have strictly more of both goods than other bundles on the (alleged) indifference curve.
Are indifference curves smooth?
The marginal rate of substitution tells how much ‘y’ a person is willing to sacrifice to get one more unit of ‘x’. This assumption assures that indifference curves are smooth and convex to the origin.
Which assumption would be violated if indifference curves were to cross?
If an indifference curve ran from a to x, then bundle x would be no better than bundle a despite containing more of both goods. This upward slope of the indifference curve would be a violation of the nonsatiation assumption.
Can indifference curves be upward sloping?
A set of indifference curves can be upward sloping if we violate assumption number three; more is preferred to less. When a set of indifference curves is upward sloping, it means one of the goods is a “bad” in that the consumer prefers less of the good rather than more of the good.
Are indifference curves always parallel?
Indifference Curves are not Necessarily Parallel to each other. Although, they are Falling and Negatively Inclined to the Right: Yet the rate of the fall will not be the same for all Indifference Curves.
What is the features of indifference curve?
The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, and (4) indifference curves are convex.
What is convexity of indifference curve?
Convexity of indifference curves implies that the marginal rate of substitution of X for Y falls as more of X is substituted for Y. Thus, indifference curves are convex to the origin when principle of diminishing marginal rate of substitution holds good and which is generally the case.
Do indifference curves change with income?
The income effect is the shift from C to B; that is, the reduction in buying power that causes a shift from the higher indifference curve to the lower indifference curve, with relative prices remaining unchanged. The income effect results in less consumed of both goods.
What does a flatter indifference curve mean?
If the indifference curve (or slope) is flat, then the MRS is low. This means the consumer is willing to give up very little good y for an additional unit of good x.
What is the utility function and how is it calculated?
A utility function that describes a preference for one bundle of goods (Xa) vs another bundle of goods (Xb) is expressed as U(Xa, Xb). Where there are perfect complements, the utility function is written as U(Xa, Xb) = MIN, where the smaller of the two is assigned the function’s value.
What is the importance of indifference curve?
The indifferent curve analysis is used in measuring the cost of living or standard of living in terms of index numbers. We come to know with the help of index numbers whether the consumer is better off or worse off by comparing two time periods when the income of the consumer and prices of two goods change.
Why does higher indifference curve give more satisfaction?
Higher indifference curve represents a higher level of satisfaction because higher IC means a bundle consisting more of both the goods or same quantity of one good n more quantity of the other good .
What does the MRS tell us?
Essentially, MRS is the slope of the indifference curve at any single point along the curve. Most indifference curves are usually convex because as you consume more of one good you will consume less of the other. So, MRS will decrease as one moves down the indifference curve.