Why is the shape of indifference curve convex?

Why is the shape of indifference curve convex?

Indifference curves are convex to the origin because as the consumer begins to increase his or her use of one good over another, the curve represents the marginal rate of substitution. The marginal rate of substitution goes down as the consumer gives up one good for another, so it is convex to the origin.

Why are indifference curves L shaped?

Indifference curves are linear if the individual regards the two goods as perfect substitutes. They are L-shaped if the individual regards the two goods as perfect complements.

Are indifference curves concave or convex?

Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve. Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.

What is the shape of the indifference curve for perfect substitutes?

Thus when two goods X and Y are imperfect substitutes; the indifference curve has its usual negatively sloping shape, as in Figure 1. If two goods X and Y are perfect substitutes, the indifference curve is a straight line with negative slope, as shown in Figure 41 because the MRSXY is constant.

Are indifference curves always convex?

The indifference curves are usually convex to the origin. Convexity of indifference curves implies that the marginal rate of substitution of X for Y falls as more of X is substituted for Y.

Why is the indifference curve convex or bowed inward?

Because of the law of diminishing marginal rate of substitution, indifference curves bow in toward the origin. Higher indifference curves represent higher levels of utility.

Why indifference curve is concave?

Indifference curves can be straight lines if a slope is constant, resulting in an indifference curve represented by a downward-sloping straight line. If the marginal rate of substitution is increasing, the indifference curve will be concave to the origin.

What is indifference curve with example?

An indifference curve shows all combinations of goods that provide an equal level of utility or satisfaction. For example, Figure 1 presents three indifference curves that represent Lilly’s preferences for the tradeoffs that she faces in her two main relaxation activities: eating doughnuts and reading paperback books.

What does concave indifference curve mean?

Concavity of the indifference curves implies that the marginal rate of substitution of X for y increases when more of X is substituted for Y. It will be clear from the analysis made below that in case of indifference curves being concave to the origin the consumer will choose or buy only one good.

Why is indifference curve concave?

If the marginal rate of substitution is increasing, the indifference curve will be concave to the origin. This is typically not common since it means a consumer would consume more of X for the increased consumption of Y (and vice versa).

What are the characteristics 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 are the features of an indifference curve?

The very important feature of the indifference curves is that they are convex to the origin and they cannot be concave to the origin. A normal indifference curve will be convex to the origin and it cannot be concave. Only convex curves will lend to the principles of Diminishing Marginal Rate of substitution.

What are types of indifference curve?

Indifference curve will not touch the axis. Another characteristic feature of indifference curve is that it will not touch the X axis or Y axis. This is born out of our assumption that the consumer is considering different combinations of two commodities.

What are the principles of an indifference curve?

Key Takeaways An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown-i.e. Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.

Why indifference curves are always negatively sloped?

The indifference curve is downward and negatively sloped because if the consumer wants to have more units of one good. He will have to reduce the consumption of other goods to maintain the same level of satisfaction.