Answer to Question #187145 in Microeconomics for salome

Question

(a) What are indifference curves? illustrate any three peculiar shapes that can be taken by indifference curves 6 mks

Answer 1

Solution:

An indifference curve is a graph displaying a combination of two goods that provide the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two goods and all points provide him with the same utility.

Indifference curves can take three peculiar shapes, which are illustrated as follows:

1.). They can take a downward sloping convex shape from left to right. They are steeper on the left and flatter on the right. This is a shape taken by normal goods.

2.). They can take a constant slope from left to right. This is a shape taken by two goods that are perfect substitutes since the consumer will be willing to switch between at a fixed ratio.

3.). They can take an L-shape, where the elbows of the curves are collinear. This is a shape taken by two goods that are perfect compliments.