Question

Explain why indifference curves are negatively sloped, asymptotic and never intersect each other. Show and decribe a satisfaction maximizing choice associated with two products, an insurance policy on X-axis and a house purchase on Y-axis. Suppose insurance policy gets cheaper, how will the equilibrium shift and which curve will emerge from this shift? What if the income of the consumer keeps on increasing every year and commodity on X axis gets inferior from normal?

Answer 1

indifference curve's tends to be negative as it slopes downwards towards right from left. This implies that for a customer to become indifferent to every combination on indifference curve, they need to leave few good Y's units so as to gain more good X.