Principles of Economics- Mankiw (5th) 454

Principles of Economics- Mankiw (5th) 454 - 468 PA R T S E...

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468 PART SEVEN ADVANCED TOPIC FOUR PROPERTIES OF INDIFFERENCE CURVES Because indifference curves represent a consumer’s preferences, they have certain properties that reflect those preferences. Here we consider four properties that de- scribe most indifference curves: ± Property 1: Higher indifference curves are preferred to lower ones. Consumers usually prefer more of something to less of it. (That is why we call this something a “good” rather than a “bad.”) This preference for greater quantities is reflected in the indifference curves. As Figure 21-2 shows, higher indifference curves represent larger quantities of goods than lower indifference curves. Thus, the consumer prefers being on higher indifference curves. ± Property 2: Indifference curves are downward sloping. The slope of an indifference curve reflects the rate at which the consumer is willing to substitute one good for the other. In most cases, the consumer likes both goods. Therefore, if the quantity of one good is reduced, the quantity of the
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This note was uploaded on 07/30/2010 for the course ECON 120 taught by Professor Abijian during the Spring '10 term at Mesa CC.

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