In general, indifference curves bow in towards the origin, rather than being straight lines or outward-bulging curves. The reason for this is that most people do not like extremes: they would rather have a some shirts and some hats than many hats and no shirts. This changing preference results in the traditional inward-curving indifference curves, and illustrates the effects of diminishing returns. In this example, diminishing returns simply means that the first hat Jim gets makes him happier than the second hat, which makes him happier than the third, and so on. His marginal utility--the extra utility he gets with each hat--decreases with the number of hats he gets. After a while, he has had enough of hats, the extra ones don't make him much happier, and he'd rather get a shirt, and might even trade several hats for one shirt. Generally, at the extremes, people are
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