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The negative slope of the indifference curve reflects the assumption of the monotonicity of consumer's preferences, which generates monotonically increasing utility functions, and the assumption of non-satiation (marginal utility for all goods is always positive); an upward sloping indifference curve would imply that a consumer is indifferent ...
Those with constricted incomes tend to prefer inferior goods for the reason of the aforementioned observable inferiority. [6] Depending on consumer or market indifference curves, the amount of a good bought can either increase, decrease, or stay the same when income increases. [3]
When the slope of the indifference curve is greater than the slope of the budget line, the consumer is willing to give up more of good 1 for a unit of good 2 than is required by the market. Thus, it follows that if the slope of the indifference curve is strictly greater than the slope of the budget line:
Whether indifference curves are primitive or derivable from utility functions; and; Whether indifference curves are convex. Assumptions are also made of a more technical nature, e.g. non-reversibility, saturation, etc. The pursuit of rigour is not always conducive to intelligibility. In this article indifference curves will be treated as primitive.
Under the standard assumption of neoclassical economics that goods and services are continuously divisible, the marginal rates of substitution will be the same regardless of the direction of exchange, and will correspond to the slope of an indifference curve (more precisely, to the slope multiplied by −1) passing through the consumption bundle in question, at that point: mathematically, it ...
An example indifference curve is shown below: Each indifference curve is a set of points, each representing a combination of quantities of two goods or services, all of which combinations the consumer is equally satisfied with. The further a curve is from the origin, the greater is the level of utility.
If an agent has monotone preferences which means the marginal rate of substitution of the agent's indifference curve is positive. Given two products X and Y. If the agent is strictly preferred to X, it can get the equivalent statement that X is weakly preferred to Y and Y is not weakly preferred to X.
Note that labour is assumed to be a 'bad', i.e., a commodity that a consumer doesn't like. Its presence in his consumption basket lowers the utility he derives. [1] On the other hand, coconuts are goods. This is why the indifference curves are positively sloped. The maximum amount of labour is indicated by L'.