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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 ...
Right graph: With fixed probabilities of two alternative states 1 and 2, risk averse indifference curves over pairs of state-contingent outcomes are convex. In economics and finance , risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter ...
Indifference curves C 1, C 2 and C 3 are shown. Each of the different points on a particular indifference curve shows a different combination of risk and return, which provide the same satisfaction to the investors. Each curve to the left represents higher utility or satisfaction. The goal of the investor would be to maximize their satisfaction ...
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 ...
The positively sloped (upward-sloped) top boundary of this region is a portion of a hyperbola, [4] and is called the "efficient frontier". If a risk-free asset is also available, the opportunity set is larger, and its upper boundary, the efficient frontier, is a straight line segment emanating from the vertical axis at the value of the risk ...
At this equilibrium point, the slope of the highest indifference curve must equal the slope of the production function. Recall that the marginal rate of substitution is the rate at which a consumer is ready to give up one good in exchange for another good while maintaining the same level of utility. [ 6 ]
Middle graph: In standard deviation-expected value space, risk averse indifference curves are upward sloped. Right graph : With fixed probabilities of two alternative states 1 and 2, risk averse indifference curves over pairs of state-contingent outcomes are convex.
But the only points from which no mutually beneficial trade exists are the points of tangency between the two people's indifference curves, such as point E. The contract curve is the set of these indifference curve tangencies within the lens—it is a curve that slopes upward to the right and goes through point E.