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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 ...
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 ...
As such, isoquants by nature are downward sloping due to operation of diminishing marginal rates of technical substitution (MRTS). [3] [4] The slope of an isoquant represents the rate at which input x can be substituted for input y. [5] This concept is the MRTS, so MRTS=slope of the isoquant. Thus, the steeper the isoquant, the higher the MRTS.
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 ]
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:
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.
diff== Positive Indifference curves == A special case of Indifference curve slopes upward from left to right (positive slope) for goods known as "Giffen goods". Giffen goods (named after Robert Giffen) are inferior goods that increase in demand as their price increases. Giffen's example was of demand for bread by the poor which increases as the ...