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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 ...
Good Y is a normal good since the amount purchased increases from Y1 to Y2 as the budget constraint shifts from BC1 to the higher income BC2. Good X is an inferior good since the amount bought decreases from X1 to X2 as income increases. In economics, inferior goods are those goods the demand for which falls with increase in income of the consumer.
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 second definition says that a good is neutral if the consumer is ambivalent towards its consumption. That is, the consumption of that good neither increases nor decreases the consumer's utility. For example, if a consumer likes texting, but is neutral about the data package on his phone contract, then increasing the data allowance does not ...
The indifference curves are also curved inwards due to diminishing marginal utility, i.e., the reduction in the utility of every additional unit as consumers consume more of the same good. The slope of the indifference curve measures the marginal rate of substitution, which can be defined as the number of units of one good needed to replace one ...
For example, every point on the indifference curve I1 (as shown in the figure above), which represents a unique combination of good X and good Y, will give the consumer the same utility. Indifference curves have a few assumptions that explain their nature. Firstly, indifference curves are typically convex to the origin of the graph.
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.
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.