The shape of the indifference curve depends on
A) the price of goods.
B) the family income.
C) the substitutability between goods for the household.
D) the level of happiness for the household.
E) the relative price of good Y.

Question

Quizplus · Accepted Answer

The shape of the indifference curve depends on the substitutability between goods for the household. The level of substitutability determines the slope of the curve. If two goods are perfect substitutes, the curve will be a straight line with a constant slope, whereas if they are perfect complements, it will be L-shaped. The price of goods (A), family income (B), level of happiness (D) and relative price of good Y (E) may affect the quantity of goods consumed, but they do not determine the shape of the indifference curve.

The Shape of the Indifference Curve Depends on