Convexity of the indifference curve follows from
A)the fact that income plays a significant role in consumption and leisure decisions.
B)the fact that more is preferred to less.
C)the fact that consumers are indifferent to consumption and leisure goods.
D)the fact that consumers prefer diversity.
E)the fact that consumption and leisure are normal goods.

Question

Quizplus · Accepted Answer

The convexity of indifference curves is a result of the principle that consumers prefer a diverse bundle of goods. This principle implies that as consumers substitute one good for another, they do so at a decreasing rate, reflecting diminishing marginal rates of substitution. This diminishing rate of substitution is what gives the indifference curve its convex shape to the origin, indicating that consumers are willing to give up less of one good to obtain more of another good as they get more of it, thereby diversifying their consumption.

Convexity of the Indifference Curve Follows from