When goods are not easy to substitute for each other, the indifference curves are less bowed, and when goods are easy to substitute, the indifference curves are very bowed.

Question

Quizplus · Accepted Answer

This statement is incorrect. When goods are not easy to substitute for each other, the indifference curves are very bowed, and when goods are easy to substitute, the indifference curves are less bowed. This is because when goods are not easy to substitute, a large change in the price of one good will have a smaller effect on the amount of the other good the consumer is willing to consume, resulting in more extreme preferences and more bowed indifference curves. Conversely, when goods are easy to substitute, a small change in the price of one good will have a large effect on the amount of the other good the consumer is willing to consume, resulting in less extreme preferences and less curved indifference curves.

When Goods Are Not Easy to Substitute for Each Other