A consumer has preferences over two goods: books and movies.The three bundles shown in the table below lie on the same indifference curve for the consumer.

Which of the following properties of indifference curves would this consumer's preferences violate?

Question

A consumer has preferences over two goods: books and movies.The three bundles shown in the table below lie on the same indifference curve for the consumer.

Which of the following properties of indifference curves would this consumer's preferences violate?

Quizplus · Accepted Answer

The three bundles lie on the same indifference curve, which violates the property of indifference curves being bowed inward. If the indifference curves are not bowed inward, it means that the consumer's marginal rate of substitution (MRS) between the two goods is constant, implying that the consumer is willing to give up the same amount of one good for an additional unit of the other good, regardless of the initial quantities of the two goods consumed. This violates the principle of diminishing marginal rate of substitution, which states that as a consumer consumes more of one good, she is willing to give up less of it for an additional unit of the other good.

A Consumer Has Preferences Over Two Goods: Books and Movies