Assume that good X and good Y each have diminishing marginal utility for a consumer. In this case,
A) an indifference curve linking the two goods will have a constant slope.
B) an indifference curve will be convex to the origin.
C) the demand curves for these goods will be positively sloped.
D) the demand curves for these goods will be horizontal.

Question

Quizplus · Accepted Answer

The principle of diminishing marginal utility suggests that as a consumer consumes more of a good, the marginal utility of each additional unit consumed will decrease, and thus the consumer will require more of the other good to maintain the same level of satisfaction. This leads to the shape of an indifference curve being convex to the origin, indicating that the consumer is willing to give up more of one good as they gain more of the other. Choice A is incorrect because the slope of an indifference curve will not be constant, as the rate at which a consumer is willing to trade one good for another will change as their consumption levels change. Choice C and D are also incorrect because the shape of the demand curves will depend on the relative prices of the goods, and will not necessarily be positively sloped or horizontally flat.

Assume That Good X and Good Y Each Have Diminishing