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Properties of Preferences and Ordinal Utility in Microeconomics

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Properties of Preferences and Ordinal Utility in Microeconomics

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Questions and Answers

What is the primary purpose of an indifference curve in microeconomics?

To demonstrate the law of demand

To analyze the production possibilities frontier

To show the budget constraints of a consumer

To illustrate the consumer's preferences for different combinations of goods (correct)

Why do indifference curves have a negative slope?

Because they represent perfect complements

As a result of diminishing marginal utility

To show that the two commodities are substitutes for each other (correct)

Due to the law of supply and demand

In microeconomics, why are indifference curves convex to the origin?

To represent perfect substitutes

To show that the two commodities are not perfectly substitutable (correct)

Because averages are preferred over extreme values

To display economies of scale

What does it mean when indifference curves do not intersect each other?

The consumer is indifferent between different points on each curve Signup and view all the answers

How does a negative slope of an indifference curve affect the quantities of goods consumed?

Increase in one good while decreasing the other Signup and view all the answers

Why does an indifference curve being convex to the origin imply diminishing marginal rate of substitution (MRS)?

Diminishing MRS reflects a decreasing rate at which a consumer is willing to trade one good for another Signup and view all the answers

What happens if two indifference curves intersect in microeconomics?

The consumer's preferences become inconsistent Signup and view all the answers

Why are averages preferred to extreme values on an indifference curve?

As it reflects consumer's preference towards balanced consumption Signup and view all the answers

What does the negative slope of an indifference curve indicate about the commodities involved?

They are substitutes for each other Signup and view all the answers

Why do indifference curves have a specific shape in microeconomics?

To illustrate consumer preferences and choices Signup and view all the answers