Question

If marginal rate of substitution is increasing throughout, then the indifference curve will be

• A. Downward sloping convex
• B. Downward sloping concave
• C. Downward sloping straight line
• D. Upward sloping convex

Hint:

An indifference curve with an increasing marginal rate of substitution will be convex, reflecting the consumer's increasing willingness to trade one good for another.

Answer 1

The Correct Option is A

Step 1: Understanding the Marginal Rate of Substitution (MRS):
The marginal rate of substitution refers to the rate at which a consumer is willing to trade one good for another while keeping their level of satisfaction constant. If the MRS is increasing, it means the consumer is willing to give up more and more of one good to obtain an additional unit of another good. This typically occurs when the goods are imperfect substitutes.
Step 2: Analyzing the Options:
- Option (A) Downward sloping convex: This is the correct answer. If the marginal rate of substitution is increasing, the indifference curve will be convex to the origin. This indicates that the consumer requires increasingly larger amounts of one good to be willing to give up the other good.
- Option (B) Downward sloping concave: This is incorrect. A concave indifference curve typically reflects a diminishing marginal rate of substitution, where less and less of one good is needed to give up the other.
- Option (C) Downward sloping straight line: This is incorrect. A straight-line indifference curve represents perfect substitutes, where the marginal rate of substitution is constant, not increasing.
- Option (D) Upward sloping convex: This is incorrect. Indifference curves cannot slope upward because that would imply that as one good increases, the other good decreases, which is inconsistent with the concept of indifference.
Step 3: Conclusion and Answer:
The correct answer is (A) because an increasing marginal rate of substitution leads to a convex downward-sloping indifference curve.