Convex indifferent curve is explained bya)increasing MRSb)diminishing MRSc)constant MRSd)None of theseCorrect answer is option 'B'. Can you explain this answer?

Question

Answer

MRS diminishes when IC is convex
MRS increases when IC is concave
MRS straight line when IC is constant

Answer

Most indifference curves are usually convex because as you consume more of one good you will consume less of the other. So, MRS will decrease as one moves down the indifference curve. This is known as the law of diminishing marginal rate of substitution

Answer

Convex Indifference Curve

A convex indifference curve represents the preferences of an individual in economics. It is a graphical representation that shows the different combinations of two goods that give the individual the same level of satisfaction or utility. The curve is convex because it is bowed inward towards the origin.

Explanation of the Correct Answer

The correct answer is option 'B', which states that a convex indifference curve is explained by diminishing MRS (Marginal Rate of Substitution). Let's understand why this is the case:

Definition of MRS

The Marginal Rate of Substitution (MRS) is the rate at which an individual is willing to exchange one good for another while maintaining the same level of satisfaction. It measures the amount of one good a person is willing to give up in order to obtain an additional unit of another good.

Explanation

When the MRS is diminishing, it means that the individual is willing to give up fewer units of one good to obtain an additional unit of the other good as they consume more of it. This behavior is reflected in a convex indifference curve.

Graphical Representation

When the MRS is diminishing, the indifference curve becomes steeper as we move along it from left to right. This means that the individual is willing to give up fewer units of the first good in exchange for more units of the second good as their consumption of the second good increases.

Example

For example, let's consider a consumer who initially has a large quantity of good X and a small quantity of good Y. At this point, the individual is willing to give up a relatively small amount of good X to obtain an additional unit of good Y. However, as the individual consumes more of good Y and less of good X, the willingness to give up good X for an additional unit of good Y decreases. This leads to a diminishing MRS and a convex indifference curve.

Conclusion

In conclusion, a convex indifference curve is explained by diminishing MRS. This means that as the individual consumes more of one good, they are willing to give up fewer units of that good to obtain more units of the other good while maintaining the same level of satisfaction.

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