The convexity of indifference curve is due to:a)Declining marginal rate of substitutionb)Rising marginal rate of substitutionc)Constant marginal rate of substitutiond)None of the above.Correct answer is option 'A'. Can you explain this answer?

Question

Answer

Answer: A. Declining marginal rate of substitutionExplanation:The convexity of indifference curves is due to the declining marginal rate of substitution (MRS). This can be further explained through the following points:- Marginal Rate of Substitution (MRS): MRS is the rate at which a consumer is willing to give up one good in exchange for another good, while maintaining the same level of satisfaction or utility. In other words, it shows the trade-off between two goods that a consumer is willing to make.- Diminishing MRS: As a consumer consumes more of one good, the marginal utility of that good decreases, while the marginal utility of the other good increases. This is known as the law of diminishing marginal utility. Due to this, the consumer is willing to give up less of the second good to obtain more of the first good, resulting in a declining MRS.- Convexity of Indifference Curves: Indifference curves are convex to the origin because of the declining MRS. As a consumer moves along an indifference curve, they are willing to give up fewer units of the second good to obtain more of the first good, resulting in the curve's convex shape.In conclusion, the convexity of indifference curves is a result of the declining marginal rate of substitution, which is due to the law of diminishing marginal utility. This reflects the consumer's willingness to make trade-offs between two goods while maintaining the same level of satisfaction or utility.

Answer

Answer: A. Declining marginal rate of substitutionExplanation:The convexity of indifference curves is due to the declining marginal rate of substitution (MRS). This can be further explained through the following points:- Marginal Rate of Substitution (MRS): MRS is the rate at which a consumer is willing to give up one good in exchange for another good, while maintaining the same level of satisfaction or utility. In other words, it shows the trade-off between two goods that a consumer is willing to make.- Diminishing MRS: As a consumer consumes more of one good, the marginal utility of that good decreases, while the marginal utility of the other good increases. This is known as the law of diminishing marginal utility. Due to this, the consumer is willing to give up less of the second good to obtain more of the first good, resulting in a declining MRS.- Convexity of Indifference Curves: Indifference curves are convex to the origin because of the declining MRS. As a consumer moves along an indifference curve, they are willing to give up fewer units of the second good to obtain more of the first good, resulting in the curve's convex shape.In conclusion, the convexity of indifference curves is a result of the declining marginal rate of substitution, which is due to the law of diminishing marginal utility. This reflects the consumer's willingness to make trade-offs between two goods while maintaining the same level of satisfaction or utility.

Answer

Answer:

The correct answer is option 'A': Declining marginal rate of substitution.

Explanation:

Indifference curves represent different combinations of two goods that provide the same level of satisfaction or utility to an individual. These curves are always convex to the origin, which means they slope downwards and become flatter as they move away from the origin.

There are several reasons why indifference curves are convex, and one of the main reasons is the declining marginal rate of substitution (MRS). The MRS measures the rate at which an individual is willing to give up one good in exchange for more of the other good while remaining on the same indifference curve.

Key points:
Here is an explanation of why the convexity of indifference curves is due to the declining marginal rate of substitution:

1. Definition of Marginal Rate of Substitution (MRS):
The MRS is defined as the amount of one good that an individual is willing to give up in order to obtain an additional unit of the other good while maintaining the same level of satisfaction.

2. Diminishing Marginal Utility:
The concept of diminishing marginal utility states that as an individual consumes more and more of a particular good, the satisfaction derived from each additional unit of that good decreases. This means that the individual is willing to give up fewer units of the other good to obtain an additional unit of the first good.

3. Relationship between MRS and Indifference Curves:
The MRS is directly related to the slope of the indifference curve. As the MRS decreases, the slope of the indifference curve becomes flatter. This is because, as the individual consumes more of one good and less of the other, the willingness to give up the other good decreases.

4. Convexity of Indifference Curves:
The convexity of indifference curves reflects the declining MRS. As the individual moves from one point to another along an indifference curve, the MRS decreases. This is because the individual is willing to give up fewer units of one good to obtain an additional unit of the other good.

5. Graphical Representation:
On a graph, the convexity of indifference curves can be observed by drawing a tangent line at any point on the curve. The slope of this tangent line represents the MRS at that point. As the individual moves along the curve, the tangent line becomes flatter, indicating a lower MRS.

In conclusion, the convexity of indifference curves is due to the declining marginal rate of substitution. This reflects the concept of diminishing marginal utility, where the willingness to give up one good for more of the other decreases as consumption increases.

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