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An indifference curve indicates, ceteris paribus?
  • a)
    Combinations of goods which yield to a producer different levels of satisfaction
  • b)
    Combinations of goods which yield to a consumer equal degrees of satisfaction
  • c)
    Combinations of goods which yield to a consumer different levels of satisfaction
  • d)
    A consumer’s preference for any two goods
Correct answer is option 'B'. Can you explain this answer?
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An indifference curve indicates, ceteris paribus?a)Combinations of goo...
In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. ... In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer.
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An indifference curve indicates, ceteris paribus?a)Combinations of goo...
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Understanding Indifference Curves
Indifference curves are a fundamental concept in consumer theory, representing the different combinations of two goods that yield the same level of satisfaction to a consumer. This concept is crucial for understanding consumer preferences and choice.
Key Features of Indifference Curves:
- Equal Satisfaction: Each point along an indifference curve indicates a combination of two goods that provides the consumer with the same level of utility or satisfaction. Therefore, the consumer is indifferent between these combinations.
- Downward Sloping: Indifference curves typically slope downwards from left to right. This illustrates the trade-off between the two goods; as the consumer consumes more of one good, they must consume less of the other to maintain the same level of satisfaction.
- Non-Intersecting: Indifference curves do not intersect each other. If they did, it would imply contradictions in the consumer's preferences, as the same combination could not yield different levels of satisfaction.
Why Option B is Correct:
The correct answer is option 'B' because it accurately encapsulates the essence of indifference curves. They represent combinations of goods that yield equal degrees of satisfaction to the consumer, emphasizing the concept of indifference in consumer choice.
In contrast, options A, C, and D misrepresent the purpose of indifference curves by suggesting varying levels of satisfaction or focusing solely on preferences without the critical aspect of equality in utility.
Hence, understanding indifference curves is vital for analyzing consumer behavior and the principles of demand in economic theory.
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Read the following passage and answer the question that follows:The ordinalist revolution originates in the criticism of the psychological foundations of the theory of demand, namely, the principle of decreasing marginal utility as Alfred Marshall ([1890] 1898) used it. The rejection of hedonist hypotheses led Irving Fisher (1892) and Pareto (1896–97, 1900, 1909) to favour an objective or “positive” approach to economic concepts.The “ordinalist revolution” (Ormazabal 1995, 116) is grounded in a methodological transformation of economics that put the facts of objective experience as a foundation of economics and provided a research program for the ensuing years (Green and Moss 1993; Lewin 1996). Mathematically, ordinalism is entirely based upon the idea that one can dispense with the use of a specific utility function and that no meaning shall be attached to utility measurement, except as an ordinal principle.Clearly, the development of ordinalist must be separated from the introduction of the concept of the indifference curve. Ordinalism was first advocated in Fisher’s “Mathematical Investigations” (1892) and Pareto’s Suunto (1900) and Manual ([1909] 1971), while the indifference curve had appeared in F. Y. Edge worth’s Mathematical Psychics (1881). It was thus only through Fisher’s and Pareto’s recasting that the concept of the indifference curve became irreversibly associated with the promotion of ordinalism.Along the way, the recasting of the theory of choice along ordinalist lines raised a number of issues (about integrability, measurability, and complementarity) that would be progressively settled. A reasonable closing date for the ordinalist revolution is 1950, after Houthakker (1950) and Samuelson’s (1950) contributions.From the late 1920s, the Paretian school was progressively gaining a larger audience while the use of the concept of marginal utility and other derivative concepts was challenged. Consequently, demand theory was recast along the principlesof individual preferences and ordinal utility functions. Nevertheless, English authors proved very silent about the meaning of indifference curves. Most if not all of the reflections after 1920 about the nature of indifference curves took place in America, mainly under the impulse of Henry Schultz at Chicago. This is an American story.Q. ______ is a curve showing a different combination of two goods, each combination offering the same level of satisfaction to the consumer.

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An indifference curve indicates, ceteris paribus?a)Combinations of goods which yield to a producer different levels of satisfactionb)Combinations of goods which yield to a consumer equal degrees of satisfactionc)Combinations of goods which yield to a consumer different levels of satisfactiond)A consumer’s preference for any two goodsCorrect answer is option 'B'. Can you explain this answer?
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