The correct answer is: A. Perfect substitute goods.
An indifference curve is a graph that shows all the combinations of two goods that provide the same level of satisfaction to a consumer. The shape of an indifference curve can tell us a lot about the relationship between the two goods.
A perfect substitute good is a good that has no other substitutes. In other words, if you have one perfect substitute good, you don’t need any other. For example, if you’re thirsty, you could drink water or soda. Both of these goods would satisfy your thirst, so they are perfect substitutes.
An indifference curve that is L-shaped indicates that the two goods are perfect substitutes. This is because the consumer is indifferent between any combination of the two goods. For example, if the consumer has $10 to spend, they could buy 5 bottles of water or 2 bottles of soda. They would be equally satisfied with either combination.
The other options are incorrect because they do not describe the relationship between the two goods as perfectly substitutes.
- Option B, substitute goods, is incorrect because substitute goods are goods that can be used in place of each other. For example, coffee and tea are substitute goods. If you don’t have coffee, you could drink tea instead.
- Option C, perfect complementary goods, is incorrect because perfect complementary goods are goods that must be used together. For example, a left shoe and a right shoe are perfect complementary goods. You can’t use one without the other.
- Option D, complementary goods, is incorrect because complementary goods are goods that are used together, but they don’t have to be used together. For example, a car and gas are complementary goods. You can’t drive a car without gas, but you can use gas for other things, like heating your home.