With reference to indifference curve, which of the following statement is/are correct? 1. It represents all those combinations of goods which give same satisfaction to consumer. 2. A consumer selects or buy the combination of equilibrium goods that maximise utility. Select the correct answer

The correct answer is: C. Both 1 and 2.

An indifference curve is a graph that shows all the combinations of goods that give a consumer the same level of satisfaction. In other words, a consumer is indifferent between any two points on the same indifference curve.

The slope of an indifference curve is negative, which means that as a consumer consumes more of one good, they must consume less of another good in order to remain indifferent. This is because goods are usually considered to be substitutes for each other.

The marginal rate of substitution (MRS) is the slope of an indifference curve. It measures how much of one good a consumer is willing to give up in order to consume more of another good.

The consumer’s equilibrium point is the point on the indifference curve where the MRS is equal to the price ratio. This is the point where the consumer is maximizing their utility.

Statement 1 is correct because an indifference curve represents all the combinations of goods that give the same satisfaction to the consumer. Statement 2 is also correct because the consumer’s equilibrium point is the point on the indifference curve where the MRS is equal to the price ratio.