[amp_mcq option1=”Two goods are perfect substitutes” option2=”Two goods are imperfect substitutes” option3=”Two goods are perfect complementary goods” option4=”None of the above” correct=”option4″]<\/p>\n
The correct answer is: D. None of the above<\/strong><\/p>\n Indifference curves are convex to the origin because consumers are assumed to have diminishing marginal rate of substitution. This means that as a consumer consumes more of one good, they are willing to give up less of another good to maintain the same level of satisfaction.<\/p>\n For example, let’s say that a consumer has an indifference curve between apples and oranges. If the consumer currently has 1 apple and 1 orange, they might be indifferent between that bundle and a bundle with 2 apples and 0 oranges. However, if the consumer already has 5 apples, they might be willing to give up only 1 apple to get 1 orange. This is because the consumer is already getting a lot of satisfaction from apples, and so they are not as willing to give up more of them to get more oranges.<\/p>\n The assumption of diminishing marginal rate of substitution is important because it implies that indifference curves are convex to the origin. If indifference curves were not convex, it would mean that consumers were willing to give up more and more of one good to get more of another good, which is not realistic.<\/p>\n A. Two goods are perfect substitutes means that the consumer is indifferent between any two bundles that have the same amount of each good. In this case, the indifference curve would be a straight line.<\/p>\n B. Two goods are imperfect substitutes means that the consumer prefers some bundles to others, even if they have the same amount of each good. In this case, the indifference curve would be curved, but it would not be convex to the origin.<\/p>\n C. Two goods are perfect complementary goods means that the consumer can only consume them in fixed proportions. In this case, the indifference curve would be a right angle.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”Two goods are perfect substitutes” option2=”Two goods are imperfect substitutes” option3=”Two goods are perfect complementary goods” option4=”None of the above” correct=”option4″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-52795","post","type-post","status-publish","format-standard","hentry","category-economics","no-featured-image-padding"],"yoast_head":"\n