The Positive Relationship Between Indifference Curve Slope and Consumer Satisfaction
What is the relationship between the slope of the indifference curve and consumer satisfaction?
A. The slope of the indifference curve is the ratio of the marginal utility of ice cream cones to the marginal utility of ice cream sandwiches.
B. The slope of the indifference curve is the ratio of the marginal utility of ice cream sandwiches to the marginal utility of ice cream cones.
C. The slope of the indifference curve is the ratio of the total utility of ice cream cones to the total utility of ice cream sandwiches.
D. The slope of the indifference curve is the ratio of the total utility of ice cream sandwiches to the total utility of ice cream cones.
Answer:
A. The slope of the indifference curve is the ratio of the marginal utility of ice cream cones to the marginal utility of ice cream sandwiches.
The Positive Relationship Between Indifference Curve Slope and Consumer Satisfaction
Indifference curve is a graphical representation showing different combinations of two goods that give a consumer equal levels of satisfaction. Each point on the indifference curve indicates that the consumer is equally satisfied with the combination of goods represented at that point.
The slope of the indifference curve, also known as the marginal rate of substitution, measures the rate at which a consumer is willing to give up one good in exchange for the other while maintaining equal satisfaction levels. In this case, the slope is the ratio of the marginal utility of ice cream cones to the marginal utility of ice cream sandwiches.
As the quantity of one good (ice cream cones) increases relative to the other (ice cream sandwiches), the slope of the indifference curve decreases. This implies that the consumer is willing to give up fewer units of ice cream sandwiches for each additional unit of ice cream cone, reflecting a higher level of satisfaction.
Therefore, the positive relationship between the slope of the indifference curve and consumer satisfaction highlights the importance of understanding consumer preferences and utility maximization in economic decision-making.