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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour3 Marks
Question
Explain why is an Indifference curve downward sloping from left to right. State the conditions of consumer's equilibrium, as per the indifference curve analysis.
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Answer

Indifference curve slopes downward from left to right because whenever a consumer wants to have more units of one commodity, he will have to sacrifice some units of the other commodity. If the consumer can have more of both the commodities his level of satisfaction will change which is not possible. Thus, there exists a negative relationship between quantity of X and quantity of Y.
The conditions of consumer's equilibrium in indifference curve analysis are:
  1. MRS = MRE or MRS = $\frac{\text{P}_\text{X}}{\text{P}_\text{Y}}$
  2. MRS continuously falls.

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