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Theory of consumer behaviour — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsTheory of consumer behaviour6 Marks
Question
What are monotonic preferences? Explain why is an indifference curve:
  1. Downward sloping from left to right and
  2. Convex to the origin.
✓

Answer

Monotonic preference means that as consumption increases, total utility also increases alongwith:
  1. Indifference curve slopes downwards 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.
  2. Indifference curve is convex to origin due to diminishing marginal rate of substitution. Marginal S rate of substitution of X for Y refers to the number of units of good Y that the consumer is willing to forego for an additional unit of good X, so as to maintain the same level of satisfaction.
$\text{MRS}=\frac{\Delta\text{Y}}{\Delta\text{X}}.$

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