Question

2. Copy each of the graphs below into your test book. For each of indifference curves glven below explain the indlividual's preferences. C. rtions draw the indiffere

Answer 1

a. (top left)

This graph represents that when lesser units of both goods are consumed, the consumer gains higher utility. This is so because both the goods are BAD for the consumer, and it does like consuming it. So less consumption is preferable.

b. (bottom left)

This IC represents that good X is a NEUTRAL good. This is so because consuming more or less units of good X doesn't give the consumer any utility. It gains utility only by consuming good Y, which is a normal good.

c.(top right)

The IC of this graph represents that good X is BAD and good Y is a normal good. This is so because consuming more units of good X gives disutility to the consumer, and consuming more units of good Y gives satisfaction to the consumer.

d. (bottom right)

This graph shows that both the goods are normal goods, consuming both the goods give the consumer utility and satisfaction.