Question

Before After - Us US Uレ 2 oel The before and after diagrams show Jane's preferences for two goods before and after her graduation from high school (Ui«U2CU3 in both instances). Based on the changes in her indifference curves, what can you say about the change in her preferences? Provide two examples of situations that could have caused the change in her preferences.

Answer 1

An indifference curve shows various combination of two goods among which the consumers is indifferent .The magnitude of the slope of the indifference curve measures the marginal rate of substitution.In the first diagram the curve is steep and in the second the curve is flat.If the indifference curve is steep the MRS is high and the person is willing to give up a very large amount of Y to obtain X. If the indifference curve is flat , the MRS is low and the person is willing to give up very little of Y to obtain large quantities of X.

Situations that could have caused the change are change in the price or utility of a good or a change in the person's income.