What does MRS 0 mean?
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What does MRS 0 mean?
MRS moves to zero as it diminishes the number of units of good X, and to infinity, as it diminishes the number of units of good Y. The second type of graph involves perfect substitutes of both goods X and Y.
How does MRS affect the shape of indifference curve?
Essentially, MRS is the slope of the indifference curve at any single point along the curve. Most indifference curves are usually convex because as you consume more of one good you will consume less of the other. So, MRS will decrease as one moves down the indifference curve.
What will be the shape of indifference curve?
Description: Graphically, the indifference curve is drawn as a downward sloping convex to the origin. The graph shows a combination of two goods that the consumer consumes.
Can indifference curve zero?
The shape of an indifference curve when the MRS is zero will be horizontal to the x-axis. When MRS is zero, this means goods is not substituted, hence the indifference curve is horizontal to x-axis, indicating to infinite unit of good on x- axis is require to substitute one unit of the good on y-axis.
What is indifference curve example?
An indifference curve shows all combinations of goods that provide an equal level of utility or satisfaction. For example, Figure 1 presents three indifference curves that represent Lilly’s preferences for the tradeoffs that she faces in her two main relaxation activities: eating doughnuts and reading paperback books.
Why are indifference curves convex?
The convex shape of the indifference curve can be attributed to the diminishing marginal rate of substitution. The diminishing marginal rate of substitution explains that in order to consume more quantity of a good then the consumer has to sacrifice a greater proportion of the other good.
Why does indifference curve slope downward?
(i) Indifference Curve Slopes Downwards : because in order to consume more units of X good the consumer must give up some quantity of Y good, so that consumer remains on the same level of satisfaction at each of an indifference curve.