Question
In economics, an indifference curve is a line drawn between different consumption bundles, on a graph charting the quantity of good A consumed versus the
In economics, an indifference curve is a line drawn between different consumption bundles, on a graph charting the quantity of good A consumed versus the quantity of good B consumed. At each of the consumption bundles, the individual is said to be indifferent. Economics builds upon indifference curves to introduce the optimal choice of goods for any consumer based on that consumer's income.
Then, do you think that the following statement is true? If yes, why? If not,why not?
This concept can be used in portfolio theory in finance. In portfolio theory, indifference curve is a term used in portfolio theory to describe investor demand for portfolios based on the trade-off between expected return and risk. It is a convex curve, meaning upward curving and where it meets the Efficient Frontier there is a match between supply and demand. This spot is called the Optimal Portfolio.
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