Question
True or false: The downward slope of typical indifference curves is a consequence of the diminishing marginal rate of substitution. False. Diminishing MRS explains the
True or false: The downward slope of typical indifference curves is a consequence of the diminishing marginal rate of substitution.
False. Diminishing MRS explains the convexity of the indifference curve, but not the downward slope. The downward slope is a result of the fact that most indifference curves are defined over two goods (i.e. two items which increase utility). But if an indifference curve was defined over onegood and one 'bad' (i.e. an item which decreased utility, like pollution or noise) then the indifference curve would slope up. (Note also though that if there were two bads, it would again slope down.)
I am not understanding the answers which are in the bold, please explain it in terms of the graphs, thanks
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