Anthropology 4400E Chapter Notes -Indifference Curve, Substitute Good
13 Oct 2014
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Slopes of indifference curves are negative and change throughout, they get less slope as go rightward. The marginal rate of substitution is the maximum amount of one good a consumer will sacrifice to obtain one more unit of another good while remaining equally well off. When measuring the mrs (marginal rate of substitution) drop the negative (-) sign. If slope is = -5 then mrs is = 5 , aka mrs is always the absolute value, the fact that its negative doesn"t matter. In a normal case, indifference curves exhibit a diminishing marginal rate of substitution: The indifference curves get flatter as we move out along the horizontal axis (and steeper as we move up the vertical axis). Indifference/preference curves have nothing to do with actual money or prices. It about how you value certain items and how much of each you want to be indifferent at certain points, the curve simply maps out these trade-offs.
