Final answer:
The false statement regarding indifference curves is D. 'They are concave to the origin.' This is incorrect as indifference curves are actually convex to the origin, demonstrating a diminishing marginal rate of substitution. The other characteristics listed (A, B, C) are all true features of indifference curves.
Step-by-step explanation:
Indifference curves are a foundational concept in microeconomics, used to illustrate the preferences of consumers when making choices between different bundles of goods. Among the properties of indifference curves, one statement that is NOT true is D. 'They are concave to the origin.' Let's explore the characteristics of indifference curves more closely:
- They are convex to the origin. This means that as a consumer moves along the curve, the rate at which they are willing to substitute one good for another decreases. This reflects the principle of diminishing marginal rate of substitution.
- They cannot intersect each other. If two indifference curves were to cross, it would imply that a consumer could have two different levels of utility for the same combination of goods, which violates the assumption of consistency in consumer preferences.
- They slope downwards from left to right. This negative slope is due to the trade-off between the two goods; to maintain the same level of utility, an increase in one good must be accompanied by a decrease in the other good.
The incorrect statement is that indifference curves are concave to the origin when, in fact, they are convex to the origin. The convexity reflects a consumer's diminishing marginal rate of substitution — as one moves from left to right on an indifference curve, additional units of a good on the horizontal axis have less utility compared to the units of the good on the vertical axis being given up.
A real-world example of this could be a consumer choosing between apples and oranges. At first, if they have many apples, they might gladly give up several apples for one orange (reflective of a steep curve on the left). However, as they obtain more oranges and have fewer apples, they become less willing to give up apples for additional oranges (reflective of a flatter curve on the right), hence the convex shape relative to the origin.