Question

Which of the following statements is correct?

I. The slope of an indifference curve measures the amount of the good on the Y-axis the consumer iswilling to give up to obtain one more unit of the good on the X-axis.
II. There exists one and only one indifference curve through each possible bundle of goods.

Answer 1

Statement I is correct. The slope of an indifference curve represents the marginal rate of substitution. Statement II is correct. Each possible bundle of goods represents a unique level of utility, and therefore, there exists only one indifference curve that passes through a specific bundle of goods.

Step-by-step explanation:

Statement I is correct. The slope of an indifference curve represents the marginal rate of substitution (MRS), which measures the amount of the good on the Y-axis a consumer is willing to give up to obtain one more unit of the good on the X-axis. The MRS reflects the trade-off a consumer is willing to make between the two goods.

Statement II is correct. Each possible bundle of goods represents a unique level of utility, and therefore, there exists only one indifference curve that passes through a specific bundle of goods.