Question

At two points on an indifference curve,

a. the consumer has the same income.

b. the consumer has the same marginal rate of substitution.

c. the bundle of the goods cost the consumer the same amount.

d. the bundle of goods that yield the consumer same satisfaction.

Short answer

The correct answer is option d) the bundle of goods that yield the consumer the same satisfaction.

Step-by-step solution

Explanation for the correct option (d)

The indifference curve shows the combination of two sets of commodities that give the same level of satisfaction to the consumers. So the option d is the suitable answer from the options. Along the indifference curve, the consumer has an equal preference over the set of goods.

Explanation of incorrect options

Reasons for the incorrect options are as follows:

• The indifference curve focuses on the satisfaction of the consumer, and it doesn’t focus on income. So, option “a” is incorrect.

• The MRS in an indifference curve will be the slope of the curve at any point. The slope of the indifference curve measures the rate at which a consumer is willing to give up one good for another. It changes along the IC curve. So option “b” is incorrect.

• The indifference curve shows the point where the same level of utility or satisfaction is received, not the same cost. So option “c” is incorrect.