Indifference Curve Analysis

Follow this resource to learn more about the concept of indifference curves. Make sure to answer the "Try It" quiz questions that show you the correct answer.

4. The Individuality of Indifference Curves

4.2. Check Answers

    • No. Jacob would have achieved greater utility by consuming a more equal balance of amusement parks and day spas during both weeks.
      Correct! If two points on the same indifference curve touch the budget constraint then a point on a higher indifference curve, with a more equal consumption bundle, is possible.
    • No. Utility maximization is only possible if the indifference curve does not intersect the budget constraint at any point.
      Incorrect. Utility maximization subject to a budget constraint occurs at the single indifference curve which is tangent to the budget constraint.
    • Yes. Because the indifference curve is convex it can cross budget constraint at multiple points
      Incorrect. If an indifference curve crosses the budget constraint at multiple points then it by definition cannot be the highest utility indifference curve achievable with a given budget.

    • Point C
      Correct! C would fall along a new indifference curve greater than the original indifference curve. The quantity consumed of both goods has increased after the price decrease.
    • Point D
      Incorrect. Point D would represent a lower indifference curve than Point A. which is an implausible new equilibrium as real income has increased.
    • Point B
      Incorrect. If the price of a good decreases the consumer should be able to move to a higher indifference curve.