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Economics Homework Four - Model (view source)
Revision as of 20:40, October 11, 2009
, 20:40, October 11, 2009added two
5. Explain why the shape of an indifference curve for two goods that are perfect substitutes is a straight line going from the upper left down to the lower right. Extra credit: why must its slope be negative 1?
5. Explain why the shape of an indifference curve for two goods that are perfect substitutes is a straight line going from the upper left down to the lower right. Extra credit: why must its slope be negative 1?
:... [T]here is perfect proportion between the two goods - if you lose three chocolate bars, you will receive three peanut butter bars, thus graphing a perfect diagonal line from the upper left tot he lower right of the graph. (Mary)
: ... The slope of the line must be negative one because that way if you take away one of good one, and add one of good two or the other way around, your level of happiness stays the same. (Nat)
:... The reason that the slope is negative ''one'' is that, for two or more goods or services which are perfect substitutes, when you lose one good or service, you need to obtain one of the other goods or services in order to maintain the same total utility. (Dermot)
:... The reason that the slope is negative ''one'' is that, for two or more goods or services which are perfect substitutes, when you lose one good or service, you need to obtain one of the other goods or services in order to maintain the same total utility. (Dermot)