What is the rationale for the slope of an indifference curve in a two-product (A and B) case?
Please provide the best answer for the statement.
The slope of the curve measures the marginal rate of substitution of one good for the other (B for A) for the consumer to have a constant level of satisfaction. The rationale for this shape is related to diminishing marginal utility. If the consumer has many units of A and few units of B, B is more valuable at the margin while A has a lower marginal utility. The consumer will then be willing to give up more of A to get more units of B. This relationship changes, however, as the consumer gets more and more of B and gives up more and more A. In this case, the consumer will not be willing to give up many units of A to obtain more units of B. This situation means that the slope of the curve diminishes. It is thus convex to the origin.
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a. True b. False Indicate whether the statement is true or false