Chapter 1. eFigure 4.5

Animated Graph
A Consumer's Indifference Curves
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You must read each slide, and complete any questions on the slide, in sequence.
E-Figure Title
Question 1 of 3

Question 1.

The indifference curve describes the consumer’s willingness to tradeoff between the two goods. In the video, it depicts Sarah’s willingness to exchange t-shirts for pairs of socks. Consider the shape of Sarah’s indifference curve. What does that tell us about her preferences?

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Correct! As Sarah’s indifference curve shows, when she has large numbers of t-shirts, she has relatively few pairs of socks. For Sarah, t-shirts are plentiful and pairs of socks are scarce. Since she likes both t-shirts and pairs of socks, she is willing to trade one for the other. However, this tradeoff changes. At the points on the indifference curve where Sarah has a large number of t-shirts she is willing to trade a larger number of the plentiful good (t-shirts) to obtain an additional unit of the scarce good (pairs of socks). Alternatively, if pairs of socks were plentiful and t-shirts were scarce, she would give up very few t-shirts to gain an additional pair of socks.
Incorrect! As Sarah’s indifference curve shows, when she has large numbers of t-shirts, she has relatively few pairs of socks. For Sarah, t-shirts are plentiful and pairs of socks are scarce. Since she likes both t-shirts and pairs of socks, she is willing to trade one for the other. However, this tradeoff changes. At the points on the indifference curve where Sarah has a large number of t-shirts she is willing to trade a larger number of the plentiful good (t-shirts) to obtain an additional unit of the scarce good (pairs of socks). Alternatively, if pairs of socks were plentiful and t-shirts were scarce, she would give up very few t-shirts to gain an additional pair of socks.