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Figure 4.6 Steepness of Indifference Curves
Because the MRS measures the willingness of the consumer to trade one good for another, we can tell a great deal about preferences by examining the shapes of indifference curves. (a) Indifference curves that are relatively steep indicate that the consumer is willing to give up a large quantity of the good on the vertical axis to get another unit of the good on the horizontal axis. Here, the consumer is willing to give up a lot of concert tickets for some additional MP3s. (b) Relatively flat indifference curves imply that the consumer would require a large increase in the good on the horizontal axis to give up a unit of the good on the vertical axis. The consumer with flat indifference curves will give up a lot of MP3s for one additional concert ticket.