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Figure 4.12 Indifference Curves for a “Bad”
An economic “bad” is a product that reduces a consumer’s utility. This homebuyer’s utility from a house falls as the age of the house increases. Therefore, to keep her utility constant, we must provide the homebuyer with more bedrooms if we increase the house’s age. This leads to upward-sloping indifference curves. Indifference curve U2 provides more utility than U1 because (holding the number of bedrooms constant) bundle B contains an older house than bundle C, making the homebuyer worse off. Alternatively, bundles A and C contain houses of the same age, but the house in bundle C has more bedrooms. Thus, the homebuyer is better off at point C (on U2) than at point A (on U1).