Consumer Theory: Axioms, Utility, MRS, and Demand Curves
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Axioms Determining Indifference Curve Shape
Six fundamental axioms determine the shape and properties of indifference curves:
- Completeness: Individuals can compare and rank any two market baskets (A or B, or indifferent between A and B).
- Transitivity: Guarantees the logical consistency of the ordering among any set of market baskets (If A is preferred to B, and B is preferred to C, then A is preferred to C).
- Non-Satiation (More is Better): Market baskets with higher quantities (q) are always preferred.
- Continuity: Market baskets in the same indifference set are distributed continuously.
- Strict Convexity: Indifference curves are always strictly convex with respect to the origin of coordinates.
- Smoothness: Indifference curves are smooth, lacking any