Question

On which of the following assumption the indifference curve approach is based?

• A. Consumer can rank different combinations of two goods in order of preference i.e. 1st, 2nd, 3rd
• B. Consumer behaviour is consistent
• C. Consumer is rational
• D. All of above

Answer 1

The correct option is D All of above

Assumption are :

(1) The consumer acts rationally so as to maximise satisfaction.
(2) There are two goods X and Y.
(3) The consumer possesses complete information about the prices of the goods in the market.
(4) The prices of the two goods are given.
(5) The consumer’s tastes, habits and income remain the same throughout the analysis.
(6) He prefers more of X to less of У or more of Y to less of X.
(7) An indifference curve is negatively inclined sloping downward.