Question

Which of the following best describes the assumption on which indifference theory is based?

Select one:

A.

Consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it.

B.

The consumer receives the same utility and is therefore indifferent between any two consumption bundles.

C.

Consumers are not able to rank consumption bundles in order of preference.

D.

The consumer is able to quantify the difference in total utility received from two different consumption bundles.

E.

The consumer has equated the marginal utilities of all products, and is therefore indifferent between consumption bundles.

Answer 1

ANSWER-

Indifference theory - Indifference theory shows various combinations of two good which gives the consumer same level of satisfaction across all the combinations. It is a curve where all the point of various combinations of two goods are plotted and when the consumer consume any of the bundle it will give the consumer same satisfaction like any other bundle or combination which means utility (satisfaction) between the two points is always the same.

Based on abpve explanation The consumer receives the same utility and is therefore indifferent between any two consumption bundles best describes the assumption on which indifference theory is based.

Hence, the answer is option (B.) The consumer receives the same utility and is therefore indifferent between any two consumption bundles.