Question

Market baskets on higher indifference curves should receive higher total utilities than market baskets on lower indifference curves.

True or False

Answer 1

Answer: True

Higher indifference corresponds to the points with higher utility than points on lower utility.

The market basket on U =30 gives higher utility than market basket on U = 20. Point S gives more utility to the consumer than point R, this is because S contains more of both good X and good Y. Also, point T gives same utility as point S because both S and T lie on the same indifference curve.

Hence by transitivity T gives more utility than point R. Thus market basket on higher indifference curves implies higher utility.