Question

Construct an indifference curve maps and explain why, assuming MU>0, that Indifference curves located farther from the origin represent higher levels of satisfaction.

Answer 1

An indifference curve shows all the combinations of two goods where the consumer gets equal satisfaction and Indifference map is a combination of many indifference curves, which we can see in the above diagram. We believe that consumers are rational and their preference is monotonic which means they would always prefer to consume more good as it gives them more utility. In the above diagram, we can see A is a point on the I1 curve and B is a point in I2 curve, at point B consumer is getting more good as compared to point A, so at point B our consumer will get more utility as compared to point A. So, from this, we can conclude that at higher indifference curve, the consumer is getting more good, which gives him more satisfaction, that's why he always prefers a combination of good on higher indifference curve.