Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 7 Topics for Further Study
Chapter 21 of 36 The Theory of Consumer Choice
Section 8 of 26
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Figure 4 here
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Figure 4 – Bowed Indifference Curves
Indifference curves are bowed inward.
This shape
· shows the marginal rate of substitution (MRS)
· depends on the quantity of the two goods the consumer is currently consuming
Starting at point A the consumer has little pizza (3) and much Pepsi (😎.
He requires much extra Pepsi to induce him to give up one of the pizzas, to move from point A to point C.
The A to C MRS is 6 pints of Pepsi for 1 pizza.
Starting at point B the consumer has much pizza (7) and little Pepsi (3).
He requires only a little extra Pepsi to induce him to give up one of the pizzas, to move from B to D.
The B to D MRS is 1 pint of Pepsi for 1 pizza
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Here we consider four properties of most indifference curves.
Property 1 – higher (further right) indifference curves are preferred to lower ones
Property 2 - indifference curves are downward sloping
Property 3 - indifference curves do not cross
Property 4 - indifference curves are bowed inward
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Property 4 - indifference curves are bowed inward
The slope of an indifference curve is the marginal rate of substitution (MRS).
This is the rate at which the consumer is willing to trade one good for the other.
The MRS depends on the amount of each good the consumer is currently consuming.
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On Figure 4 at point A the consumer has much Pepsi and little pizza.
He is very hungry but not very thirsty.
To induce him to give up 1 pizza, he has to be given 6 pints of Pepsi.
Here the MRS is 6 pints of Pepsi per pizza.
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At point B the consumer has little Pepsi and much pizza
He is very thirsty but not very hungry.
To induce him to give up 1 pizza, he has to be given 1 pint of Pepsi.
Here the MRS is 1 pint of Pepsi per 1 pizza.
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The inward-bowed shape of the indifference curve reflects the consumer’s
· greater willingness to give up a good he now has in large quantity
· lesser willingness to give up a good he now has in small quantity
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