Evaluate the theoretical properties of an indifference curve in ordinal utility consumer theory. Why do standard indifference curves exhibit a convex shape relative to the origin?

💡 Solution & Explanation

The convexity of a standard indifference curve reflects the diminishing marginal rate of substitution, meaning a consumer requires increasingly larger quantities of one good to give up successive units of another. Linear indifference curves represent perfect substitutes, whereas right-angled curves represent perfect complements. Consumer equilibrium is achieved where the budget line is tangent to the highest attainable indifference curve.