Economics • Economic BasicsHard
In the context of consumer choice theory, what does a downward-sloping, convex indifference curve signify?
A. Perfect substitutability between goods and increasing marginal rate of substitution
B. Perfect complementarity and constant marginal rate of substitution
C. Diminishing marginal rate of substitution and a preference for variety✓ Correct Answer
D. Fixed proportions in consumption and negative utility for one of the goods
💡 Solution & Explanation
A downward-sloping, convex indifference curve illustrates a diminishing marginal rate of substitution, indicating that consumers prefer diversified consumption bundles. Perfect substitutes generate straight-line indifference curves rather than convex curves with variable marginal rates of substitution.
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