PRINCIPLE OF DIMINISHING MARGINAL RATE OF SUBSTITUTION
The diagram of an Cinderella curve given already is a typical one. From the following paragraph’. it would become clear why indifference curves ‘norm have this shape. Besides, we shall notice the properties of typical indifference curves. There arc three characteristics of indifference curves. ti) Downward sloping to the right. Iii) Non-discriminating, and (iii) Convex to the origin.Higher I higher is the origin: in fig. (b), it is a straight line, and in . (e) it is concave to the origin. From Fig. (a) it is evident that the marginal rate of substitution (MRS) of for apples falls is smaller than ab) (b). the MRS of mangoes for apples remains constant which is against the normal behavior of MRS (diminishing). In Fig. (t’) it actually increases is larger than ab) which is quite the opposite of the normal behavior of MRS. We have already seen that normally the marginal rate of substitution of a commodity diminishes as we have more of it. In other words. the normal shape of an indifference curve would be convex to the origin, as in given in Fig. (a) below. The other two shapes given in Fig. (b) and Fig. (1′) arc unrealistic Having studied the concept of indifference curve and its properties. we arc now in a position to study the indifference curve analysis of demand.
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