Question

Explain the following:

What will be the shape of an indifference curve when Two goods are perfect substitutes?

Answer 1

When two goods are perfect substitutes, the consumer is willing to substitute one good for the other at a constant rate. This means the marginal rate of substitution (MRS) remains constant. As a result, the indifference curve is a straight line sloping downwards from left to right, indicating equal utility at all combinations along the line.