Chapter EMD, Problem 1DS

To determine

What would it indicate about preferences for two goods when indifference curves were vertical and examples of pairs of goods in this situation?

Explanation of Solution

As combinations of items that offer a similar amount of utility or satisfaction are represented by an indifference curve which means when the indifference curve is vertical then the goods are perfect substitutes because the good which is on the vertical axis will offer zero utility and the assortment of goods is considered to include ideal replacements. Here the preferences of people will move to one substitute which provides the maximum level of satisfaction.

For instance, tea and coffee are the goods for which people can choose one which they like or the product which they prefer to consume to get maximum satisfaction would deliver a vertical shape of indifference curve as the utility of the one good will become zero. Moreover, in the case of physical books or online books, people can also choose one which would be convenient and cost-effective for them and they will leave the preference for one good that will make the shape of the indifference curve vertical.

Economics Concept Introduction

Introduction: People's levels of contentment are difficult for them to quantify and by making indifference curves they would be able to and do recognize which options might increase, decrease, or provide them with the same level of satisfaction.