Q340
In the case of two perfect substitutes, the indifference curve will be
A.
Straight line
AnswerB.
L-shaped
C.
U-shaped
D.
C-shaped
Answer: Option A
Solution
Answer: Option A
Solution:
In the case of two perfect substitutes, the indifference curve will be Straight line. This is because perfect substitutes have a fixed ratio of substitution. An indifference curve is usually concave towards the origin because the two goods are usually not perfect substitutes. This means that the exchange rate varies hence the slope of the line tangent to the curve (exchange rate) varies.