440 PART VII tOpICS FOr FUrther StUDY
indifference curve as point C, these two points would make the consumer
equally happy. But these conclusions imply that points A and C would also
make the consumer equally happy, even though point C has more of both
goods. This contradicts our assumption that the consumer always prefers
more of both goods to less. Thus, indifference curves cannot cross.
• Property 4: Indifference curves are bowed inward. The slope of an indifference
curve is the marginal rate of substitution—the rate at which the consumer is
willing to trade off one good for the other. The marginal rate of substitution
usually depends on the amount of each good the consumer is currently
consuming. In particular, because people are more willing to trade away
goods that they have in abundance and less willing to trade away goods
of which they have little, the indifference curves are bowed inward. As an
example, consider Figure 4. At point A, because the consumer has a lot of
Pepsi and only a little pizza, she is very hungry but not very thirsty. To induce
the consumer to give up 1 pizza, she has to be given 6 liters of Pepsi: The
marginal rate of substitution is 6 liters per pizza. By contrast, at point B, the
consumer has little Pepsi and a lot of pizza, so she is very thirsty but not very
hungry. At this point, she would be willing to give up 1 pizza to get 1 liter of
Pepsi: The marginal rate of substitution is 1 liter per pizza. Thus, the bowed
shape of the indifference curve reflects the consumer’s greater willingness to
give up a good that she already has in large quantity.
21-2c Two Extreme Examples of Indifference Curves The shape of an indifference curve tells us about the consumer’s willingness to
trade one good for the other. When the goods are easy to substitute for each other,
the indifference curves are less bowed; when the goods are hard to substitute,
the indifference curves are very bowed. To see why this is true, let’s consider the
extreme cases.