Question

What is a real-life example of locally non-satiated but not monotone preferences? (Meaning, there is more of everything in bundle x but bundle y is preferred because it is on a higher indifference curve.)

Answer 1

An indifference curve is a locus of combinations of goods which derive the same level of satisfaction, so that the consumer is indifferent to any of the combination he consumes.If a consumer equally prefers two product bundles, then the consumer is indifferent between the two bundles. The consumer gets the same level of satisfaction (utility) from either bundle. Graphically speaking, this is known as the indifference curve. An indifference curve shows combinations of goods between which a person is indifferent.

Symbolically,in the equation form,

An Indifference Curve =

U=f(x1,x2,x3,.....xn)=kU=f(x1,x2,x3,.....xn)=k

......where, k is a constant.

*Higher Indifference Curve Represents Higher Level of Satisfaction:

Indifference curve that lies above and to the right of another indifference curve represents a higher level of satisfaction. The combination of goods which lies on a higher indifference curve will be preferred by a consumer to the combination which lies on a lower indifference curve.

Diagram:

In this diagram, there are three indifference curves, IC1, IC2 and IC3 which represents different levels of satisfaction. The indifference curve IC3 shows greater amount of satisfaction and it contains more of both goods than IC2 and IC1. IC3 > IC2> IC1.

Thus due to this property of indifference curve, a person will always choose the jungle higher on indifference curve, no matter what it offers.

Thus, for a real life example suppose -

Mr. Anderson's choices are either more quantity of the same kind of fruit or less quantity of variety of fruits. Obviously for him, a variety would be the better option because he can not keep on eating the same fruit again and again. Thus he will choose less quantity but higher indifference curve.