Question

Recall that two of the assumptions we made about people’s preferences are that they are consistent and that more is preferred to less. True or false: these two assumptions imply that indifference curves cannot cross.

Answer 1

TRUE

An indifference curve is a curve showing combination of two goods that gives the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent as each point gives him or her the same amount of utility. The higher the indifference curve, the more of the two goods are consumed and thus higher the utility derived.

In the figure above, IC1 and IC2 cut each other at point C. As stated above, a consumer is indifferent between the points on the same indifference curve as they provide him with the same utility. That implies that consumer is indifferent between point C and point B and also between point A and point C This can be written as :

U(C)=U(B)

U(C)=U(A)

This would imply that a consumer must be indifferent between point A and point B. But as consumer has consistent preferences and more is preferred over less, this mean that utility from A must be higher than utility from B and thus it implies that two ICs cannot intersect each other.