Question

I can't figure this problem out! The problem is: Show the relationship between income and crime using indifference curves.

Answer 1

Let us support income as a good commodity more the individual and crime as a bad commodity for the individual. This is because consumer wants more and more of income but does not want more and more of crime.

Now, we can easily contruct an IC by taking crime on the y axis and income on the x axis. The IC will come out to be an upward sloping IC.

This is because the consumer is ready to tolerate more amounts of crime only if he is getting more and more of income so that he remains indifferent between the both. All the bundles with lesser amounts of crime and more income will be strictly preferred by the individual. Hence, we cannot draw an IC through those points.

IC can be drawn only through those points where the consumer gets the same amount of utility and there is no preference of one bundle over the other.

Now, in order to stay indifferent between income and crime, an individual will be ready to tolerate more of crime, only if he is compensated by more and more of income. Hence, the IC comes out to be upward sloping.