AP_Krugman_Textbook

Goods that satisfy all four properties of indifference curve maps are called ordinary
goods. The vast majority of goods in any consumer’s utility function fall into this cate-
gory. Below we will define ordinary goods more precisely and see the key role that di-
minishing marginal utility plays for them.

Indifference Curves and Consumer Choice

Above we used indifference curves to represent the preferences of Ingrid, whose con-
sumption bundles consist of rooms and restaurant meals. Our next step is to show how
to use Ingrid’s indifference curve map to find her utility-maximizing consumption

module 80 Appendix 791

Quantity of rooms

Quantity of rooms

Quantity of rooms

Quantity of rooms

Quantity of

restaurant

meals

Quantity of

restaurant

meals

Quantity of

restaurant

meals

Quantity of

restaurant

meals

A

W

A

I 2

I 2

I 1

I

I

I 1

(b) Additional Properties of Indifference Curves for Ordinary Goods

(a) Properties of All Indifference Curves

B

A

B

X

Y

Z

200 utils

200 utils

100 utils

100 utils

Steeper

slope

Flatter

slope

figure 80.4

Panel (a) represents two general properties that all indifference

curves share. The left diagram shows why indifference curves

cannot cross: if they did, a consumption bundle such as A would

yield both 100 and 200 utils, a contradiction. The right diagram of

panel (a) shows that indifference curves that are farther out yield

higher total utility: bundle B, which contains more of both goods

than bundle A, yields higher total utility. Panel (b) depicts two addi-

tional properties of indifference curves for ordinary goods. The left

diagram of panel (b) shows that indifference curves slope down-

ward: as you move down the curve from bundle W to bundle Z,

consumption of rooms increases. To keep total utility constant, this

must be offset by a reduction in quantity of restaurant meals. The

right diagram of panel (b) shows a convex-shaped indifference

curve. The slope of the indifference curve gets flatter as you move

down the curve to the right, a feature arising from diminishing

marginal utility.

Properties of Indifference Curves