Which of the following is true about indifference curves?

• A. Indifference curves shift outward as income increases
• B. When a consumer has more of one good, they are less willing to exchange it for a unit of another good
• C. Indifference curves show all combinations of goods that result in the same level of utility
• D. Both (a) and (c)

Answer: (C)

Verified step by step guidance

1. Understand the concept of an indifference curve: An indifference curve represents a set of bundles of goods between which a consumer is indifferent, meaning each combination provides the same level of utility or satisfaction.
2. Analyze option (a): Indifference curves do not shift outward with an increase in income. Instead, an increase in income typically leads to a shift in the budget constraint, allowing the consumer to reach higher indifference curves, but the curves themselves do not shift.
3. Evaluate option (b): This statement is related to the concept of diminishing marginal rate of substitution, which suggests that as a consumer has more of one good, they are generally less willing to give up units of another good to get more of the first good. However, this statement does not directly describe indifference curves.
4. Consider option (c): This is the correct definition of indifference curves. They show all combinations of two goods that provide the consumer with the same level of satisfaction or utility.
5. Review option (d): Both (a) and (c) cannot be correct because (a) is incorrect. Therefore, the correct answer is option (c) alone, which accurately describes the nature of indifference curves.