Properties of Indifference Curves

The valuation of a good declines as it is consumed more intensively—therefore, indifference curves are always convex. As we noted above, the slope of the indifference curve represents the willingness of the individual to substitute one good for the other. This is also defined as the marginal rate of substitution (MRS), which refers to the amount of good X that is just sufficient to compensate the consumer for the loss of a unit of the good Y. Reflecting the principle of diminishing marginal utility, MRS of a good Y will decline as the good X is consumed more intensively relative to other goods Y. This means that as his or her consumption of good X increases (and his or her consumption of good Y declines), his or her valuation of good X relative to good Y will decline, and vice versa. Therefore, since the valuation of each good declines as it is consumed more intensively, indifference curves must be convex to the origin.