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Question
Will you defend or refute the case depicted in the following diagram? Provide a rationale in support of your view.
Solution
The diagram shows a straight-line Indifference curve, which is to be refuted. IC cannot be a straight line in general for imperfect substitute goods. Here, always, the same amount of good B is sacrificed for every additional unit of good A. That is, MRS is constant. However, the concept of the indifference curve, in general, is based on the assumption of DMRS. Therefore, the case depicted in the diagram should be refuted on the grounds of a violation of the assumption of DMRS.
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