Smoothness of indifference curve means
X and Y are substitutes of each other
X and Y can be consumed in fixed proportion
Perfect divisibility of two goods
Perfect non divisibility of two goods
Imagine a budget constraint between good y on the vertical axis and good x on the horizontal. How would that budget line be effected if both income and the price of both goods fell?
The new budget line will have the same slope as the original so long as the price of both goods change in the same proportion
The new budget line must be parallel to the old budget line
The budget line must become shallower
The budget line would not shift
When MRS is constant x and y are :
Not related
Perfect Substitutes
Perfect Complements
Inferior Goods
