An Indifference curve shows:

a. the one most desirable portfolio for a particular investor

b. all combinations of portfolios that are equally desirable to a particular investor

c. all combinations of portfolios that are equally desirable to all investors.

d. the one most desirable portfolio for all investor

Question

Business

Carolyn Simpson

19 September, 09:37

An Indifference curve shows:

a. the one most desirable portfolio for a particular investor

b. all combinations of portfolios that are equally desirable to a particular investor

c. all combinations of portfolios that are equally desirable to all investors.

d. the one most desirable portfolio for all investor

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Answers (1)

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Maldonado · Answer 1

The correct answer to the question is option B (all combinations of portfolios that are equally desirable to a particular investor).

Explanation:

An indifference curve is a downward sloping graph that cannot Intersect showing two products that a consumer has no preference. Depends on the level of that consumer's income, the consumer chooses two products that give similar utility. The consumer shows no preference for any of the two products because if the products are close substitutes, it will be easier for the consumer to show no preference as they both give similar satisfaction, that is, the difference in the products is not obvious because they both serve a similar purpose to a consumer.

An investor would consider the indifference curve of any portfolio with a good utility score considering risk and finances as the combination of portfolios which would give the most satisfaction.