The effectiveness of using indifference curves to illustrate the functioning of an economic system depends on the assumption that

  • individuals make prudent choices in the things they consume.
  • given a budget constraint, an individual will choose the level of consumption that provides him or her with the highest feasible indifference curve.
  • individuals have access to all products that are available in all markets.
  • the relative price of products is the same in all countries.

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