Lilly has many books and few doughnuts. From this starting point, her marginal utility gained from extra

books will be relatively low, while the marginal utility lost from additional doughnuts would be relatively

high—so on the margin, it will take a relatively smaller number of doughnuts to offset the change of one

marginal book. In short, the slope of the indifference curve changes because the marginal rate of

substitution—that is, the quantity of one good that would be traded for the other good to keep utility

constant—also changes, as a result of diminishing marginal utility of both goods.

The Field of Indifference Curves

Each indifference curve represents the choices that provide a single level of utility. Every level of utility will

have its own indifference curve. Thus, Lilly’s preferences will include an infinite number of indifference curves

lying nestled together on the diagram—even though only three of the indifference curves, representing three
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