higher levels of utility. Indifference curves slope downward because, if utility is to remain the same at all points

along the curve, a reduction in the quantity of the good on the vertical axis must be counterbalanced by an

increase in the quantity of the good on the horizontal axis (or vice versa). Indifference curves are steeper on

the far left and flatter on the far right, because of diminishing marginal utility.

The utility-maximizing choice along a budget constraint will be the point of tangency where the budget

constraint touches an indifference curve at a single point. A change in the price of any good has two effects: a

substitution effect and an income effect. The substitution effect motivation encourages a utility-maximizer to

buy less of what is relatively more expensive and more of what is relatively cheaper. The income effect

motivation encourages a utility-maximizer to buy more of both goods if utility rises or less of both goods if
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