ON A MORE GENERAL RATIONALE FOR CIRCULAR INDIFFERENCE CURVES

Many texts display circular indifference curves. The rationale for such curves typically requires that goods become bads — that is, their marginal utilities become negative — over some range (e.g., Baumol [1], p. 199). In this note we develop what seems to be a far more general and intuitively appealing rationale for “approximately circular” indifference curves. This rationale suggests that the phenomenon may be far more widespread than previous analysis implies.