The degree of convexity of an indifference curve depends on the rate of decline in the marginal rate of substitution of X for Y. When two goods are the perfect substitutes of each other, the indifference curve is a straight line on which marginal rate of substitution remains constant. Straight line indifference curves of perfect substitutes are shown in given figure. The better the substitutes two goods are for each other, the closer the indifference approaches to the straight line, so that when the two goods are perfect substitutes, the indifference curve is a straight line. In case of perfect substitutes, the indifference curves are parallel straight lines.because the consumer equally prefers the two goods and is willing to exchange one good for the other at a constant rate. As one moves along a straight line indifference curve of perfect substitutes, marginal rate of substitutions of one good for another remains constant. For example, two different brands of tea such as Tata Tea and Tajmahal Tea, two different brands of cold drink such as Pepsi and Thums Up.
The greater the decline in marginal rate of substitution, the more the convexity of the indifference curve. The less the ease with which two commodities can be alternative for each other, the more will be the decline in marginal rate of substitution. At the highest, when two goods cannot at all be substituted for each other, that is, when the two goods are perfect complementary goods, as for example bread and butter, the indifference curve will consist of two straight lines with a right angle bent which is convex to the origin. Perfect complementary commodities are utilized in a certain fixed ratio.
The left hand portion in figure of an indifference curve shows the perfect complementary goods through vertical straight line which indicates that an endless amount of Y is necessary to substitute one unit of X, and the right hand side portion in figure of an indifference curve shows horizontal straight line which means that an endless amount X is necessary to substitute unit of Y all means that the two perfect complements are utilized in a certain fixed ratio and cannot be substituted for each other.
Figure shows that two perfect complements are consumed in the ratio, 3X : 2Y. Complements are thus those goods which are used jointly in consumption so that their consumption increases or decreases simultaneously. Pen and Ink, Right Shoe and Left Shoe, Automobile and Petrol, Sauce and Hamburger, Typewriter and Typists are important examples of perfect complements.
