The indifference curves have a number of attributes and interesting properties which have come to be known as. They slope negatively or slope downwards from the left to the right 2. Developed by the irishborn british economist francis y. The main attributes or properties or characteristics of indifference curves are as follows. The indifference curve has a convex shape because as you consume more of the same product, your marginal utility, i. The principles and characteristics of indifference curve analysis.
When we move along an ic, our utility from the combination of two goods remains. In the second diagram, if we look at lancaster demand, our utility functions will be based on the characteristics that each basket contains rather than on the amount of each type of good. An indifference curve is negatively inclined sloping downward. Indifference curves are graphical representations of various combinations of two commodities which an individual considers equally valuable. It doesnt have dependent and independent variables in. Consumer choice which of the following is a key characteristic of the indifference curve. Indifference curve, in economics, graph showing various combinations of two things usually consumer goods that yield equal satisfaction or utility to an individual. In other words, the indifference curve is the graphical representation of different combinations of goods generally two, for which the consumers are indifferent, in terms of the overall satisfaction and the utility.
Indifference curve, in economics, graph showing various combinations of two things usually consumer goods that yield equal satisfaction or utility to an individual developed by the irishborn british economist francis y. Four properties of indifference curves quickonomics. There are four important properties of indifference curves that describe most of them. As an indifference curve is convex to the origin, similarly an isoproduct curve is also convex to the origin. If you continue browsing the site, you agree to the use of cookies on this website. This document is highly rated by commerce students and has been viewed 33223 times. Top 6 properties of indifference curve with diagram. Indifference curve analysis ppt linkedin slideshare. Reviewed by raphael zeder last updated sep 28, 2019 published may 15, 2017. The indifference curve analysis was developed by the british economist francis ysidro edgeworth, italian economist vilfredo pareto and others in the first part of the 20th century. For the love of physics walter lewin may 16, 2011 duration.
However, even though brand 1 got cheaper, well still consume a, since it remains on a higher indifference curve. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different combination on the same curve. Indifference curve adopted the concept of ordinal utility instead of cardinal utility. Ic1 represents the indifference set d,c,b,a while ic2 represents the basket or indifference set g,f,e. The indifference curves must slope down from left to right. The indifference curve um has four points labeled on it. Similarly, points a and c on ic 2 also give the same level of satisfaction. It is assumed that the consumer has a fixed amount of money, whole of which is to be spent on the two goods, given constant prices of both the goods.
Meaning an indifference curve is a graphical presentation of locus of all such points which shows different combinations of two commodities which gives equal satisfaction to the consumer indifference set it is set of combination of two commodities which offer a consumer the. The level of output being same, the producer will be indifferent across all the combinations on the isoquant. Bain is at point s, consuming 4 days of skiing and 1 day of horseback riding per. It is assumed that the consumer has not reached the point of saturation. This violates the basic definition of an indifference curve. Any combination lying on this curve gives the same level of consumer satisfaction. And, that tangent lines slope is the slope of the indifference curve at that particular point. This is based on consumer preference and believes that we cannot quantitatively measure human satisfaction in monetary terms. Thus, the tradeoff between the goods that the individual is willing to undertake mrs. The indifference curve shows the different combinations of two goods that give equal satisfaction and utility to the consumers. Indifference curves ic are those curves which shows the relationship between two goods such that the different combinations of two goods on an ic gives same utility.
In the second diagram, if we look at lancaster demand, our utility functions will be based on the characteristics that each basket contains rather than. The slope of an indifference curve shows the rate at which two goods can be exchanged without affecting the consumers utility. Thus the basis of indifference curve approach is the preference indifference hypothesis. All points on ic2 are preferred to all points on ic1. Ordinal approach indifference curve characteristics budget line equilibrium of consumer. It means, only one indifference curve will pass through a given point on an indifference map.
An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. An indifference map is a set of indifference curves. Indifference curvesbudget lines a c b d e income 100 income 140 income 124 utility 714 utility 892 q2 q1 economics 101 spring 2001 section 4 hallam exam 2a blue for questions 16 consider the diagram below. Learn characteristics of indifference curves with free interactive flashcards.
In an isoproduct curve a factor of production is substituted by another factor of production and consequently the marginal rate of technical substitution of labour for capital mrts lk declines and on account of decreasing mrts lk. It implies that the consumer is capable of simply comparing different levels of satisfaction. That is, any combinations of two products indicated by the curve will provide the consumer with equal levels of utility, and the consumer has no preference for one combination or bundle of goods over a different. Choose from 254 different sets of characteristics of indifference curves flashcards on quizlet. Which of the following is characteristic of indifference curves a they are from econ 101 at uea. This means that an indifference curve is negatively sloped. Examples of indifference curves kent state university. Edgeworth, it is widely used as an analytical tool in the study of consumer behaviour, particularly as related to consumer demand. An indifference curve represents a series of combinations between two different economic goods, between which an individual would be theoretically indifferent regardless of. Since an indifference curve represents a set of choices that have the same level of utility, lilly must receive an equal amount of utility, judged according to her personal preferences, from two books and 120 doughnuts point a, from three books and 84 doughnuts. What are the properties of the indifference curves. This property implies that an indifference curve has a negative slope.
The group of indifference curves is called an indifference map. Indifference curve being downward sloping means that when the amount of one good in the combination is increased, the amount of the other good is reduced. This implies that the isoquant is a negatively sloped curve. Jan 12, 2018 in microeconomics, indifference curve is an important tool of analysis in the study of consumer behavior. Jun, 2017 in this video, arizona state universitys professor joana girante will show you how to graph an indifference curve. Indifference curves operate under many assumptions, for example, each. Indifference map means a set of indifference curves drawn from the original curve shows a higher level of satisfaction. Allen in their research paper, a reconsideration of the theory of. Understanding indifference curves page 2 of 3 this indifference curve, at this particular point, with four toys and three snacks, we would look for the straight line that is tangent to or touches the curve at that point. All the choices on this indifference curve have the same utility.
The indifference curves have a number of attributes and interesting properties which have come to be known as characteristic features or properties of indifference curves. At a more advanced level, economists often rely on a more formal techniqueindifference curve analysis to present this material. Mar 08, 2017 for the love of physics walter lewin may 16, 2011 duration. At the optimum, the indifference curve is tangent to the budget constraint so their slopes are equal. An indifference curve is always convex to the origin. This approach assigns an order to consumer preferences rather than measure them in terms of money. It depicts the complete picture of a consumers preferences. The fourth property of indifference curve is that no two indifference v curves can ever cut each other. An indifference curve is normally drawn as convex to the origin this reflects the assumption of the law of diminishing marginal satisfaction marginal utility i. A graph of indifference curves for several utility levels of an individual. May 06, 2020 chapter indifference curve chapter notes, micro economics, class 12 edurev notes is made by best teachers of commerce.
An indifference curve is a graphical representation of a combined products that gives similar kind of satisfaction to a consumer thereby making them indifferent. An indifference curve is smooth and continuous which means that the two goods are highly divisible and that level of satisfaction also change in a continuous manner. An indifference curve shows all of the amounts of goods that give the consumer the same level of satisfaction. Indifference curve analysis the utility analysis suffers from a defect of subjective nature of utility i. An indifference curve can be drawn through any point. Shell also introduce you to marginal rates of substitution dont worry. Examples of indifference curves apples and bananas \ a b 1 5 7 2 4 3 8 6 i2 i1 examples of indifference curves apples and bananas \ a b 1 5 7 2 4 3 8 6 i2 i1 i3 examples of indifference curves more to come done the basic model of utility maximization some applications to indifference curve we continue this topic in the next.
Characteristics of indifference curves flashcards quizlet. The indifference curve approach managerial economics. In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. The concept of indifference curve analysis was first propounded by british economist francis ysidro edgeworth and was put into use by italian economist vilfredo pareto during the early 20th century. Every point on the indifference curve shows that an individual or a consumer is indifferent between the two products as it gives him the same kind of utility. Since point a is an indifference curve ic 2, it represents a higher level of satisfaction to the consumer c than point b which is located on the lower indifference c curve ic 1. This diagram on xaxis show good x and on yaxis good y. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.
In microeconomics, the indifference curve analysis is an important analytical tool in the study of consumer behaviour. Which of the following is characteristic of indifference. Basic characteristics of an isoquant are same as that of an indifference, hence, they are discussed briefly with regard to an isoquant below. That is, in reality, when we relax these artificial. An indifference curve shows combination of goods between which a person is indifferent.
The main properties of the isoquants are similar to those of indifference curves. Utility functions and indifference curves questions 1 for the part of the function shown in the graph, are preferences complete. If an indifference curve touches horizontal axis or vertical axis, it implies that the customer prefers only one commodity because when it touches axes, one of the commodities becomes zero quantity. A popular alternative to the marginal utility analysis of demand is the indifference curve analysis. In this video, arizona state universitys professor joana girante will show you how to graph an indifference curve. Use and impact in economics, which covers these topics. An indifference curve is a locus of points at which consumer is indifferent between different consumption bundles i.
At the point of equilibrium, indifference curve must be convex to the origin. An indifference curve represents various combinations of two commodities. A given budget line must be tangent to an indifference curve, or the marginal rate of substitution between commodity x and commodity y mrs x,y must be equal to the price ratio between the two goods math\fracpxpymath. In chapter 20 chapter 7 in the micro split, we used marginal utility analysis to develop the demand curve of an individual. According to it when a consumer is presented with a number of various combinations of goods, he can order or rank. Pdf the thesis of this paper is that when the indifference curve is concave to the origin, the optimal point on the budget line is not the corner. An indifference curve is an implicit function that has the amounts of goods as variables. It doesnt have dependent and independent variables in the sense of there being a cause and effect. Chapter indifference curve chapter notes, micro economics. It is the locus of points representing pairs of quantities between which the.
Characteristics of indifference curves with diagram. They are used to analyze consumer preferences and a number of other concepts. Hence, it is also named as producers indifference curve. In microeconomics, indifference curve is an important tool of analysis in the study of consumer behavior. Propertiescharacteristics of indifference curve definition. If the various combinations are plotted on a diagram and are joined by lines, this becomes an indifference curve, as i in the figure 1. Learn more about indifference curves by viewing the lesson titled indifference curves.
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