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Indifference curve is a curve that shows consumption bundles that give the consumer the same level of satisfaction. Indifference map, on the other hand Indifference curve is a graph of two or more indifference curves.
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a single indifference curve cannot cross itself.
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what will be the shape of indifference curve if one of the two goods is a free commodity
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The three major characteristics of an indifference curve are:
1. They are negatively sloped
2. They are convex to the origin
3. Indifference curve cannot be intersected
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Explain the consumer equilibrium with the help of indifference curve?
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the indifference curve has its usual negatively sloping shape
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Yes. The height of an indifference curve is the marginal rate of substitution.
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1) Concave down.
2) Always decreasing.
3) Represents a fixed utility value (and therefore can never intersect another indifference curve).
4) Is considered equally optimal any where on the curve.
5) The lower the indifference curve is, the less optimal it is. The optimal indifference curve is the one furthest away from the origin.
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No indifference curve can intersect because all points on indifference curve are ranked equally prefered and ranked either or less more prefered than every other point on the curve.rt
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The derivation of an individual consumer demand curve can be done using the indifference curve approach. This is done by preparing the demand schedule of a consumer from the price consumption curve.
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indifference curve approach show the combination of two goods that an individual would be willing to buy, and which would make the buyer equally satisfied (or different). indifference curve assume that more is preferred to less. thay are convex as seen from the origin. the indifference curve form an entire map of various level of satisfaction..
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Yes, that is true. It just cant cross another indifference curve because it would violate transtivity
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indifference curve is the graphical representation of the bundles of commodities for a given income level or budget that yields equal satisfaction at all the points.
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Indifference curve is a set of all the consumption bundles which are indifferent in the level of utility each bundle provide. Any bundle which provide higher utility will form another IC. Thus Indifference curve is a closed set.
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indifference curve is a combination of two commodities. where as, isoquant curve shows a relationship between of variable factor i.e. labour and fixed factor i.e. capital.
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The relationship between the indifference curve and perfect substitutes is that in the case of perfect substitutes, the indifference curve is a straight line. This means that the consumer is equally satisfied with either good and is willing to trade one for the other at a constant rate.
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Indifference curves can indeed be used to depict different kinds of preferences. An indifference curve is really a graph that is used to show different bundles of goods.
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the two difference of curve is radios
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It is the equilibrium point of utility maximization.
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budget line shows purchasing power of an consumer but indifference curve show willingness of consumer for two commodities.
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its something to do with a non satiation assumption. ie if all the bundles on the indifference curve are "goods" (actively wanted products) then the indifference curve slopes downward from L to R. if there is a "good" and a "bad" on the curve then it will be positively sloped. (upward from L to R)
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Indifference curve: ordinal-based preference structure, based on WARP (weak axiom of revealed preferences).
Marshellian: cardinal-based preference structure.
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Indifference curve is a curve.
A curve that is being intersected with the budget line.
In order to show the maximum satisfaction.
Dave Ono:
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indifference curve analysis is not much in use because it only tells us that demand curve has a negative slope except when they don't ....
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You find the tangent to the curve at the point of interest and then find the slope of the tangent.
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The MRS measures how much of a good you are willing to give up in exchange for one more unit of the other good, keeping utility constant. The MRS diminishes along a convex indifference curve in that as you move down along the indifference curve, you are willing to give up less and less of the one good in exchange for the other. The MRS is also the slope of the indifference curve, which increases (becomes less negative) as you move down along the indifference curve. The MRS is constant along a linear indifference curve, since in this case the slope does not change. The consumer is always willing to trade the same number of units of one good in exchange for the other.
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The tangency point of Indifference curve and budget line shows the Marginal Rate of Substitution between X and Y commodities. Consumer's equilibrium is achieved at that point.
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When income of consumer incresing this will lead the indifference curve to shift out ward in case for normal goods.So incresing in income of consumer it lead to incresing the purchasing power of consumer or consumer will demand much goods.
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i don not kno
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Marginal utility is the satisfaction a consumer receives from consuming an additional unit of a good The indifference curve shows different combinations of 2 goods that the consumer is indifferent towards
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To effectively draw an indifference curve, one should plot different combinations of two goods on a graph where the consumer is equally satisfied. The curve should be downward sloping and convex to the origin, showing the trade-off between the two goods.
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indifference curve is the loci of points, where each represents a combination of goods in different ratios but gives equal amount of satisfaction.
indifference curves help us to know which combinations of goods give us equal satisfaction and which increase it.
they dont intersect eachother thus its not possible for two indifference curves to have the same level of satisfaction.
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Consumer equilibrium is the point where consumer attains highest level of satisfaction. There are two conditions of equilibrium under ordinal approach
1- Necessary Condition:
'Budget line is tangent to the highest possible indifference curve.'
2- Sufficient Condition:
'At equilibrium, Indifference curve must be convex to the origin'
Thus, at equilibrium , Px/Py (absolute slope of Budget line) = dy/dx (absolute slope of Indifference Curve)
(In simple words, it'd determination of consumer's equilibrium with the help of Indifference curve.)
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Indifference curves are not supposed to have any thickness to them at all. It would not be rational if an indifference curve had thickness to it. It is supposed to look like a really thin pancake with only one side.
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indifferent curves are convex to their origin, they do not intersect, and have a negative slope
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It gives more satisfaction
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Indifference curve is locus of point of one combination of two product consume by consumer. To make satisfaction constant consumer if increase one product he have to sacrifice other product unit.
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Properties/Characteristics of Indifference Curve:
Definition, Explanation and Diagram:An indifference curve shows combination of goods between which a person is indifferent. The main attributes or properties or characteristics of indifference curves are as follows:
(1) Indifference Curves are Negatively Sloped:The indifference curves must slope down from left to right. This means that an indifference curve is negatively sloped. It slopes downward because as the consumer increases the consumption of X commodity, he has to give up certain units of Y commodity in order to maintain the same level of satisfaction.
In fig. 3.4 the two combinations of commodity cooking oil and commodity wheat is shown by the points a and b on the same indifference curve. The consumer is indifferent towards points a and b as they represent equal level of satisfaction.
At point (a) on the indifference curve, the consumer is satisfied with OE units of ghee and OD units of wheat. He is equally satisfied with OF units of ghee and OK units of wheat shown by point b on the indifference curve. It is only on the negatively sloped curve that different points representing different combinations of goods X and Y give the same level of satisfaction to make the consumer indifferent.
(2) Higher Indifference Curve Represents Higher Level:A higher indifference curve that lies above and to the right of another indifference curve represents a higher level of satisfaction and combination on a lower indifference curve yields a lower satisfaction.
In other words, we can say that the combination of goods which lies on a higher indifference curve will be preferred by a consumer to the combination which lies on a lower indifference curve.
In this diagram (3.5) there are three indifference curves, IC1, IC2 and IC3 which represents different levels of satisfaction. The indifference curve IC3 shows greater amount of satisfaction and it contains more of both goods than IC2 and IC1 (IC3 > IC2 > IC1).
(3) Indifference Curve are Convex to the Origin:This is an important property of indifference curves. They are convex to the origin (bowed inward). This is equivalent to saying that as the consumer substitutes commodity X for commodity Y, the marginal rate of substitution diminishes of X for Y along an indifference curve.
In this figure (3.6) as the consumer moves from A to B to C to D, the willingness to substitute good X for good Y diminishes. This means that as the amount of good X is increased by equal amounts, that of good Y diminishes by smaller amounts. The marginal rate of substitution of X for Y is the quantity of Y good that the consumer is willing to give up to gain a marginal unit of good X. The slope of IC is negative. It is convex to the origin.
(4) Indifference Curve Cannot Intersect Each Other:Given the definition of indifference curve and the assumptions behind it, the indifference curves cannot intersect each other. It is because at the point of tangency, the higher curve will give as much as of the two commodities as is given by the lower indifference curve. This is absurd and impossible.
In fig 3.7, two indifference curves are showing cutting each other at point B. The combinations represented by points B and F given equal satisfaction to the consumer because both lie on the same indifference curve IC2. Similarly the combinations shows by points B and E on indifference curve IC1 give equal satisfaction top the consumer.
If combination F is equal to combination B in terms of satisfaction and combination E is equal to combination B in satisfaction. It follows that the combination F will be equivalent to E in terms of satisfaction. This conclusion looks quite funny because combination F on IC2 contains more of good Y (wheat) than combination which gives more satisfaction to the consumer. We, therefore, conclude that indifference curves cannot cut each other.
(5) Indifference Curves do not Touch the Horizontal or Vertical Axis:One of the basic assumptions of indifference curves is that the consumer purchases combinations of different commodities. He is not supposed to purchase only one commodity. In that case indifference curve will touch one axis. This violates the basic assumption of indifference curves.
In fig. 3.8, it is shown that the in difference IC touches Y axis at point C and X axis at point E. At point C, the consumer purchase only OC commodity of rice and no commodity of wheat, similarly at point E, he buys OE quantity of wheat and no amount of rice. Such indifference curves are against our basic assumption. Our basic assumption is that the consumer buys two goods in combination.
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the same total satisfaction :)
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Hicks and Allen developed Ordinal approach or Indifference Curve Approach.
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Because of diminishing marginal rate of substitution, which is the principle that the more of one good a consumer has, the more they are willing to give up for an additional unit of the other good. Therefore the indifference curve must get flatter as we go along it
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A risk-averse individual's indifference curve shows that they prefer certainty over uncertainty in decision-making. This is because the curve will be steeper, indicating that they require a higher level of certainty to compensate for taking on any level of risk.
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