Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.
Also, what are the properties of an indifference curve?
There are four important properties of indifference curves that describe most of them: (1) They are downward sloping, (2) higher indifference curves are preferred to lower ones, (3) they cannot intersect, and (4) indifference curves are convex (i.e. bowed inward).
Furthermore, what is indifference curve example? Two commodities are perfect substitutes for each other – In this case, the indifference curve is a straight line, where MRS is constant. Two goods are perfect complementary goods – An example of such goods would be gasoline and water in a car. In such cases, the IC will be L-shaped and convex to the origin.
Similarly, what does indifference curve mean?
In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer.
Is a utility function the same as an indifference curve?
The utility function defines the level of utility or satisfaction as a function of the quantities of commodities consumed. An indifference curve shows all of the amounts of goods that give the consumer the same level of satisfaction.
Similar Question and The Answer
What are the uses of indifference curve?
The indifference curve analysis has also been used to explain producer's equilibrium, the problems of exchange, rationing, taxation, supply of labour, welfare economics and a host of other problems. Some of the important problems are explained below with the help of this technique.
What is the slope of the indifference curve?
The slope of the indifference curve is called the marginal rate of substitution , which declines as the quantity of X increases relative to the quantity of Y. Of course, the amounts of commodities X and Y that the individual will be able to consume depends on the level of that person's income.
What are the properties of budget line?
Properties of Budget Line Negative Slope: It slopes downward showing an inverse relationship between the buying of the two goods. Straight Line: It is a straight line which denotes the constant market rate of exchange at each combination.
Why does higher indifference curve give more satisfaction?
Higher indifference curve represents a higher level of satisfaction because higher IC means a bundle consisting more of both the goods or same quantity of one good n more quantity of the other good .
Why indifference curve is convex to the origin?
Indifference curves are convex to the origin because as the consumer begins to increase his or her use of one good over another, the curve represents the marginal rate of substitution. The marginal rate of substitution goes down as the consumer gives up one good for another, so it is convex to the origin.
What are the differences and similarities between an Isoquant and an indifference curve?
An isoquant is analogous to an indifference curve in more than one way. In it, two factors (capital and labour) replace two commodities of consumption. An isoquant shows equal level of product while an indifference curve shows equal level of satisfaction at all points.
Can indifference curve cross itself?
A single indifference curve cannot cross(intersect) itself because by so doing,the indifference curve will be yielding two levels of satisfaction at the same time and in general economics,this is impossible since a consumer only has one level of satisfaction/utility which he/she gains by consuming different combination
Why indifference curve is downward sloping?
The indifference curve is drawn as a downward slope from left to right; in other words, it is negatively sloped. This is because as the consumer increases the consumption of a particular commodity (X), he or she must sacrifice units of the other commodity (Y) to maintain the same level of satisfaction.
What is indifferent behavior?
Assertive indifference is a type of behavior that purposely blocks any type of external reaction, in any given situation. You act as if it doesn't matter to you and doesn't affect you in any way. It is a type of simulated behavior, because the purpose is to not reveal to the other person what you are really feeling.
Why is indifference curve L shaped?
An indifference curve is the curve at every point of which the utility would remain same. The indifference curve of perfect complementary goods is 'L' shaped. This is because the utility of Left shoe would be zero without a Right shoe and vice versa.
What does it mean to be indifferent?
adjective. without interest or concern; not caring; apathetic: his indifferent attitude toward the suffering of others. having no bias, prejudice, or preference; impartial; disinterested. neither good nor bad in character or quality; average; routine: an indifferent specimen.