Explain the characteristics of indifference curve. The Indifference Curve Analysis 2019-02-10

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What Are Characteristics of an Indifference Curve?

explain the characteristics of indifference curve

This is the reason that indifference curves cannot intersect each other since the beginning of breaks same level of utility. So, he cannot be indifferent to the combinations. For example if an individual prefers good A to good B and good B over good C. Delta Y, the change in Y over change in X, is equal to the slope. Indifference Curve can never intersect each other: 5.

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What are the Properties of the Indifference Curves?

explain the characteristics of indifference curve

However, the fact is that you can draw an infinite number of indifference curves between two indifference curves. Because satisfaction derived from a commodity differs from person to person. Let's say that right now, at some point, I am consuming 5 pounds of fruit per month and 15 bars of chocolate per month. Perfect complementary goods are used in a certain fixed ratio. Therefore, two indifference curves cannot intersect. Right where we are now, exactly at this point.

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Describe the characteristics of indifference curve

explain the characteristics of indifference curve

We therefore conclude that indifference curves are generally convex to the origin. Consumer choices are consistent with a simple postulate of rationality. It is for this reason that we reject indifference curves of concave or straight-line shapes and assume that indifference curves are normally convex to the origin. Consistency and transitivity of choice: It is assumed that the consumer is consistent in his choice that is, if he chooses bundle x over y in any over period, then he will not choose y over x in another period. If, for instance, the amount of good X is increased in the combination, while the amount of good Y remains unchanged, the new combination will be preferable to the original one and the two combinations will not therefore lie on the same indifference curve provided more of a commodity gives more satisfaction. Higher indifference curve represents higher level of satisfaction. This must be so if the level of satisfaction is to remain the same on an indifference curve.

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How to Construct Indifference Curves

explain the characteristics of indifference curve

Complements are thus those goods which are used jointly in consumption so that their consumption increases or decreases simultaneously. The indifference curves, as we move away from the origin of coordinates, imply higher consumption and, therefore, increasing levels of utility. To prove this, let us take a concave curve where the marginal rate of substitution of X for Y increases instead of diminishing, i. Also, two goods can never perfectly substitute each other. Exactly at that point it's going to change as things change along this curve. That is my indifference curve.

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4 Important Properties of Indifference Curve (with curve diagram)

explain the characteristics of indifference curve

Just think about it, if someone were to ask you if you wanted a free slice of pizza or an entire pizza for free, what would you say? Indifference curve An indifference curve is a locus of all combinations of two goods which yield the same level of satisfaction utility to the consumers. Check out the illustration below to see this. I've introspected on what I like and what I derive benefit and satisfaction out of and I get the same total utility out of either of these points. For next one unit X 3 X 4 of 'X', the consumer would like to give up only Y 3 Y 4 units of 'Y'. Thiswould be a zero slope line.

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Indifference Curve

explain the characteristics of indifference curve

That is, the budget constraint is determined both by consumer income as the relative prices of goods. Now, I want more puppies, but less garbage. Over here you're willing to give up fewer bars for every incremental fruit. I don't know, this looks like about 5 pounds of fruit. He cannot therefore indifferent between P and Q.


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Indifference Curve

explain the characteristics of indifference curve

Rational consumers According to this theory, a consumer always behaves in a rational manner, i. Indifference curves are drawn based on the consumer's presumed indifference. Over here you have a lot of bars and not a lot of fruit, so you're willing to give up a lot of bars for fruit. This is absurd and impossible. This simply shows that its becomes very difficult for the consumer to substitute x for y as x is relatively in abundance as compared toy at point B.

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Indifference Curve Analysis: Concept, Assumption and Properties

explain the characteristics of indifference curve

Secondly, the rate of substitution between the two commodities need not be the same in all the indifference schedules. For example, if I have puppies andgarbage. He gets maximum satisfaction from these goods and never changes this situation. 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. Assumption: The points A and B on the indifference curve are so close to each other that they almost fall on the same straight line Tt which is touching the indifference curve. Or, you can say this is equal to negative 2.

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Characteristics of Indifference Curves (with diagram)

explain the characteristics of indifference curve

Substitutes and complements The shape of an indifference curve is helpful to understand whether commodities under consideration are substitutes or complements. Change in Y when I get a certain change in X, when I get a certain change in X. So indifference curve is convex to the origin. This forms a diminishing marginal rate of substitution. In other words, point A gives as much utility as point B to the individual.


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