# Characteristics of indifference curve. Indifference Curves 2019-01-07

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## Four Properties of Indifference Curves If we depict this in the form of a curve, we get an indifference curve. The monolithic approach has been implemented time and time again, therefore the costs, challenges, and benefits are known. The following diagram will help you understand this property clearer. We, therefore, conclude that indifference curves cannot cut each other. This is a rational approach to get as much of an item as possible.

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## Indifference Curve Analysis A person would receive the same utility satisfaction from consuming 4 hours of work and 6 hours of leisure, as they would if they consumed 7 hours of work and 3 hours of leisure. However, the analysis has its limitations. The consumer will purchase 3 kg. In a way it contributes to the Welfare economics. You would also not be less happy with more air. The meeting of two indifference curves at a point will also lead us to an absurd conclusion.

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## Properties of Indifference Curves Such indifference curves are against our basic assumption. As soon as you move, because this is a curve, it changes a little bit. Indifference curves always slope downwards from left to right. Both produce in the range where marginal revenue is positive. In other words, the indifference curve is relatively flatter in its right-hand portion and relatively steeper in its left-hand portion.

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## Indifference Curve Analysis: Concept, Assumption and Properties It has presented indifference curve analysis in the new form which is just like the utility analysis. It is the declining significance of x and increasing significance of y as the consumer travels down an indifference curve which makes its shape convex to the origin and this forms the basis of Prof. The Slope of the curve is referred as the Marginal Rate of Substitution. 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. When the man drinks 12 cup of coffee, he consumes 1 cigarette every day.

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## Microecon. Final Flashcards The oportunity cost of a unit of good X for individual A is A. In other words, how the change in the wage rate will affect the choice between leisure time and work time. In such cases the indifference curve is a straight line at an angle of 45 degree with either axis. This creates a positively sloped line. The indifference curves cannot intersect. This is wrong and against the fundamentals of economics and consumption. Which of the following is not a characteristic of a perfectly competitive market A.

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## 9 Most Important Properties of Indifference Curves Non-satiation describes the assumption that consumers want as much of a good as possible. The table given below is an example of indifference schedule and the graph that follows is the illustration of that schedule. Higher indifference curve represents higher level of satisfaction. And, thus the curve is sloping downward from left to right. The convexity rule implies that as the consumer substitutes X for Y the marginal rate of substitution diminishes. Honestly, Martin Luther King Jr. We can explain consumer's equilibrium with the help of indifference curve.

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## Indifference Curve In other words, point A gives as much utility as point B to the individual. This is an important feature of an indifference curve. Total utility is equal to the change in marginal utility from consuming an additional unit of a product. Assuming that I'm getting marginal benefit from those incremental pounds of fruit, we will make that assumption, then this right over here, anything out here is going to be preferred. For example, if I have puppies andgarbage. An indifference curve shows various combinations of two goods that provides equal level of satisfaction to consumer. Budget Line or Price Line of Indifference Curves: Budget line or price line is an important concept in the indifference curve analysis.

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## 4 Important Properties of Indifference Curve (with curve diagram) Indifference curves have all of the following characteristics, except one. Only a convex indifference curve can mean a diminishing marginal rate of substitution of X for K If indifference curve was concave to the origin it would imply that the marginal rate of substitution of X for y increased as more and more of X was substituted, for Y. Thus, he possesses more units of commodity X and less of commodity Y but the level of satisfaction remains the same because all the combinations A, B, C, D and E are on the same indifference curve. Key Terms Extension exercise Enter your text here References and Bibliography J. It was propounded by F. The above diagram shows the U indifference curve showing bundles of goods A and B.

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## Describe the characteristics of indifference curve Which of the following is an example of price discrimination? It is not based on the psychological assumptions, namely, cardinal utility, subjectivity of utility, etc. In the figure 7, the indifference curve is concave to the origin. Therefore, two indifference curves cannot intersect. We'll stay with the chocolate and the fruit tradeoff. For example if an individual prefers good A to good B and good B over good C. This consumption of a good is diminishing marginal utility.

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