Ic curve properties. 5 Most Important Properties of Indifference Curves 2019-01-10

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Indifference Curve: Concept, Properties, Features, Examples

ic curve properties

This is so because Indifference Curves are assumed to be negatively sloping and convex to the origin. Volker Böhm and Hans Haller 1987. In simple words, monotonic preferences imply that as consumption increases total utility also increases. The shaded area in this figure contains all the bundles, i. If some bundles indifferent to X which is contained in an indifference set lie in areas B and W, the non-satiation assumption is violated. For analytical purposes, it is convenient if u x 1, x 2 can be assumed to be differentiable.

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Indifference Curve: Concept, Properties, Features, Examples

ic curve properties

If they do then the axiom of dominance will be violated. When the consumer increased the consumption of commodity X to X2, the amount of commodity Y fell to Y2. Concavity of the indifference curves is against the principle of diminishing marginal rate of substitution. Each indifference curve shows all the combinations of standard deviation and expected income that give the individual the same level of utility or satisfaction. Such indifference curves are against our basic assumption. Since the price of Apple has not changed, the consumer can purchase at the extreme 6 kg. Key Terms Extension exercise Enter your text here References and Bibliography J.

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5 Most Important Properties of Indifference Curves

ic curve properties

Such curves are in contradiction to the assumption that the consumer buys two goods in combinations. An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. The meeting of two indifference curves at a point will also lead us to an absurd conclusion. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility. Indifference curves are not influenced by market or economic circumstances.

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Indifference Curves: Assumptions and Properties

ic curve properties

Hence, strict convexity rules out the possibility of indifference curves cutting the axes. It means, infinite number of indifference curves can be drawn. But as he consumes more and more of apples, his marginal utility from apples keeps on declining. Because of this reason, the consumer always tries to move outward to maximize his level of satisfaction. Similarly all points on 0W are inferior to X. It is also assumed that prices of both the commodities are constant. Our mission is to provide an online platform to help students to discuss anything and everything about Economics.

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Top 6 Properties of Indifference Curve (With Diagram)

ic curve properties

When he started consuming two cigarettes a day, his coffee consumption dropped to 8 cups a day. But the rate o the slope may not necessarily be the same as shown in the following diagram: 8. Figure 6 b shows a straight line as an indifference curve. Another characteristic of the indifference curve is that hire the indifference curve higher will be the level of satisfaction. Indifference curves slope downward to the right: This property implies that an indifference curve has a negative slope. Higher Indifference Curve Represents Higher Level of satisfaction. It means that if combination A is preferable to В, and В to C, then A is preferable to C.

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Indifference Curve Analysis: Concept, Assumption and Properties

ic curve properties

In the following schedule Table 12. Nor can it slope upward to the right. We can prove this property of indifference curves through contradication. These assumptions are Two commodities It is assumed that the consumer has fixed amount of money, all of which is to be spent only on two goods. Pen and ink, right shoe and left shoe, automobile and petrol sauce and hamburger, type writer and typists are some examples of perfect complements.

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What are the Properties of the Indifference Curves?

ic curve properties

Now point Y is not indifferent to X but is inferior to X because it lies to the left of X. The simplest example, shown in Fig. By as­sumption the indifference curves represent distinct levels of preference. In order to ensure that we have indifference curves like those in Fig. It happens because if the consumer decides to have more units of one good say apples , he will have to reduce the number of units of another good say bananas , so that total utility remains the same. The graphical representation of such combinations is termed as indifference curve.

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The Indifference Curve: Meaning, Property and Assumption

ic curve properties

Diminishing marginal rate of substitution: Indifference curve analysis assumes diminishing marginal rate of substitution. . It tries to solve how does a consumer reach the equilibrium point without measuring the utility in Cardinal numbers. Such a diagram is known as an indifference map where each indifference curve corresponds to a different indifference schedule of the consumer. In combination T, the sacrifice falls to 2 bananas for 1 apple. Hence the consumer must prefer Q to S.

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Indifference Curves: Risk Aversion and Properties

ic curve properties

They Slope Negatively or Slope Downwards from the Left to the Right 2. It implies he gets more and more of both the commodities. It means, points B and C should also give the same level of satisfaction. Properties of Indifference Curve: 1. In reality, Indifference Curves are like Bangles: But as a matter of principle their effective region is in the form of segments. What is the Marginal Rate of Substitution for Ms. If he increases his consumption of X so as to reach the dotted portion of the I 1 curve horizontally from point S , he gets negative utility.

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Indifference Curve: Concept, Properties, Features, Examples

ic curve properties

Hence, an indifference curve to the right always represents higher level of satisfaction. Each person has a unique set of indifference curves. Point T lies beyond his income range and hence is not feasible. Indifference curve analysis is based on the assumption of the diminishing marginal rate of substitution. In other words, the combinations which lie on a higher indifference curve will be preferred to the combinations which lie on a lower indifference curve. If a curve does not have a negative slope as shown in figure 3, it cannot be an indifference curve. However, each indifference curve shows the same level of satisfaction individually.

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