Q.Explain the concept of Indifference Curve. Discuss its properties.
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Start your 14-day free trial to unlock the full solution →An indifference curve shows combinations of two goods that give equal total satisfaction. Its four basic properties are: it slopes downward (negative slope), because to keep satisfaction constant more of one good means less of the other; it is convex to the origin, because of the diminishing marginal rate of substitution; a higher indifference curve represents a higher level of satisfaction; and two indifference curves can never intersect, since intersection would give contradictory levels of satisfaction.
Meaning
An indifference curve is the locus of combinations of two goods (X and Y) that give the consumer the same level of satisfaction, so he is indifferent among those combinations. A family of such curves forms an indifference map.
Properties of Indifference Curves
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Indifference Curve Slopes Downward from Left to Right (Negative Slope): to keep total satisfaction unchanged, when the consumer takes more of good X he must give up some of good Y. Hence the curve has a negative slope.
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Indifference Curve is Convex to the Origin: this is because of the diminishing Marginal Rate of Substitution (MRS). As the consumer gets more of X, he is willing to sacrifice less and less of Y for each additional unit of X, which gives the curve its convex shape.
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A Higher Indifference Curve represents a Higher Level of Satisfaction: a curve farther from the origin contains larger combinations of both goods, so (by non-satiety) it yields greater satisfaction than a lower curve.
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