Q.(OR) What do you understand by Indifference Curve? Explain its characteristics.
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Start your 14-day free trial to unlock the full solution →An indifference curve shows equal-satisfaction combinations of two goods; it slopes downward, is convex to the origin, higher curves mean more satisfaction, and two curves never intersect.
Meaning:
An indifference curve is the locus of all those combinations of two goods (say X and Y) which give the consumer the same (equal) level of satisfaction, so that the consumer is indifferent among them. A collection of such curves is an indifference map.
Characteristics (properties) of indifference curves:
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An indifference curve slopes downward from left to right (negative slope). To keep satisfaction constant, if the consumer takes more of one good he must give up some of the other, so the two goods move in opposite directions.
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An indifference curve is convex to the origin. This is because of the diminishing Marginal Rate of Substitution (MRS) — as the consumer gets more of good X, he is willing to give up less and less of good Y for each additional unit of X. The convex shape reflects this falling MRS.
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A higher indifference curve represents a higher level of satisfaction. A curve farther from the origin contains more of both goods (or more of one with no less of the other), giving greater satisfaction, since more is preferred to less.
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Two indifference curves never intersect (cut) each other. If they did, the point of intersection would represent two different levels of satisfaction at the same time, which is impossible (it would violate the principle of transitivity).
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