What do you mean by indifference curve analysis? An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.
What is indifference curve analysis class 11? An indifference curve is a graphical representation of a combined products that gives similar kind of satisfaction to a consumer thereby making them indifferent. Every point on the indifference curve shows that an individual or a consumer is indifferent between the two products as it gives him the same kind of utility.
What is indifference curve with examples? An indifference curve shows all combinations of goods that provide an equal level of utility or satisfaction. For example, Figure 1 presents three indifference curves that represent Lilly’s preferences for the tradeoffs that she faces in her two main relaxation activities: eating doughnuts and reading paperback books.
Who gave indifference curve analysis? Developed by the Irish-born British economist Francis Y. Edgeworth, it is widely used as an analytical tool in the study of consumer behaviour, particularly as related to consumer demand.
What do you mean by indifference curve analysis? – Related Questions
What do you mean by indifference curve Class 12?
Indifference curve is a curve showing different combinations of two goods, each combination offering the same level of satisfaction to the consumer. So that the consumer is indifferent, between all set of bundles. Indifference curves is convex to the point of origin because of diminishing Marginal Rate of Substitution.
What is IC curve Class 11?
What is an Indifference Curve? An indifference curve is a curve that represents all the combinations of goods that give the same satisfaction to the consumer. Since all the combinations give the same amount of satisfaction, the consumer prefers them equally. Hence the name indifference curve.
What is the shape of indifference curve?
Description: Graphically, the indifference curve is drawn as a downward sloping convex to the origin. The graph shows a combination of two goods that the consumer consumes.
What are the applications of indifference curve analysis?
The indifference curve analysis has also been used to explain producer’s equilibrium, the problems of exchange, rationing, taxation, supply of labour, welfare economics and a host of other problems. Some of the important problems are explained below with the help of this technique.
What is the properties of indifference curve?
The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, and (4) indifference curves are convex.
What is the importance of indifference curve?
Some of the advantages are: 1. It Dispenses with Cardinal Measurement of Utility 2. It Studies Combinations of Two Goods Instead of One Good 3. It Provides a Better Classification of Goods into Substitutes and Complements and Others.
Why can’t indifference curves never cross?
The indifference curves cannot intersect each other. 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. This is absurd and impossible.
What are the assumptions of indifference curve analysis?
Assumptions of Indifference Curve Analysis:
(1) The consumer acts rationally so as to maximise satisfaction. (2) There are two goods X and Y. (3) The consumer possesses complete information about the prices of the goods in the market.
Why indifference curve is negatively sloped?
An indifference curve always slopes downward from left to right, i.e. it has a negative slope. This is so because if a consumer wants to have more units of one commodity; he will have to reduce the number of units of the other commodity, due to his limited income.
What is indifference map with diagram?
Indifference map refers to a set of indifference curves. An indifference curve which is to the right and above another shows a higher level of satisfaction to the consumer. Here, IC3 shows higher level of satisfaction than IC2. Thus, the indifference curve relates to a higher level of income of the consumer.
What is meant by monotonic preferences?
Monotonic preferences means the consumer preferences are such that greater consumption of a commodity always offers him a higher level of satisfaction.
What are the features of indifference?
The very important feature of the indifference curves is that they are convex to the origin and they cannot be concave to the origin. A normal indifference curve will be convex to the origin and it cannot be concave. Only convex curves will lend to the principles of Diminishing Marginal Rate of substitution.
What is Isoquant curve?
An isoquant curve is a concave-shaped line on a graph, used in the study of microeconomics, that charts all the factors, or inputs, that produce a specified level of output. Most typically, an isoquant shows combinations of capital and labor and the technological trade-off between the two.
Why IC is convex?
Indifference curves are convex to the origin because as the consumer begins to increase his or her use of one good over another, the curve represents the marginal rate of substitution. In simple terms, IC is convex to origin because of decreasing MRS(Marginal rate of substitution).
What is the equation of budget line?
Therefore, the numerical slope of the budget line is px / py which is equal to the ratio of the prices of X and Y. Since the numerical slope of the line represents the price ratio, or, the relative price of good X in terms of good Y, this line is also called the price line.
What is an example of indifference?
It includes physically ignoring the other person and the bid he or she has tried to make; nonverbally ignoring the other person; refusing to respond to the other person (the silent treatment) Example. Examples of indifference include the following: Not looking at the person. Pretending to be busy with some other task.
Can an indifference curve be a straight line?
Yes, the indifference curve can be a straight line if both the goods are perfect substitutes that is both goods provide the same level of satisfaction
What are the limitations of indifference curve analysis?
(ii) Indifference curve analysis assumes that consumers are familiar with their preference schedules. But, it is not possible for a consumer to have a complete knowledge of all the combinations of the two commodities, total satisfactions from them, rates of substitutions and total incomes.
What are the criticism of indifference curve?
Indifference curve analysis is criticized on the ground that it cannot explain consumer behaviour when he has to choose among alternatives involving risk or uncertainty of expectation. To make a choice among uncertain alternatives quantitative measurement of utility is needed to decide whether the risk is worth taking.
What is indifference curve and explain its properties with diagram?
Indifference curves slope downward to the right: This property implies that an indifference curve has a negative slope. This property follows from assumption I. Indifference curve being downward sloping means that when the amount of one good in the combination is increased, the amount of the other good is reduced.
Can two indifference curves cross?
An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Typically, indifference curves are shown convex to the origin, and no two indifference curves ever intersect.