What are the properties of indifference curves?
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 indifference curve in business economics?
In economics, an indifference curve is a curve that shows the combination of two goods that give a consumer equivalent satisfaction and utility. When two goods or products with different qualities give a consumer the same level of satisfaction and utility, an indifference curve is realized.
Why is it called 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?
Indifference curves have a roughly similar shape in two ways: 1) they are downward sloping from left to right; 2) they are convex with respect to the origin. In other words, they are steeper on the left and flatter on the right.
What is indifference curve explain its properties 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 State three properties of indifference curves?
The indifference curve slopes downward. 2. The indifference curve is convex towards the origin. 3. Higher indifference curve represents higher utility.
Why is indifference curve convex explain?
The convex shape of the indifference curve can be attributed to the diminishing marginal rate of substitution. The diminishing marginal rate of substitution explains that in order to consume more quantity of a good then the consumer has to sacrifice a greater proportion of the other good.
What are indifference curves explain the consumer equilibrium?
It means that the consumer’s equilibrium point is the point of tangency of price line and indifference curve. At equilibrium, Slope of indifference curve = Slope of budget or price line or MRSXY=PXPY. Also, at point E, IC2 is convex to the origin. Accordingly, equilibrium is stable.
Why is indifference curve 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. The marginal rate of substitution goes down as the consumer gives up one good for another, so it is convex to the origin.
What are the assumption of indifference curve?
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.
What is indifference map Class 12?
Ans. Indifference map refers to a set of indifference curves corresponding to different income levels of the consumer. Higher indifference curve gives higher level of satisfaction than the lower indifference curve, as we move to the right, the level of satisfaction also rises.