Indifference curve
Consumers rank goods in terms of preference for them. Suppose a person has the option of apple and oranges, he chooses apple then his preference is apple. The consumer can consistently rank all available options. Consumers prefer more commodities than less of them. It is however not applicable to economic bad.
The indifference curve is a graph that shows the various combinations of two goods that give the same level of satisfaction to a consumer.
The curve shows the different combinations of two goods that give the same level of satisfaction to a consumer.
The consumer is indifferent between points a, b, c, and d.
At point a, there is a combination of 1 unit of good X and 8 units of good Y.
At point b, there is a combination of 2 units of good X and 4 units of good Y.
At point c, there is a combination of 3 units of good X and 3 units of good Y.
At point d, there is a combination of 5 units of good X and 2 units of good Y.
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The emoji symbol denotes that the utility for various combinations of goods is the same. In this case, one good is getting better while another is getting worse.
Apples and oranges on your kitchen table can represent commodities X and Y, respectively. That implies that your satisfaction can be recorded and examined in a graph.
We have assumptions to apply these concepts.
There should be two goods and only two goods.
The consumer has a fixed income
The consumer is rational
The consumer is free to choose
The consumer can compare the two goods
The consumer has a fixed budget
The consumer has a preference
The consumer is rational to maximize satisfaction.
The consumer has a fixed income
The consumer has a fixed time.
Characteristics of indifference curve
The indifference curve is a graph.
It is convex to the origin which means bowed inward.
The lines do not touch the axes because it violates the assumption that there should be two goods.
Indifference curves never meet each other
Indifference curves are downward sloping.
The collection of the indifference curve is called an indifference map.
A higher indifference curve is preferred. because consumers prefer more. More s better for everyone.
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Conclusion
The indifference curve shows the amount of one good that is exchanged for another good the indifference curve shows the trade-off between two goods An indifference curve is a line that shows the different combinations of two goods that give you the same satisfaction/utility.
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