Indifference curve Managerial Economics

1. ANALYSIS OF CONSUMER BEHAVIOUR ORDINAL UTILITY APPROACH

2. Indifference curve analysis Developed - Edge worth It was later preferred by J.R Hicks & R.J.D. Allen indifference curve approach is also known as ordinal utility approach.. consumer express their utility in terms of preference not in term of quantity.

3. ASSUMPTION OF INDIFFERENCE CURVE A consumer is assumed to buy any two goods in combinations. A consumer can rank the alternative combinations and compare their level of satisfaction, and he prefers a combination providing a higher level of satisfaction. Consumer is rational and his choices are transitive. The consumer behavior is assumed to be constant, throughout the analysis.

4. INDIFFERENCE CURVE Good X Good Y An indifference curve may be defined as the locus of various combination of two goods which yield the same total satisfaction to the consumer

5. INDIFFERENT SCHEDULE For eg : The following table shows the indifference schedule of combination of biscuits and cups of tea for a consumer. combination Cups of Tea + Biscuits A B C D E F 1 2 3 4 5 6 + + + + + + 50 38 26 21 17 15

6. X Y Graphical representation of indifference schedule…

7. INDIFFERENCE MAP A collection of indifference curve is known as indifference map. A higher indifference curve indicates a higher level of satisfaction and vise versa. Ic1 Ic2 Ic3 Good y Y Good x X

8. Thanks….