Indifference curve ppt-9.pdf micro economics

Micro economics

1. INDIFFERENCE
CURVE
ANALYSIS

2. What Is Indifference Curve ??
An Indifference Curve is a Curve
which shows different combination
of commodities providing equal
satisfaction to the consumer.

3. IC’s schedule and diagram
EACH POINT (A,B,C,D) ON IC INDICATES THAT A
CONSUMER IS INDIFFERENT BETWEEN THE X & Y
COMMODITIES AND ALL POINTS GAVE HIM SAME
UTILITY.

4. Indifference Map
INDIFFERENCE
MAP IS THAT
GRAPH WHICH
REPRESENTS A
GROUP OF
INDIFFERENCE
CURVE, AND EACH
INDIFFERENCE
CURVE EXPRESSES
DIFFERENT LEVEL
OF UTILITY.

5. Feature of Indifference Curve
THERE ARE 6 FEATURES OF IC:
1. An Indifference Curve slopes
downward from left to right
WHEN A CONSUMER WANTS TO
HAVE MORE OF A COMMODITY,
HE/SHE WILL HAVE TO GIVE UP
SOME OF THE OTHER
COMMODITY,GIVEN THAT THE
CONSUMER REMAINS ON THE SAME
LEVEL OF UTILITY AT THE
CONSTANT INCOME.
AS A RESULT, THE INDIFFERENCE
CURVE SLOPS DOWNWARD FROM
LEFT TO RIGHT.

6. 2. Indifference Curve Should be convex to
the point of Origin
THIS IS AN IMPORTANT PROPERTY
OF INDIFFERENCE CURVE.THEY
ARE CONVEX TO THE ORIGIN. THIS
IS EQUIVALENT TO SAYING THAT AS
THE CONSUMER SUBSTITUTES ITEM
A FOR ITEM B ,THE MARGINAL
RATE OF SUBSTITUTION DIMINSHES
OF A FOR B ALONG AN
INDIFFERENCE CURVE.

7. 3.Two Indifference Curve never
touch each other
EACH INDIFFERENCE CURVE
REPRESENT THE DIFFERENT LEVEL
OF SATISFACTION SO THEY DON’T
INTERSECT EACH OTHER.
HERE A & B POINT SHOW THE SAME
LEVEL OF SATISFACTION AND ALSO
A&C POINT SHOW SAME LEVEL OF
SATISFACTION SO A=B AND A= C
THEREFORE B=C WHICH IS NOT
POSSIBLE.

8. 4.Higher Indifference Curve
INDICATES higher satisfaction
HIGHER INDIFFERENCE CURVE
SHOWS HIGHER LEVEL OF
SATISFACTION BECAUSE IT TAKES
MORE QUANTITY OF GOODS AS
COMPARED TO LOWER
INDIFFERENCE CURVE.
HERE Q POINT HAVE MORE
GOODS AS COMPAERED TO POINT
S ON LOWER INDIFFERENCE
CURVE.

9. 5.Indifference Curve neither
touches x-axis not y-AXIS
INDIFFERENCE CURVE IS
RELATED WITH THE
COMBINATION OF TWO
COMMODITIES WHICH MEANS
ONE COMMODITY GIVES EQUAL
SATISFACTION.
HERE IC2 HAVE OL UNITS OF
GOOD Y WHILE ZERO UNITS OF
GOOD X SO INDIFFERENCE
CURVE NEVER TOUCHES ANY
AXIS.

10. 6.Indifferce Curve need not be
parallel to EACH other
TWO INDIFFERENCE
CURVE MAY OR MAY NOT
BE PARALLEL TO EACH
OTHER . IT All DEPENDS
UPON MARGINAL RATE OF
SUBSTITUTION OF TWO
CURVES.
HERE BOTH IC HAVE
DIFFERENT MARGINAL
RATE OF SUBSTITUTION .

11. ANOTHER SHAPES OF
INDIFFERENCE CURVE
1. AN INDIFFERENCE CURVE IS PARALLEL
TO X AXIS
IF AN INDIFFERENCE CURVE
PARALLEL TO OX AXIS THEN IT GIVES
WRONG EXPLANATION OF THE
THEORY .
HERE CONSUMER GETS MORE
SATISFACTION AT POINT B THAN A
BECAUSE ON POINT B CONSUMER
GETS MORE GOODS THAN POINT A .

12. 2. AN INDIFFERENCE CURVE IS PARALLEL
TO Y AXIS
IF AN CURVE PARALLEL TO OY
AXIS THEN IT WILL ALSO GIVE
WRONG EXPLANATION OF THE
THEORY.
HERE CONSUMER GETS MORE
SATISFACTION AT POINT A THAN
B. ON POINT A CONSUMER GETS
MORE GOODS SO HE GETS MORE
SATISFACTION.

13. 3. An Indifference Curve has positive slope
THIS TYPE OF INDIFFERENCE
CURVE ALSO GIVES WRONG
EXPLANATION OF THE THEORY
.
HERE CONSUMER GETS MORE
SATISFACTION AT POINT A
THAN POINT B .IT IS CLEARLY
SHOWN THAT ON POINT A
CONSUMER GETS MORE
COMMODITIES WHICH GIVES
HIM MORE SATISFACTION.

14. Thank
You