The document defines indifference curves as graphical representations showing combinations of commodities x and y that provide equal utility to consumers. It details characteristics such as the negative slope and convexity of the curves, the impossibility of intersection, and the importance of the marginal rate of substitution (MRS) in illustrating consumer choice. The MRS indicates how much of one commodity a consumer is willing to give up for an additional unit of another, demonstrating diminishing utility as one moves along the curve.

1. Indifference CurveIndifference Curve
By Hira Saeed
University Of Karachi.

2. DefinitionDefinition
Indifference curve shows various
combinations of commodity X and
commodity Y which yield equal utility or
satisfaction to the consumer.

3. CharacteristicsCharacteristics
 Indifference curve shows an ordinal rather than cardinal
measure of utility.
 A Higher indifference curve shows greater amount of
satisfaction and a lower one, less satisfaction.
 Indifference curve must be negatively sloped. To maintain the
same level of satisfaction consumption of one of the commodity
is decreasing if the consumption of the other good is
increasing.
 It is also convex to origin because it exhibits diminishing
MRSxy.

4. Characteristics
 It is impossible for indifference curve to intersect. Two
indifference curves represent two different levels of satisfaction.
If these indifference curves intersect each other, the
intersection will represent same level of satisfaction, which is
impossible
 Indifference curve do not touch any of the two axis because IC
is that the consumer purchases combination of different
commodities. He is not supposed to purchase only one
commodity. In that case Indifference curve will touch one axis.

5. Figure 1.1
 Two Commodities- X and Y
 Graph having Three
indifference curves IC1, IC2,
IC3.
 IC2 indicate greater
satisfaction than IC1 but
less satisfaction than IC3.
 Each curve reflecting the
idea that you have to give
up some unit of Y in order to
get an additional unit of X or
vice verse.

6. Marginal Rate Of Substitution
 The Marginal rate of substitution of X for Y (MRSxy) refers to
the amount of Y that a consumer is willing to give up in order to
gain one additional unit of X (and still remain on the same
indifference curve).
 As the Individual moves down an indifference curve the MRSxy
diminishes.
 The MRS is linked with indifference curves, since the slope of
this curve is the MRS.

7. Figure 1.2
•The rate at which one
commodity is substituted for
other.
• marginal = additional.
• rate = Speed.
• Substitution = replacing
something with another thing.
• In figure 1.2, in moving from
point A to B, individual gives
up 2 units of Y in order to get
one additional unit of X.

8. Figure 1.2
 Formulae
 MUx = dU/dx
MUy = dU/dy
MRSxy = dy/dx = MUx/MUy
 In Figure 1.2, MRSxy = 2/1 = 2
which means giving up 2 units of Y for an additional unit of X.