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A PRESENTATION ON –
INDIFFERENCE CURVE
Assumptions
 Rational behavior of the consumer
 Utility is ordinal
 Diminishing marginal rate of substitution
 Consistency in choice
 Transitivity in choice making
 Goods consumed are substitutable
Definition :
A curve that shows combinations of
goods which gives the same level of
satisfaction to the consumers so that
an individual is indifferent.
Properties of indifference curves :
• Indifference curves are negatively sloped
If the quantity of one good increases then the quantity
of other goods must be decreased.
• Indifference curves are convex to the origin
Convexity illustrates the law of diminishing marginal
marginal rate of substitution.
• Indifference curves can never intersect each other
• If two indifferent curve intersects then the point of
intersection would be represent two different level
of satisfaction.
Consumer Equilibrium
At the point of tangency, the slopes of
indifference curve and budget line
equal
Y/ X = Px/Py
Budget Line- It shows all the
possible combinations of two
goods that can be purchased
with given level of income.
Indifference curve

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Indifference curve

  • 1. A PRESENTATION ON – INDIFFERENCE CURVE
  • 2. Assumptions  Rational behavior of the consumer  Utility is ordinal  Diminishing marginal rate of substitution  Consistency in choice  Transitivity in choice making  Goods consumed are substitutable
  • 3. Definition : A curve that shows combinations of goods which gives the same level of satisfaction to the consumers so that an individual is indifferent.
  • 4.
  • 5. Properties of indifference curves : • Indifference curves are negatively sloped If the quantity of one good increases then the quantity of other goods must be decreased. • Indifference curves are convex to the origin Convexity illustrates the law of diminishing marginal marginal rate of substitution. • Indifference curves can never intersect each other • If two indifferent curve intersects then the point of intersection would be represent two different level of satisfaction.
  • 6. Consumer Equilibrium At the point of tangency, the slopes of indifference curve and budget line equal Y/ X = Px/Py
  • 7. Budget Line- It shows all the possible combinations of two goods that can be purchased with given level of income.