This document discusses key properties of indifference curves: 1. Indifference curves always slope downward, as increasing one good requires sacrificing the other to maintain utility. They cannot be horizontal, vertical, or upward sloping. 2. All indifference curves are convex to the origin, due to the principle of diminishing marginal rate of substitution. 3. Indifference curves cannot touch or intersect each other, as that would mean two levels of satisfaction are equal at one point. 4. Higher indifference curves represent greater satisfaction and lie above and to the right of lower curves. 5. Indifference curves do not need to be parallel, as rates of substitution may differ between curves depending on

1. Dr. Geetanjali Diwani

2. 1. An Indifference Curve
Slopes Downward from Left
to Right (Negative Slope)
An indifference curve always slopes downward from
left to right i.e., the slope of the indifference curves is
negative because in order to increase the units of one
commodity, units of another commodity are
sacrificed, so that satisfaction level remains the same.
An indifference curve cannot be either horizontal
line, vertical line or upward sloping curve
Dr. Geetanjali Diwani

3. Diagram 1
If the IC is horizontal to X axis, the various points on
the curve P, Q, R, S denote various combinations of
increasing quantity of apple (i.e., ON1, ON2, ON3, and
ON4), but a fixed quantity of orange (i.e., OM).
Hence, the consumer cannot be indifferent. Each
succeeding combination is better than the previous
one.
Therefore, an IC cannot be horizontal since different
combinations on the curve differ in significance.
Dr. Geetanjali Diwani

4. Diagram 2
If the IC is vertical to X axis, the various points on the curve P, Q, R, S
denote various combinations of increasing quantity of orange (i.e., OM1,
OM2, OM3 and OM4), but the same quantity of apple (i.e., ON).
Hence, the consumer cannot be indifferent to various combinations as
they denote different satisfactions.
For example, he secures greater satisfaction at Q than at P.
Therefore, and indifference Curve cannot be vertical.
Dr. Geetanjali Diwani

5. Diagram 3
If the IC slopes upward to the right, the various points on the curve
P, Q, R, S differ in significance because if the consumer moves from
one point to another, he purchases more of both the commodities.
His total satisfaction cannot remain constant.
So, he cannot be indifferent to the combinations. Therefore, sloping
upward is not possible.
Dr. Geetanjali Diwani

6. 2. All the Indifference
Curves are Convex to
the Origin
All the IC are generally
convex to the origin. This
feature is derived from the
principle of diminishing
marginal rate of substitution.
Dr. Geetanjali Diwani

7. 3. IC can neither touch
or intersect each other
Two IC can neither touch or intersect each other.
Since each IC represents a given level of
satisfaction, it will necessarily be different from
other IC representing other levels of satisfaction.
If two IC touch or intersect each other, it will
mean that at point of intersection satisfaction
level of one IC is equal to that of another.
Dr. Geetanjali Diwani

8. 4. Higher IC
represent a higher
level of satisfaction
Every IC that lies above to the
right of another curve
represents a greater satisfaction
than that of the left.
Dr. Geetanjali Diwani

9. 5. IC need not be
parallel to each
other
ICs slope downward and are parallel to each other.
But the rate of substitution between the two commodities may not
be the same in case of all ICs.
It depends upon changing economic position of a consumer.
There is no definite proportion between the range of different levels
of satisfaction representing different IC.
Hence, they may be or may be not parallel as the situation may be.
Dr. Geetanjali Diwani

10. 6. An indifference curve
should not touch either
of the axis.
If the IC touches x-axis, it indicates
that the consumer is buying only
commodity A and if IC touches y-axis,
it indicates that he is buying only B.
Hence, to represent a combination of
two commodities, an IC should not
touch either x or y axis.
Dr. Geetanjali Diwani

11. Budget Line
The budget line shows the different combinations of two goods that a consumer can buy with a given
money income while prices of two goods are given and constant.
Thus, it indicates:
Fixed money income of the consumer
Price of two commoditiesDr. Geetanjali Diwani

12. Illustration Income of the consumer is Rs. 6
Price of commodity Y is Rs. 0.50 per unit
Price of commodity X is Rs. 1 per unit
Budget line of the consumer can be drawn on the basis of above
information. If a consumer spends his entire income of Rs. 6, he can buy 12
units of Y or 6 units of X.
When we represent 12 units of Y on Y axis and 6 units of X on X axis, we get the
points A and B. If A and B are joined, we get the AB budget line of the consumer which
indicates different combinations of two commodities that a consumer can have with the
given money income and the prices of two commodities.
Dr. Geetanjali Diwani

13. Shifts in the budget line
Dr. Geetanjali Diwani

14. Shifts in the budget line
Dr. Geetanjali Diwani

15. Shifts in the budget line
Dr. Geetanjali Diwani

16. Dr. Geetanjali Diwani