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1. WELCOME
Everyone
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2. Subject: Principle of Economics
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Topic:
Indifference Curve

3. Presented By
Group: H
 13. Najmun Nahar
 32. Md. Raihan Kabir
 33. Abdullah Al-Helal
 38. Shuvongkor Barman
E-59, 4th Semester
Computer Science & Engineering
Presented To
Mr. Yeamin Masum
Lecturer of Economics
Dhaka International University
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4. Simple History
 The concept of indifference curve was
first developed by British economist
Francis Ysidro Edgeworth and was put into
use by Italian economist Vilfredo Pareto
during the early 20th century.
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5. Indifference Curve
 An indifference curve is a graph
showing combination of two goods that
give the consumer equal satisfaction
and utility.
 Each point on an indifference curve
indicates that a consumer is indifferent
between the two and all points give him
the same utility.
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20
10
105
Combination Good A Good B
A 10 10
B 20 5

6. Explanation of Indifference Curve
 The above diagram shows the U
indifference curve showing bundles of
goods A and B. To the consumer,
bundle A and B are the same as both of
them give him the equal satisfaction.
 In other words, point A gives as much
utility as point B to the individual. The
consumer will be satisfied at any point
along the curve assuming that other
things are constant.
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20
10
105
Combination Good A Good B
A 10 10
B 20 5

7. Assumptions of Indifference
Curve
 Two Commodities: It is assumed that the consumer has fixed
amount of money, all of which is to be spent only on two goods
while prices of both goods are constant.
 Non Satiety: Satiety means full satisfaction. Indifference curve
theory assume that the consumer has hot yet reached the point of
satiety. It implies that the consumer still has the will to consume more
of both the goods.
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The indifference curve theory is based on some assumptions. These assumptions are -

8.  Ordinal Utility: According to this theory, utility is a psychological
phenomenon and thus it is unquantifiable. However, the theory
assumes that a consumer can express utility in terms of rank. The
consumer can do it by the basis of satisfaction yielded from each
combination of goods.
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Diminishing Marginal Rate of Substitution: Marginal rate of
substitution may be defined as the amount of a commodity that a
consumer is willing to trade off for another commodity, as long as the
second commodity provides the same level of utility as the first one.
Rational Consumer: A consumer always behaves in a rational manner,
i.e. a consumer always aims to maximize his total satisfaction.

9. Properties of Indifference Curve
There are 4 basic properties of an indifference curve. These are -
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 An indifference curve can neither be horizontal
line nor an upward sloping curve. This is very
important.
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 constant income.
As a result, the indifference curve slopes downward
form left to right.
1. Indifference Curve Slope Downwards to Right:

10.  This is an important property of
indifference curves. They are convex to
the origin (bowed inward). This is
equivalent to saying that as the consumer
substitutes commodity X for commodity
Y, the marginal rate of substitution
diminishes of X for Y along an
indifference curve.
 In this figure (3.6) as the consumer
moves from A to B to C to D, the
willingness to substitute good X for
good Y diminishes. This means that as
the amount of good X is increased by
equal amounts, that of good Y
diminishes by smaller amounts. The
marginal rate of substitution of X for Y
is the quantity of Y good that the
consumer is willing to give up to gain a
marginal unit of good X. The slope of IC
is negative. It is convex to the origin.
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 2. Indifference Curve is Convex to the Origin:

11.  3. Indifference Curve Cannot Intersect Each Other: 11
Each indifference curve is a representation of
particular level of satisfaction.
The level of satisfaction of the consumer for
any given combination of two goods is same
throughout the curve, that’s why indifference
curve cannot intersect each other.

12. 12 4. Higher Indifference Curve Represents Higher level
of Satisfaction:
Higher the indifference curves, higher will be
the level of satisfaction. This means any
combination of two goods on the higher
curve give higher level of satisfaction to the
consumer then the lower one.

13. THANK YOU
For Your Attention
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Presentation Made By Shuvongkor Barman

14. QUESTIONS
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15. THANK YOU
Good Bye
Take Care
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Presentation Made By Shuvongkor Barman