What are the indifference curves? Explain their properties.

Consumer behavior (i.e. The allocation of resources in such a way as to maximize his wants)can be studied by two different approaches:

The utility concept was rejected on two grounds (a) the utility is subjective state of mined and cannot be measured by any objective sense. (b) It involves too many assumptions (that satisfaction is measurable)

However, in 2nd approach, there is no need to measure the amount of satisfaction. All what is required is to know the level of satiety or scale of preference. (i.e. ordinal measurement in terms of more or less).

Indifference curves

The consumer behavior can be exhibited in the form of a series of an infinite number of curves one above the other, each indicating a position of higher preference (greater satisfaction) than the lower one. Each curve is called indifference curve, all points of which indicating combination of two different commodities between which a consumer is indifferent. These curves are said to resemble with contour lines. Just as all point of each contour line shows the same altitude from sea level, similarly all points of each indifference curve show the same level of satisfaction.

Different curves indicate different level of satisfaction. Such curves are collectively called as the indifference map of consumer.

Points to remember.

1. These curves only indicate all possible (potential) combination of a pair of commodities. The choice of one or two combinations by the consumer will depend upon the price and income etc.

2. Each curve shows a possible combination of two commodities. Separate curves are to be drawn from other pairs of commodities.

Properties, characteristic or assumption of indifference curve (I.C).

I.C are negatively sloped.  The I.C slops downward from left to right, because as the consumer increases the consumption of X commodity, he has to give up certain units of Y commodity in order to maintain the same level of satisfaction

Higher level of I.C represents a higher level of satisfaction:  The combination of goods which lies on a higher I C will be preferred by a consumer to the combination which lies on a lower I.C.

I.C are always convex to the origin: This is an important property.  It is neither straight line nor concave to the origin. They are convex to the origin because as we have more units of X we have to less units of Y. The consumer substitute Co.X for Y. the MRS diminish of X for y along an I.C

I.C can not intersect each other.

Two indifference covers cannot intersect each other, higher indifference covers will always lie on above the lower indifference covers. They will not intersect one another at one point.

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