Indifference Curve Properties MBA Economics Notes

Mon, 12/19/2011 - 07:03 -- Umar Farooq

Indifference Curves

Each point in the diagram stands for a basket of meat and ghee (cooking oil) A, B, C, D are all baskets among which a certain consumer is indifferent. All give equal utility. These points and all others on a smooth curve connecting them constitute an indifference set. An indifference curve is a graphical representation of an indifferent set.

Indifference Curve Properties

Following are the indifference curve properties:

1. If two commodities are perfect substitute the indifference curve is a straight line.

 

2. When two commodities are not substitutable then the shape is represented by two vertical and horizontal lines.

3. In more typical cases, in which the two commodities can be substituted for each other but are not perfect substitutes, the indifference curve will be curved as

4. The more easily the two commodities can be substituted for each other the nearer will the curve approach straight line.


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