What are indifference curves?
What are indifference curves?
An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Along the curve, the consumer has an equal preference for the combinations of goods shown—i.e. is indifferent about any combination of goods on the curve.
How do you plot an indifference curve to a utility function?
If you are given a utility function U(x,y), it is easy to derive a given indifference curve from it: simply plot all points (x,y) such that U(x,y) equals a constant. This is a utility function in which the consumer values x as much as a/b units of y.
What does indifferent Mean Mean?
Definition of indifferent 1a : marked by a lack of interest, enthusiasm, or concern for something : apathetic indifferent to suffering and poverty. b : marked by no special liking for or dislike of something indifferent about which task he was given. 2a : being neither good nor bad : mediocre does indifferent work.
What are the 6 properties of indifference curve?
The four properties of indifference curves are: (1) indifference curves can never cross, (2) the farther out an indifference curve lies, the higher the utility it indicates, (3) indifference curves always slope downwards, and (4) indifference curves are convex.
What is indifference curve formula?
The equation of a typical indifference curve is: U(t, y)=c. where the constant c stands for the utility level achieved on the curve. Different values of c correspond to different indifference curves: if we increase c we obtain a new indifference curve that is above and to the right of the old one.
What is the relationship between utility and indifference curve?
Indifference curves and utility functions are directly related. In fact, since indifference curves represent preferences graphically and utility functions represent preferences mathematically, it follows that indifference curves can be derived from utility functions.
What is the equation of an indifference curve?
In algebraic terms, if we rewrite the equation of an indifference curve U(t, y)=c in the form y=g(t, c), then g(t, c) is a decreasing and convex function of t for given c.
Why indifference curve has negative slope?
An indifference curve will always have a negative slope because the consumer has to give up more of one good to purchase another good. This means the indifference curve is concave to the origin and has a rising marginal rate of subtitution.
What is an example of indifferent?
The definition of indifferent is having no preference or being uninterested. An example of indifferent is a person who has no opinion about politics.
What makes a person indifferent?
It is a state of indifference, or the suppression of emotions such as concern, excitement, motivation, or passion. An apathetic individual has an absence of interest in or concern about emotional, social, spiritual, philosophical, virtual, or physical life and the world.
What are the 4 properties of indifference curves?
Why is it called indifference curve?
An indifference curve is a curve that represents all the combinations of goods that give the same satisfaction to the consumer. Since all the combinations give the same amount of satisfaction, the consumer prefers them equally. Hence the name indifference curve.
What is slope of indifference curve?
The slope of the indifference curve is the marginal rate of substitution (MRS). The MRS is the amount of a good that a consumer is willing to give up for a unit of another good, without any change in utility.
Why does the indifference curve approach is better than marginal utility approach?
The indifference curve technique is definitely superior to the utility analysis because it discusses the income effect when the consumer’s income changes; the price effect when the price of a particular good changes and its dual effect in the form of the income and substitution effects.
Can indifference curves have a positive slope?
In that case, a set of indifference curves is upward sloping. The positive slope means that the consumer will accept more of the bad good only if she also receives more of the other good in return.
Why indifference curve is convex to origin?
IC are convex to the origin because they follow the law of DMRSxy (Diminishing marginal rate of substitution).
What is indifferent person?
indifferent, unconcerned, incurious, aloof, detached, disinterested mean not showing or feeling interest. indifferent implies neutrality of attitude from lack of inclination, preference, or prejudice.
What does indifferent mean?
without interest or concern
without interest or concern; not caring; apathetic: his indifferent attitude toward the suffering of others. having no bias, prejudice, or preference; impartial; disinterested. neither good nor bad in character or quality; average; routine: an indifferent specimen.