Properties of indifference curves, Managerial Economics

Properties of Indifference Curves

  • An indifference curve is usually convex to the origin.
  • Indifference curves slope downwards from left to right.
  • A set of indifference curves with each successive curve lying outside the previous one in a North East direction is called an indifference map.
  • The curves do not cross as this would isolate the axiom of transitivity of preferences.
  • Each curve is a graphical representation of a utility function expressed as:

U  =  f (x,y)

Where:  u is a predetermined level of utility.

x and y are two commodities to be consumed in combination to guide u.

The slope of the indifference curve gives the rate at which a consumer is willing to exchange one unit of a product for units of another.  This is called the marginal rate of substitution.

Posted Date: 11/27/2012 5:23:20 AM | Location : United States







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