Question
Define indifference curve. Explain the three properties of indifference curves.

OR

Explain the three properties of indifference curve.

OR

Explain the three properties of indifference curve.

OR

State and explain three properties of indifference curves.

Answer

Indifference curve is defined as the curve which represents all combinations of two commodities which give same level of satisfaction to the consumer so that the consumer becomes indifferent towards these combinations.

Following are the main properties of Indifference Curve:

  1. An Indifference Curve is always downward sloping: The indifference curve is negatively sloped or downward sloping from left to right which represents that in order to increase the consumption of commodity X, the consumer has to sacrifice commodity Y in order to remain at the same scale of preference or same level of satisfaction represented by the Indifference curve.

  2. An Indifference Curve is convex to origin: The nature and shape of indifference curve is based on the concept of diminishing marginal rate of substitution. When the consumer consumes more of X after sacrificing Y, then it leads to decrease in MU for X and increase in MU for Y due to which the consumer becomes willing to sacrifice lesser units of Y with every increase in consumption of X due to which MRS decreases and IC is convex to origin.

  3. Higher Indifference Curve represents higher scale of preference: Indifference curve analysis is based on the assumption of monotonic preferences which represents that higher consumption of a commodity gives higher level of satisfaction to the consumer. A higher indifference curve represents that the consumer is able to consume more units of the commodity and hence represents higher scale of preference to the consumer.

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