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Theory of consumer behaviour — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsTheory of consumer behaviour1 Mark
Question
Explain that Higher IC provides higher level of satisfaction.

OR

'Higher indifference curve represents higher level of satisfaction to the consumer'. Explain the statement, also state the underlying assumption related to this property of indifference curve.

✓

Answer

  1. Higher IC lying above and to the right of another IC represents a higher level of satisfaction. All combinations of goods X and Y lying on the higher indifference curve IC, have more satisfaction than lower indifference curve IC, as shown in figure given here.

  1. This is because of monotonic preferences, as monotonic preferences state that we must have atleast more of one good and no less that of other goods (means other goods can be equal or greater, but not less). The figure above shows that bundle F(OX, + OY) is monotonic preferred to bundle E(OX, + OY,). So, if bundle F is monotonic preferred to bundle E than F bundle gives more satisfaction than that of Bundle E.
  2.  It can be seen from the above diagram that all combinations of IC, contain a large quantity of both X and Y, than all combinations on IC,. For, e.g., point E lying on IC, represents ox, units of X and Oy, units of Y. Point F lying on IC, represents more units of Y, i.e., OY, as well as more units of X, i.e. OX,

The consumer gets greater satisfaction from a larger pieces of goods than from a smaller amount. Hence, point F shall be on a higher IC and shall be more preferable to point E, lying on lower IC.

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