# an indifference curve is related to

Indifference curve analysis suggests that the rational consumer has many such points of indifference, depending on the budget available to them, and on other significant factors which affect the consumer’s preferences between two goods.For example, in the diagram below there are four indifference curves, each one representing a different set of indifference points relating to different levels of utility. Indifference curveOptimal consumer choice is depicted in the indifference curve T, which is tangential to the buyer's budget line P. Indifference curve analysis emphasizes marginal rates of substitution (MRS) and opportunity costs. 2.The slope indifference curve is equal to: 3. Is Demand or Supply More Important to the Economy? An indifference curve shows combinations of goods and services between which a consumer is indifferent In other words, each combination on an indifference curv… Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. That is to say that at any point on the graphed curve, the consumer holds no preference for one combination of goods over another. An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. B.Marginal rate of substitution for a good increases as more of the good is consumed. Here is an example to understand the indifference curve better. A graph showing a combination of two goods that give a consumer equal utility and satisfaction is called an indifference curve. An indifference curve shows a combination of two goods that give a consumer equal satisfaction and utility thereby making the consumer indifferent. Indifference curves slop downward to the right This is an important and obvious feature of indifference curves. 1. If two indifference curves intersects each other than there would be more than one equilibrium or more than one point where the customer can get maximum satisfaction. Your email address will not be published. Solution for Draw the indifference curve in the expected return–standard deviation plane corresponding to a utility level of .05 for an investor with a risk… Finance Q&A Library Draw the indifference curve in the expected return–standard deviation plane corresponding to a utility level of .05 for an investor with a risk aversion coefficient of 3. Following are some of the indifference curve multiple choice questions and answers that will help the students in brushing up their understanding of the concept of the indifference curve. Consumer preferences might also change between two different points in time rendering specific indifference curves practically useless. Indifference curves represent combinations of two goods which a consumer considers equally valuable. Each indifference curve suggests combinations among which the consumer is indifferent. Many core principles of microeconomics appear in indifference curve analysis, including individual choice, marginal utility theory, income, substitution effects, and the subjective theory of value. Economics is a branch of social science focused on the production, distribution, and consumption of goods and services. 10. In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. Meaning of Indifference Curve 2. Of course, the amounts of commodities X and Y that the individual will be able to consume depends on the level of that person's income. An indifference curve measures the value a consumer receives from the consumption of two different products. Start studying Indifference Curve. Along the curve the consumer has an equal preference for the combinations of goods shown—i.e. They represent those combinations of two goods that give the same satisfaction, C. Each indifference curve represents a different level of satisfaction. Required fields are marked *. Curves that are higher and to the right are preferred to those that are lower and to the left. An indifference curve is generally convex to the point of origin. The IS-LM model represents the interaction of the real economy with financial markets to produce equilibrium interest rates and macroeconomic output. Since all the combinations give the same amount of satisfaction, the consumer prefers them equally. What Factors Influence a Change in Demand Elasticity? The slope of the indifference curve is called the marginal rate of substitution, which declines as the quantity of X increases relative to the quantity of Y. It explains consumer behaviour in terms of his preferences or rankings for different combinations of two […] In this context we also refer to a few additional axioms. There are four properties that describe most of them. Indifference Curves On a indifferent curve, the increase in utility from eating more pizza must just offset the decrease in utility from watching fewer videos Thus, along an indifference curve, there is an inverse relationship between theÎ Indifference curves are used in microeconomic studies in order to study consumer preferences. Along an indifference curve, if the marginal rate of substitution is 3, then the consumer is willing to Select one: a. 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