In what way are all points on an indifference curve equal?

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 is indifference curve related to utility?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.

Are the indifference curves of various individuals the same?

Each person determines his or her own preferences and utility. Thus, while indifference curves have the same general shape—they slope down, and the slope is steeper on the left and flatter on the right—the specific shape of indifference curves can be different for every person.

Why are indifference curves downward sloping?

Indifference curves slope downward because, if utility is to remain the same at all points along the curve, a reduction in the quantity of the good on the vertical axis must be counterbalanced by an increase in the quantity of the good on the horizontal axis (or vice versa).

Are indifference curves marginal utility?

The slope of the indifference curve at any point is the negative marginal utility of good A as a proportion of the marginal utility of good B. It indicates that the optimal consumption bundle – the marginal rate of substitution between goods A and B – is the ratio of their prices.

How do you find the utility function from an indifference curve?

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.

Why indifference curve is convex?

Indifference curves are convex to the origin because as the consumer begins to increase his or her use of one good over another, the curve represents the marginal rate of substitution. The marginal rate of substitution goes down as the consumer gives up one good for another, so it is convex to the origin.

Are utility curves and indifference curves the same?

A utility function tells you the utility of every possible bundle of goods. An indifference curve represents a subset of this. It shows all possible bundles of goods that have a particular level of utility. If you draw all the indifference curves, you have basically drawn the utility function.

Are indifference curves always downward sloping?

Indifference curves slope downwards. The only way an individual can increase consumption in one good without gaining utility is to consume another good and generate the same amount of utility. Therefore, the slope is downwards sloping. Indifference curves assume a convex shape.

What is a level of utility on an indifference curve?

Combinations of two goods that yield equal levels of utility are shown on an indifference curve. Because all points along an indifference curve generate the same level of utility, economists say that a consumer is indifferent between them.

What is indindifference curve?

Indifference curves assume a convex shape. As illustrated above in the indifference curve map, the curve gets flatter as you move down the curve to the right. It illustrates that all individuals experience diminishing marginal utility, where additional consumption of another good will generate a lesser amount of utility than the prior.

Why do economists say a consumer is indifferent between two points?

Because all points along an indifference curve generate the same level of utility, economists say that a consumer is indifferent between them. Figure 7.10 “An Indifference Curve” shows an indifference curve for combinations of skiing and horseback riding that yield the same level of total utility.

What is the difference between Ul and um in indifference curve?

In Figure 1, indifference curve Ul can be thought of as a “low” level of utility, while Um is a “medium” level of utility and Uh is a “high” level of utility. All of the choices on indifference curve Uh are preferred to all of the choices on indifference curve Um, which in turn are preferred to all of the choices on Ul.