Indifference curves

A consumer’s tastes and equilibrium can also be shown by indifference curves. It is a graphical way to present consumer's preferences. An indifference curve shows the various combinations of commodity X and commodity Y which yield equal utility or satisfaction to the consumer.

A higher indifference curve shows a greater amount of satisfaction and a lower one,less satisfaction.
Thus, indifference curves show an ordinal rather than a cardinal measure of utility.

We have already done a video on that.

Basic difference between the two methods is that cardinal method gives numbers to utility,ordinal method give ranks to different levels of preferences.

SLOPE OF INDIFFERENCE CURVE

MRS is the slope of an indifference curve.

The marginal rate of substitution of X for Y (MRSxy) refers to the amount of Y that a consumer is willing to give up in order to gain one additional unit of X (and still remain on the same indifference curve ). As the individual moves down an indifference curve, the MRSxy diminishes.

Indifference curves exhibit three basic characteritics:

they are negatively sloped,

they are convex to the origin,

they cannot intersect.