Topics
Indian Economy on the Eve of Independence
- Introduction to Indian Economy on the Eve of Independence
- Low Level of Economic Development Under the Colonial Rule
- Agricultural Sector in India
- Industrial Sector
- Foreign Trade of India
- Demographic Condition
- Occupational Structure
- Infrastructure
Introductory Macroeconomics
Introduction
- A Simple Economy
- Central Problems of an Economy
- Concepts of Production Possibility Frontier
- Organisation of Economic Activities
- Positive and Normative Economics
- Microeconomics and Macroeconomics
Introduction
- How Macroeconomics Differs from Microeconomics
- Representative Goods and Sectors
- Macroeconomic Agents and Government Role
- Emergence of Macroeconomics
- Context of the Present Book of Macroeconomics
Theory of Consumer Behaviour
- Consumer Behaviour: The Problem of Choice
- Basic Concepts of Microeconomics > Utility
- Cardinal Approach (Utility Analysis)
- Derivation of Demand Curve in the Case of a Single Commodity
- Ordinal Utility Analysis/Indifference Curve Analysis
National Income Accounting
- Meaning of Economic Wealth and Final Goods
- Stocks, Flows, and Depreciation
- Capital Formation, Trade-off & Circular Flow of Income
- Circular Flow of Income and Methods of Calculating National Income
- Output Method/Product Method
- Expenditure Method
- Income Method
- Factor Cost, Basic Prices and Market Prices
- Some Macroeconomic Identities
- National Disposable Income
- Private Income
- National Income Aggregates
- Real GDP and Nominal GDP
- GDP and Welfare
Indian Economy 1950-1990
Indian Economic Development
Money and Banking
- Concept of Money
- Functions of Money
- Demand for Money and Supply of Money
- Money Creation by Banking System
- Limits to Credit Creation and Money Multiplier
- Policy Tools To Control Money Supply
- Demand and Supply for Money : A Detailed Discussion
- The Transaction Motive
- The Speculative Motive
- Various Measures of Supply of Money
- Legal Definitions: Narrow and Broad Money
- Demonetisation
Production and Costs
- Production Function
- Basics of Production Theory
- Variation of Output in the Short-Run Returns to a Factor
- Relation Between Total, Average and Marginal Product
- Law of Variable Proportions
- Average and Marginal Physical Products
- Changes in Production
- Cost - Fixed Cost
- Cost -variable Cost
- Behaviour of Cost in the Short - Run
- Relationship Between Average Variable Cost and Average Total Cost and Marginal Cost
- Concept of Opportunity Cost
- Marginal Revenue
- Producer's Equilibrium
- Law of Supply
- Market Supply Schedule
- Distinguish between Stock and Supply
- Determinants of Supply
- Movements Along and Shifts in Supply Curve
- Measurement of Elasticity of Supply
- Methods of Measurement of National Income
- Cost Concepts > Marginal Cost
- The Law of Diminishing Marginal Product
- Shapes of Product Curves
- Costs in Long Run Period
- Returns to Scale
Liberalisation, Privatisation and Globalisation : An Appraisal
Introductory Microeconomics
The Theory of the Firm Under Perfect Competition
- Concept of Market
- Market Equilibrium
- Determination of Market Equilibrium
- Effect of Simultaneous change in Demand and Supply on Equilibrium Price
- Perfect Competition
- Imperfect Competition
- Classification of Market Structure
- Oligopoly
- Market Forms - Perfect Oligopoly
- Market Forms - Imperfect Oligopoly
- Equilibrium Price
- Applications of Tools of Demand and Supply Price Control
- Price Ceiling
- Price Floor
- Revenue Concepts
- Profit Maximisation Objective
- Determinants of a Firm’s Supply Curve
- Market Supply Schedule
- Price Elasticity of Supply
Human Capital Formation in India
Determination of Income and Employment
- Aggregate Demand and Its Components
- Consumption
- Consumption and Saving Propensities
- Investment
- Determination of Income in Two-sector Model
- Determination of Equilibrium Income in the Short Run
- Macroeconomic Equilibrium with Price Level Fixed
- Effect of an Autonomous Change in Aggregate Demand on Income and Output
- The Multiplier Mechanism
- Paradox of Thrift
- Equilibrium Output and Employment
Market Equilibrium
- Simple Monopoly in the Commodity Market
- Other Non - Perfectly Competitive Markets
Government Budget and the Economy
Rural Development
Employment: Growth, Informalisation and Other Issues
- The Nature and Importance of Work in Society
- Workers and Employment
- Participation of People in Employment
- Self-employed and Hired Workers
- Employment in Firms, Factories and Offices
- Growth and Changing Structure of Employment
- Informalisation of Indian Workforce
- Concept of Unemployment
- Government and Employment Generation
Open Economy Macroeconomics
- Open Economy and Its Linkages
- Concept of Balance of Payments
- Current Account
- Capital Account
- Balance of Payments Surplus and Deficit
- Foreign Exchange Market
- Foreign Exchange Rate
- Determination of the Exchange Rate
- Merits and Demerits of Flexible and Fixed Exchange Rate Systems
- Managed Floating Exchange Rate System
Environment and Sustainable Development
Comparative Development Experiences of India and Its Neighbours
- Comparative Development Strategies: India, China, and Pakistan
- Developmental Path - a Snapshot View
- Demographic Indicators
- Gross Domestic Product and Sectors
- Indicators of Human Development
- Development Strategies - an Appraisal
- Introduction: Ordinal Utility
- Definition: Indifference Curve Analysis
- Origin
- Indifference Schedule
- Indifference Curve
- Indifference Map
- Marginal Rate of Substitution (MRS)
- Assumptions
- Real-Life Application
- Key Point Summary
CISCE: Class 12
Introduction: Ordinal Utility
Ordinal utility means a consumer can rank preferences—like first, second, and third—but cannot say “how much” more they like one option over another.
For example, you can say you prefer pizza to pasta and pasta to salad, but you can’t say pizza gives you exactly twice as much ‘utility’ as salad.
CISCE: Class 12
Definition: Indifference Curve Analysis
According to Hicks, "It is the locus of the points representing parts of quantities between which the individual is indifferent and so it is termed as an indifference curve."
According to Meyres, "An indifference curve may be defined as a schedule of various combinations of goods which will be equally satisfactory to the consumer concerned."
According to Ferguson, "An indifference curve is a combination of goods, each of which yields the same level of total utility for which the consumer is indifferent." According to Leftwich, "A single indifference curve shows the different combinations of X and Y that yield equal satisfaction to the consumer."
CISCE: Class 12
Origin
Italian economist Pareto first drew these curves; British economists Hicks and Allen developed the theory further (1930s).
CISCE: Class 12
Indifference Schedule
Suppose a consumer chooses between “Food” and “Clothing”. All the following bundles give the same satisfaction:
| Combination | Food (units) | Clothing (units) | Marginal Rate of Substitution (MRS) |
|---|---|---|---|
| A | 1 | 10 | – |
| B | 2 | 7 | 3:1 |
| C | 3 | 5 | 2:1 |
| D | 4 | 4 | 1:1 |
CISCE: Class 12
Indifference Curve
- Axes: X-axis: Food, Y-axis: Clothing
- Each point (A, B, C, D) is a bundle with equal satisfaction.
- Connecting these points forms the “Indifference Curve”.
- Any point on the same curve means the consumer is “indifferent” (no preference).
CISCE: Class 12
Indifference Map
- A single indifference curve = one level of satisfaction.
- Multiple indifference curves (IC1, IC2, IC3…) = indifference map, where curves farther from the origin mean higher satisfaction.
- Each curve shows different satisfaction levels; none ever cross.
CISCE: Class 12
Marginal Rate of Substitution (MRS)
- Definition: The quantity of good Y given up for 1 more unit of X, satisfaction unchanged.
- Formula:
\[MRS_{XY}=\frac{-\Delta Y}{\Delta X}\] - Diminishes as more of X is consumed (curve flattens).
CISCE: Class 12
Assumptions
CISCE: Class 12
Real-Life Application
Imagine choosing between extra study hours and hours spent playing a sport. Your “indifference curve” links combinations that make you equally happy!
CISCE: Class 12
Key Point Summary
- Indifference curves analyse choices using preference rankings (ordinal utility), not absolute numbers.
- The slope (MRS) tells us the consumer’s willingness to substitute between goods, always decreasing along the curve.
- Higher curves = higher satisfaction.
Test Yourself
Related QuestionsVIEW ALL [16]
Read the following passage and answer the question that follows:
| The ordinal list revolution originates in the criticism of the psychological foundations of the theory of demand, namely, the principle of decreasing marginal utility as Alfred Marshall ([1890] 1898) used it. The rejection of hedonist hypotheses led Irving Fisher (1892) and Pareto (1896-97, 1900, 1909) to favour an objective or "positive" approach to economic concepts. The "ordinal list revolution" (Omarzabal 1995, 116) is grounded in a methodological transformation of economics that put the facts of objective experience as a foundation of economics and provided a research program for the ensuing years (Green and Moss 1993; Lewin 1996). Mathematically, ordinalism is entirely based upon the idea that one can dispense with the use of a specific utility function and that no meaning shall be attached to utility measurement, except as an ordinal principle. Clearly, the development of ordinalism must be separated from the introduction of the concept of the indifference curve. Ordinalism was first advocated in Fisher's "Mathematics Investigations" (1892) and Pareto's Sunto (1900) and Manual ([1909] 1971), while the indifference curve had appeared in F. Y. Edge Worth's Mathematical Psychics (1881). It was thus only through Fisher's and Pareto's recasting that the concept of the indifference curve became irreversibly associated with the promotion of ordinalism. Along the way, the recasting of the theory of choice along ordinal list lines raised a number of issues (about integrability, measurability, and complementarity) that would be progressively settled. The reasonable closing date for the ordinalist revolution is 1950, after Houthakker's (1950) and Samuelson's (1950) contributions. From the late 1920s, the Paretian school was progressively gaining a larger audience while the use of the concept of marginal utility and other derivative concepts was challenged. Consequently, demand theory was recast along with the principles of individual preferences and ordinal utility functions. Nevertheless, English authors proved very silent about the meaning of indifference curves. Most if not all of the reflections after 1920 about the nature of indifference curves took place in America, mainly under the impulse of Henry Schultz at Chicago. This is an American story. |
Consider the given statement:
Under the Cardinal Utility approach, utility is measured in utility.
Identify the correct pair of items from the following Columns I and II:
| Columns I | Columns II |
| (1) Marginal Rate of Substitution (MRS) | (a) It states the real employment of the consumer from which he can purchase certain qualitative bundles of three goods at given price. |
| (2) Consumer's Bundle | (b) It refers to the number of units of good Y which the consumer is willing to gain for an additional unit of goodX. |
| (3) Budget set | (c) It is quantitative combination of those bundles which a consumer can purchase from his given income at prevailing market prices. |
| (4) Consumer Budget | (d) It is a qualitative combination of three goods which can be purchased by a consumer from his given expenses at given prices. |
