Question

Explain any two properties (characteristics) of the indifference curve with the help of a diagram.

What are the properties of an indifference curve? Explain with the help of diagrams.

Answer 1

1. An Indifference Curve Slopes Downward from Left to the Right: An indifference curve has a negative slope, meaning it slopes downward from left to right. This feature is predicated on the idea that a consumer will only experience the same degree of satisfaction from various combinations of the two commodities if he eats more of one (food) and less of the other (clothing). The presumption of non-satiety leads to this. For instance, the diagram shows that in order to achieve the same degree of happiness from both combinations, the customer consumes one more unit of food but three less units of clothes while moving from combination ‘A’ to combination 'B' on the provided indifference curve (IC). An indifference curve must therefore have a negative slope. The consumer will, however, prefer the new combination over the original one if the amount of food is raised but the number of clothing stays the same because the new combination will be more useful to him. As a result, the indifference curves of these two combinations will not coincide.
2. An Indifference Curve is Convex to the Origin: Convexity to the origin is another characteristic of the indifference curve. The indifference curve is said to bow inward toward the origin if it is convex. To put it another way, as we proceed down the indifference curve, its slope gets smaller. The premise of a declining marginal rate of substitution leads to this. The analysis of the indifference curve is predicated on the idea that the marginal rate of substitution is decreasing. This presumption suggests that a household will be less inclined to give up a unit of one item in order to receive an additional unit of the other commodity if the household consumes less of the first one. We typically find that when a consumer has fewer resources available to him, he is less ready to give up an item. He places greater value on a unit of the commodity whose quantity is declining. Therefore, the household is eating an increasing amount of food and a decreasing amount of clothing as we proceed down the Table and indifference curve IC in the diagram through combinations ‘A’ to ‘D’. The rate at which the consumer is willing to forgo more clothing in order to obtain more food decreases in accordance with the diminishing marginal rate of substitution assumption. For instance, when the household goes from ‘A’ to ‘B’, they are willing to give up three pieces of clothes for one unit of food; however, when they go from ‘B’ to ‘C’, they are only willing to give up two units of clothing for one unit of food. Because it represents the pace at which a consumer is willing to switch from one good to another, the slope of the indifference curve displays the marginal rate of substitution. The indifference curve's slope must be decreasing from left to right in order to be consistent with the diminishing marginal rate of substitution assumption. An indifference curve, in other words, needs to be convex to the origin.
   
3. Higher Indifference Curves Yield Higher Satisfaction: A higher degree of contentment is indicated by an indifference curve that is above and to the right of another indifference curve than by the lower one. The combinations that produce greater satisfaction than those on the lower indifference curve are represented by the higher indifference curve. Because a combination with a higher indifference curve will contain more of one commodity, more of the other, or more of both, it will provide greater satisfaction than a combination with a lower indifference curve. Examine the diagram's IC₁ and IC₂ indifference curves. While combination ‘A’ is on the lower indifference curve IC₁, combination ‘B’ is on the higher indifference curve IC₂. Because the consumer receives more of both goods, MM1 more of the X good and NN1 more of the Y good, combination ‘B’ provides greater satisfaction to the customer than combination ‘A’. Thus, it is clear that more pleasure results from a higher indifference curve.
   
4. Two Indifference Curves Never Intersect Each Other: Indifference curves have the crucial characteristic of never intersecting, even if they may lay close to one another. The fact that each indifference curve indicates a distinct degree of satisfaction leads to this conclusion. Consequently, there is no intersection or contact between two indifference curves. It is absurd to assume that a combination of two commodities that correspond to the point of crossing will result in two distinct levels of satisfaction if the two indifference curves intersect. Two significant facts regarding the indifference curve should be noted. First, since we assume that a customer purchases both of the items displayed on the X and Y axes, the indifference curves do not touch any of them. A customer consumes only one commodity if an indifference curve hits either axis. Second, there is no requirement that the indifference curves be parallel to one another. The marginal rate of substitution between the two goods indicated on the two axes determines the slope of the indifference curve.