Question

State the meaning of indifference curves.

Answer 1

1. The Consumer is rational and his aim is to derive maximum satisfaction.
2. The utility cannot be cardinally measured but can be ranked or compared or ordered by an ordinal number such as I, II, III, and so on.
3. The indifference curve approach is based on the concept “Diminishing Marginal Rate of Substitution”.
4. The consumer is consistent. This assumption is called the assumption of transitivity.