- The locos point of combinations of goods or commodities which give same utility to the customers is known as indifference curve.
In the above diagram there is an indifference curve. This a locus of various points of combination of apple mango from which the customer derives equal satisfaction from the above table the satisfaction derived by the consumer from 2 mango 15 apple is the range, as the derives from
1 mango 25 apple
- Assumptions of indifference curve analysis
1. Commodities to be used are homogeneous to each other.
2. Commodities can be divided in small parts by the consumer.
3. Rational consumer
4. Use of two commodities for making carbonations
5. Based on marginal rate of technical substitution. - Marginal Rate of substitution:-
Change in quantity of commodity Y / Change in quantity of commodity X / or Y /X
The rate at which the quantity of one commodity is sacrificed in order to increase the production of another commodity.
Is other words in order to produce more quantity of Y, one has to decrease production of X or vice-versa. - Characteristics
1. Various combinations of two commodities giving equal utility to a consumer.
2. Scope downwards to the right
3. Remain convex to the origin
4. Higher indifference curve always yields higher level of satisfaction.
5. It may not necessarily pc parallel.
6. These curves never touch X Y axis.
7. These curves never intersect each others.
Author – Lalita Soni