5.6:
Indifference Curves
An indifference curve is a graphical representation of a consumer's preferences. A consumer is indifferent among different combinations of two products if those combinations suit their tastes equally.
For example, John loves to collect books and buy new clothes. To show his preferences graphically, consider the number of clothes on the x-axis and the number of books on the y-axis that John buys each week.
Then, consider the market baskets A, B, C, and D. Each basket has a different combination of books and clothes.
Basket A, which has one item of clothing and ten books, is plotted on the graph. It gives John a certain level of satisfaction.
He gets the same level of satisfaction with Basket B, which has two articles of clothing and six books.
He is equally happy with Basket C, which has four items of clothing and three books, and Basket D, containing seven articles of clothing and one book.
All combinations of books and clothes that provide John equal satisfaction are joined. This gives the indifference curve. Since John is equally happy with all the baskets, it is difficult for him to choose among them.
To summarize, an indifference curve represents combinations of two products that give the same level of satisfaction to the consumer.
5.6 Indifference Curves
Indifference curves are a graphical representation of a consumer's preferences. It represents different combinations of goods or market baskets that provide the same level of satisfaction to the consumer. The term 'indifference' shows that the consumer is indifferent towards the various market baskets as she is equally content with all combinations of goods represented on a single curve.
For instance, a consumer's two favorite items are pizza and cookies. The consumer has two distinct baskets. Basket A has three slices of pizza and one cookie. Basket B has two slices of pizza and two cookies. The consumer will pick the one depending on her preference for pizza over cookies or vice versa.
Further, consider three baskets: P, Q, and R. Basket P has one slice of pizza and ten cookies. Basket Q has two slices of pizza and six cookies. Basket R has four slices of pizza and three cookies. If these baskets give the same satisfaction to the consumer, they lie on the same indifference curve. All combinations of pizza and cookies that provide the consumer equal satisfaction are joined to get the indifference curve.
Suggested Reading
- Allen R. G. D. The Nature of Indifference Curves, The Review of Economic Studies, Volume 1, Issue 2, February 1934, Pp 110–121, https://doi.org/10.2307/2967617
- Block W. E. José Antonio M. A. S. (2012). Indifference Curve Analysis: Beyond Simplifying Assumptions. Vol. 12 No. 1. Journal for Economic Educators. Pp 7-12
- Goolsbee A, Levitt S and Syverson C (2013), Microeconomics, Worth Publishers, pp. 116-118
- Hicks on Demand. (n.d.). The University of Texas at Austin. Retrieved December 21, 2023, from https://la.utexas.edu/users/hcleaver/368/368hicksVCdemand.pdf
- Lemieux P. (2015). John Hicks and the Beauty of Logic. CATO Institute. Available at https://www.cato.org/regulation/winter-2014-2015/john-hicks-beauty-logic
- Mankiw N G (2013), Principles of Microeconomics, 7th ed, Cengage Learning, Pp. 438-439.
- Pindyck R S and Rubinfeld D L (2013), Microeconomics, 8th ed, Pearson, pp. 71-73
- Siebel J. P. (2010) Indifference curves for beginners. Volume 7, Number 2. Australasian Journal of Economics Education. pp.1-12.