Indifference
Curve analysis has rejected the concept of cardinal
utility approach (Marginal Utility
Analysis) and adopted the concept of ordinal utility.
This implies that consumer compare the utility (which goods or which combination of goods give him the same, more or less utility) derived from different goods. In this utility is not measured in quantitative terms but on the scale of preference.
Below shown is the Indifference Curve.
Properties of Indifference Curve :
1) Has
a Negative Slope :
This implies that consumer compare the utility (which goods or which combination of goods give him the same, more or less utility) derived from different goods. In this utility is not measured in quantitative terms but on the scale of preference.
Below shown is the Indifference Curve.
Properties of Indifference Curve :
 |
| indifference curve |
An
indifference curve slopes downwards from left to right. This is due to the
assumption of Marginal Rate of Substitution.
This means that as the consumer consumes
more of one commodity say X, he must consume less quantity of the other say Y,
then only he will have the same level of
satisfaction from different combinations of the two commodities.
As shown in the below graph, going to
combination B from A, to get 1 additional unit of food,he has to give up 3
units of clothing. If unit of food is increased, without changing the unit of
clothing than the consumer will prefer new combination to the previous one as
the new combination gives him more utility.
