INDIFFERENCE

CURVE
 DEFINITION: IC
An Indifference curve (IC) is
the locus of all those
two goods whichof give the same
combination
level of satisfaction to the
consumer.

Thus consumer is indifferent towards all the combinations

lying on the same indifference curve. In other words,
consumer gives equal preference to all such
combinations.
 INDIFFERENCE CURVES
24
22 A(1, 22)
20
INDIFFERENCE SCHEDULE 18
(Table Showing Different 4 )
16 2, 1
Combinations giving Equal B(
Satisfaction) 14 10)
12 (3,
Combinatio Apples Oranges C

8)
n 10

4,

7)
D(
A 1 22

5,
8
Oranges

E(
B 2 14 6
4
C 3 10
2 Apples
D 4 8
0
E 5 7 1 2 3 4 5 6
 INDIFFERENCE CURVES
24
22 A(1, 22)
20
INDIFFERENCE SCHEDULE 18
16 ,14)
Combination Apples Oranges
14 B(2 )
0
A 1 22 12 3,1
(
C

8)
2 14 10

4,

7)
D(
B 8

5,
C 3 10

E(
Oranges

D 4 8 6
4 IC1
5 7
2
E Apples
0
1 2 3 4 5
 MARGINAL RATE OF
SUBSTITUTION (MRS)
The marginal rate of substitution of X
for Y (MRSxy) is defined as the
amount of Y, the consumer is just
willing to give up to get one more
unit of X and maintain the same
level of satisfaction.

MR Sxy = Decrease in the Consumption of Y

Increase in the Consumption of X = (-) ∆∆Y
X
 DIMINISHING MARGINAL RATE
OF SUBSTITUTION

Combination Apples Oranges MRS

A 1 22 ---
B 2 14 8:1
C 3 10 4:1
D 4 8 2:1
E 5 7 1:1
As the consumer increases the consumption of
apples, then for getting every additional unit of
apples, he will give up less and less of oranges, that
is, 8:1, 4:1, 2:1, 1:1 respectively This is the Law of
Diminishing MRS.
 LAW OF DIMINISHING MRS
24 A
22
20
18
MRS = -O/A = 8:1
16
14 MRS = 4:1
MRS is measured 12 B
by the slope of 10
MRS = 2:1
the indifference 8 C
Oranges

curve 6

D
4 IC1

E
2
0 Apples
1 2 3 4 5
PROPERTIES OF IC
1. An Indifference curve has
negative slope i.e. it slope
downwards from left to right.

2. Indifference curve is always convex to the

origin.
3. Two Indifference curves
never each other.
 PROPERTIES OF IC
4. Higher indifference curve
represents higher satisfaction.

Indifference map

More is preferred to Less

 PROPERTIES OF IC
5. Indifference curve touches
neither X-axis nor Y-axis.

X
12
10 A(0, 10)
8
Oranges
6
IC1
4
2 Apples
0
1 2 3 4 5