How do you derive an indifference curve?

If you are given a utility function U(x,y), it is easy to derive a given indifference curve from it: simply plot all points (x,y) such that U(x,y) equals a constant. This is a utility function in which the consumer values x as much as a/b units of y.

What is the satiation point?

BIBLIOGRAPHY. The Oxford English Dictionary offers one definition of satiation to be the “point at which satisfaction of a need or familiarity with a stimulus reduces or ends an organism’s responsiveness or motivation” and thereby encompasses, in principle, the satiety of both needs and desires.

How do you find the optimal point of an indifference curve?

The consumer’s optimal combination of goods is at the point where the budget line is tangent to an indifference curve or where the marginal rate of substitution (MRS) is equal to the opportunity cost or relative price of the two goods, as indicated by the slope of the budget constraint.

What is indifference curve map?

An Indifference Map is a set of Indifference Curves. It depicts the complete picture of a consumer’s preferences. The following diagram showing an indifference map consisting of three curves: We know that a consumer is indifferent among the combinations lying on the same indifference curve.

Who first used indifference curve?

Francis Ysidro Edgeworth
History. The theory of indifference curves was developed by Francis Ysidro Edgeworth, who explained in his 1881 book the mathematics needed for their drawing; later on, Vilfredo Pareto was the first author to actually draw these curves, in his 1906 book.

What is indifference curve example?

An indifference curve shows all combinations of goods that provide an equal level of utility or satisfaction. For example, Figure 1 presents three indifference curves that represent Lilly’s preferences for the tradeoffs that she faces in her two main relaxation activities: eating doughnuts and reading paperback books.

What is indifference curve with examples?

What is indifference curve explain with diagram?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Description: Graphically, the indifference curve is drawn as a downward sloping convex to the origin. The graph shows a combination of two goods that the consumer consumes.

What is indifference curve introduction?

Definition: An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curve indicates that a consumer is indifferent between the two and all points give him the same utility.

What are indifference and indifference maps?

A graph of indifference curves for several utility levels of an individual consumer is called an indifference map. Points yielding different utility levels are each associated with distinct indifference curves and these indifference curves on the indifference map are like contour lines on a topographical graph.

What is the relationship between indifference curve and satiation curve?

The combinations of two commodities, say chocolate and ice cream, which are nearer to the point of satiation or bliss point, lie on higher indifference curves and the combinations lying further away from the satiation point, would lie on lower indifference curves.

Are indifference curves convex?

Indifference curves between two commodities which are “goods” slope downward and are convex to the origin. However, when for a consumer a commodity is a bad’ that is undesirable object, the more of it will lower his satisfaction. Thus, if a commodity which is bad’ less IS preferable to more.

Can you draw an indifference curve through any combination of goods?

In general, any combination that lies above and to the right of an indifference curve is preferred to any point on the indifference curve. We can draw an indifference curve through any combination of two goods. Figure 7.11 “Indifference Curves” shows indifference curves drawn through each of the points we have discussed.

What is a level of utility on an indifference curve?

Combinations of two goods that yield equal levels of utility are shown on an indifference curve. Because all points along an indifference curve generate the same level of utility, economists say that a consumer is indifferent between them.