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.