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Indifference curves
In order to explain indifference curves, we will again make the simplifying assumption that the consumer buys two goods, x and y.
The table below gives a number of combinations of x and y which the consumer considers to give the same satisfaction as for example, combination c of bx and 4y is thought to give the same satisfaction as D where 7x and 2y are consumed. The consumer is thus said to be indifferent as to which combination they have hence the name given to this type of analysis.
Table : An indifference schedule
Combination
Units of x
Units of y
A
B
C
D
1
4
6
7
12
2
Figure 2.3 gives a graphical representation of the figures in Table
Such a graph is called an indifference curve:
An indifference curve shows the lines of combinations of the amounts of two goods say x and y such that the individual is indifferent between all combinations on that curve.
At each point on the indifference curve the consumer believes that the same amount of utility is received.
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