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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.
Indifference Curve Analysis In the 1930s a group of economists, including Sir John Hicks and sir Roy Allen, came to believe that cardinal measurement of utility was not necess
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