Indifference curves, Microeconomics

Assignment Help:

Indifference Curves: Every consumption-leisure point, (l; c), in the diagram is associated with a unique level of utility. The line II represents the individuals indifference curve. It gives the combinations of consumption, c, and leisure, l, that generate some particular level of utility, u. Indifference curves have three properties:

(1) Indifference curves slope downwards. Why? Again, along an indifference curve utility is fixed at u. Therefore, to give the person more leisure, l, you must take away some of his consumption, c, at least if you want to keep him at the specified level of utility, u. The slope of the indifference curve gives the .marginal rate of substitution between leisure and consumption. In other words, it speci.es the maximal amount of consumption that the person is willing to forgo in order to gain an extra unit of leisure. Anymore consumption would reduce the persons utility and any less would raise it.

(2) The slope of an indifference curve decreases (in absolute value) as you move from left to right along the horizontal axis. The more leisure a person enjoys the less consumption he is willing to give up for yet an extra unit. This reflects diminishing marginal utility in leisure and consumption. Each marginal unit of leisure generates less and less in extra utility. Likewise, each marginal unit of consumption that is taken away results in increasing losses in utility. Note that higher (lower) levels of utility are associated with indifference curves that lie outwards (inwards) from II.

(3) Indifference curves cannot cross one another. If they could then every point of intersection would be linked with two levels of utility.


Related Discussions:- Indifference curves

What is ceteris paribus, What is ceteris Paribus?  Ceteris paribus is a...

What is ceteris Paribus?  Ceteris paribus is a Latin phrase, literally translated as "other things the similar," and usually rendered in English as "all other things being equa

Corporations price and output in the short run, Consider that the governmen...

Consider that the government tells a large monopolistic firm that maximizes profits that it has to pay a fee to the Reelect the President Committee same to one third of its total p

Managerical economics, Plot the demand schedule and draw the demand curve f...

Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above?

Equilibrium price and equilibrium quantity of cassette, The compact disk pl...

The compact disk player has literally revolutionized the recording industry with its state-of-the-artclarity, sound, durability, and the fact that it costs less than cassette tape

Public administration-delivery mechanism, Public Administration: Accor...

Public Administration: According to L.D. White, "Public administration consists of all those operations having for their purpose the fulfillment or enforcement of public polic

Total cost function, A firm's production function is given by Q = √LK . Th...

A firm's production function is given by Q = √LK . The price of labour is w and the price of capital is r. a. The price of labour is $5 and the price of capital is $20. What is

Consumer''s chiose involving risk, risk describe,prefrence towards risk,the...

risk describe,prefrence towards risk,the demand for risky assets.consumer behaviour under asymmetricinformation

Combined finances of union and states, COMBINED FINANCES OF UNION AND STAT...

COMBINED FINANCES OF UNION AND STATES: Taxes on goods and services are levied in India in various forms and at different levels of Government, Centre, states, and local bodies

Competition and industry ., need to get assignment on income effect and sub...

need to get assignment on income effect and substuation effect how does increase in price of both comodity will affect the or show the new effect

Point elasticity of demand for demand function Q=10-2p, calculate point ela...

calculate point elasticity of demand function Q=10-2p for decrease in price from Rs3 to Rs2

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd